EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the "Agreement") is made as of August 1, 2002
between PEPCO HOLDINGS, INC. (the "Company") and EDDIE R. MAYBERRY
(the "Executive").

                                                   RECITALS:

The Board of Directors of the Company (the "Board of Directors") recognizes that
outstanding management of the Company is essential to advancing the best
interests of
the Company, its shareholders and its subsidiaries. The Board of Directors
believes that
it is particularly important to have stable, excellent management at the present
time. The
Board of Directors believes that this objective may be achieved by giving key
management employees assurances of financial security for a period of time, so
that they
will not be distracted by personal risks and will continue to devote their full
time and best
efforts to the performance of their duties.

In order to achieve the foregoing objectives, the Human Resources Committee of
the
Board of Directors (the "Committee") has recommended, and the Board of Directors
has
approved, entering into employment agreements with the Company's key management
executives, which agreements will supercede in their entirety the executives'
existing
severance agreements. Accordingly, this Agreement supercedes the severance
agreement
previously entered into between the Company and the Executive, dated December
28,
1999 (the "Prior Agreement"). Upon execution of this Agreement, the Prior
Agreement
shall be of no further force or effect. The Executive is a key management
executive of
the Company and is a valuable member of the Company's management team. The
Company acknowledges that the Executive's contributions to the past and future
growth
and success of the Company have been and will continue to be substantial. The
Company and the Executive are entering into this Agreement to induce the
Executive to
remain an employee of the Company and to continue to devote his full energy to
the
Company's affairs. The Executive has agreed to continue to be employed by the
Company under the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing and the mutual undertakings
contained in this Agreement, the parties agree as follows:

1.   Term of this Agreement. The term of this Agreement shall begin on the date
first set
forth above and shall end on the third anniversary thereof; provided, however,
that, on
such third anniversary, the term of this Agreement shall be automatically
renewed for an
additional three (3) years unless either party gives notice to the other at
least 6 months
prior to such anniversary that the term of this Agreement shall not be renewed
(the initial
3 year term of this Agreement and, if extended, the extension thereof, shall
hereinafter be
referred to as the "Term of this Agreement"). Notwithstanding the forgoing, if
the
Executive's employment is terminated during the Term of this Agreement and all
of the
Company's and the Executive's obligations hereunder have been satisfied prior to
the end
of the Term of this Agreement, this Agreement shall expire upon satisfaction of
all such
obligations.

2.   Duties. The Company and the Executive agree that, while employed during the
Term
of this Agreement, the Executive will serve in a senior management position with
the
Company. The Executive (a) will devote his knowledge, skill and best efforts on
a full-
time basis to performing his duties and obligations to the Company (with the
exception of
absences on account of illness or vacation in accordance with the Company's
policies and
civic and charitable commitments not involving a conflict with the Company's
business),
and (b) will comply with the directions and orders of the Board of Directors and
Chief
Executive Officer of the Company (or any designee thereof) with respect to the
performance of his duties.

3.   Affiliates. Employment by an Affiliate of the Company or a successor to the
Company will be considered employment by the Company for purposes of this
Agreement, and the Executive's employment with the Company shall be considered
terminated only if the Executive is no longer employed by the Company or any of
its
Affiliates or successors. The term "Company" as used in this Agreement will be
deemed
to include Affiliates and successors. For purposes of this Agreement, the term
"Affiliate"
means the subsidiaries of the Company and other entities under common control
with the
Company.

4.   Compensation and Benefits.

(a)  During the Term of this Agreement, while the Executive is employed by the
Company, the Company will pay to the Executive the following salary and
incentive
awards for services rendered to the Company:

                   (i)     The Company will pay to the Executive an annual
salary in an amount
                  not less than the base salary in effect for the Executive as
of the date on which
                  this Agreement is executed (in the event the Executive's rate
of annual base
                  salary is increased, such increased rate shall not be
decreased during the Term
                  of this Agreement); and

                  (ii)     The Executive will be entitled to receive incentive
awards if and to the
                  extent that the Board of Directors determines in good faith
that the Executive's
                  performance merits payment of an award according to the terms
of the
                  incentive compensation plans applicable to senior executives
of the Company.

If the Executive is employed by an Affiliate or a successor (as described in
Section 3),
the term "Board of Directors" as used in this Section 4(a) and in Section 5(a)
means the
Board of Directors of the Executive's employer.

(b)  During the Term of this Agreement, while the Executive is employed by the
Company, the Executive will be eligible to participate in a similar manner as
other senior
executives of the Company in retirement plans, fringe benefit plans,
supplemental benefit
plans and other plans and programs provided by the Company for its executives or
employees from time to time.

5.   Termination of Employment.

If, during the Term of this Agreement, the Company terminates the Executive's
employment other than for Cause (as defined in Section 7), the Company will pay
to the
Executive in cash within 30 days after the Executive's termination of employment

                  (i)     a lump sum payment equal to three (3) times the sum
of: (A) the highest
                  annual base salary rate in effect for the Executive at any
time during the three-
                  year period preceding employment termination, plus (B) the
highest of (1) the
                  annual bonus for the year in which the termination of
employment occurs, or
                   (2) the highest annual bonus received by the Executive during
the three
                  calendar years preceding the calendar year in which the
termination of
                  employment occurs; and

                  (ii)     any unpaid salary through the date of employment
termination, unpaid
                  annual bonus for the prior year and a pro-rated portion of the
annual bonus for
                  the year in which termination of employment occurs.

For purposes of Sections 5(a)(i)(B)(1) and 5(a)(ii), the annual bonus for the
year in which
termination of employment occurs will be the "target" annual bonus for such year
unless,
before the Executive's termination of employment, the Board of Directors made a
good
faith final determination of the amount of the Executive's actual annual bonus
for such
year. If the Board of Directors made such a determination, the applicable award
will be
computed based on the Board of Directors' determination, rather than on the
"target"
amount for such year.

(b)  If, during the Term of this Agreement, the Company terminates the
Executive's
employment other than for Cause (as defined in Section 7), the Executive will be
entitled
to receive the following additional benefits determined as of the date of his
termination of
employment:

                  (i)     Any outstanding restricted stock that would become
vested (that is,
                  transferable and nonforfeitable) if the Executive remained an
employee
                  through the Term of this Agreement will become vested as of
the date of the
                  Executive's termination of employment (or as of the date
described in the next
                  sentence, if applicable). In addition, if the Company has
agreed to award the
                  Executive restricted stock at the end of a performance period,
subject to the
                  Company's achievement of performance goals, and the date as of
which the
                  restricted stock is to become vested falls within the Term of
this Agreement,
                  the stock will be awarded and become vested at the end of the
performance
                  period if and to the extent that the performance goals are
met.

                  (ii)     A supplemental retirement benefit payable in cash in
a lump sum equal
                  to the difference between (A) the present value of the vested
retirement
                  benefits that the Executive had accrued at the time of
termination of
                  employment under the Company's qualified defined benefit
retirement plan
                   (the "Retirement Plan"), any excess or supplemental
retirement plans in
                  which the Executive participates and/or other supplemental
retirement benefits
                  to which the Executive is entitled under any contract or
agreement (together,
                  the "SERPs"), assuming for this purpose that the Executive
would begin
                  receiving benefits at the first early retirement date provided
under the
                  applicable plan or, if the Executive is eligible to receive
retirement benefits
                  upon termination of employment under the applicable plan,
assuming the
                  Executive will begin receiving benefits at the time of
termination of
                  employment, and (B) the benefit the Executive would be
entitled to receive
                  under the Retirement Plan and the SERPs assuming for all such
benefit
                  determinations that the Executive was three years older than
the Executive's
                  actual age and had three additional years of service. For
purposes of the
                  calculations required under this Section 5(b)(ii), the same
actuarial
                  assumptions that are used under the Company's qualified
retirement plan shall
                  be used.

                  (iii)     If the split dollar insurance arrangement between
the Company and the
                  Executive is in effect at the time of the Executive's
employment termination,
                  the Company shall continue to pay all premium amounts with
respect to the
                  Executive's policy under the Company's split dollar insurance
program for the
                  lesser of ten (10) years from the date of termination of
employment or the
                  period of time remaining until the Executive's "Roll Out
Qualification Date,"
                   (as defined in the split dollar program) whichever first
occurs.

(c)  If the Executive voluntarily terminates employment with the Company during
the
Term of this Agreement under circumstances described in this subsection (c), the
Executive will be entitled to receive the benefits described in subsections (a)
and (b)
above as if the Company had terminated the Executive's employment other than for
Cause. Subject to the provisions of this subsection (c), these benefits will be
provided if
the Executive voluntarily terminates employment after (i) the Company reduces
the
Executive's base salary (except a reduction consistent and proportional with an
overall
reduction, due to extraordinary business conditions, in the compensation of all
other
senior executives of the Company), (ii) the Executive is not in good faith
considered for
incentive awards as described in Section 4(a)(ii), (iii) the Company fails to
provide
benefits as required by Section 4(b), (iv) the Company relocates the Executive's
primary
place of employment to a location, other than either the Washington, D.C. or
Wilmington, Delaware metropolitan areas, further than 50 miles from the
Executive's
primary place of employment on the first day of the Term of this Agreement, or
(v) the
Company demotes the Executive to a position that is not a senior management
position
(other than on account of the Executive's disability, as defined in Section 6
below). In
order for this subsection (c) to be effective: (1) the Executive must give
written notice to
the Company indicating that the Executive intends to terminate employment under
this
subsection (c), (2) the Executive' s voluntary termination under this subsection
must
occur within 60 days after the Executive knows or reasonably should know of an
event
described in clause (i), (ii), (iii), (iv), or (v) above, or within 60 days
after the last in a
series of such events, and (3) the Company must have failed to remedy the event
described in clause (i), (ii), (iii), (iv), or (v), as the case may be, within
30 days after
receiving the Executive's written notice. If the Company remedies the event
described in
clause (i), (ii), (iii), (iv), or (v), as the case may be, within 30 days after
receiving the
Executive's written notice, the Executive may not terminate employment under
this
subsection (c) on account of the event specified in the Executive's notice.
Termination
under the circumstances above shall be deemed an involuntary termination without
Cause
for purposes of non-qualified benefit plans.

(d)  Notwithstanding subsection (a), (b), and (c) of this Section 5, if the
independent
public accountants for the Company (the "Accountants") determine that if the
payments
and/or benefits to be provided under subsections (a), (b), and (c) of this
Section 5 (and/or
any other payments and/or benefits provided or to be provided to the Executive
under any
applicable plan, program, agreement or arrangement maintained, contributed to or
entered into by the Company or any group or entity whose actions result in a
change of
ownership or effective control (as those terms are defined in Code Section 280G
and
regulations promulgated thereunder) or any affiliate of the Company) (a
"Payment" or
collectively "Payments") were provided to the Executive (x) the Executive would
incur
an excise tax under Section 4999 of the Internal Revenue Code of 1986, as
amended (the
"Code") (such excise tax, together with any interest and penalties, are
hereinafter
collectively referred to as the "Excise Tax"), and (y) the net after tax
benefits to the
Executive attributable to the Payments would not be at least $10,000 greater
than the net
after tax benefits that would accrue to the Executive if the Payments that would
otherwise
cause the Executive to be subject to the Excise Tax were not provided, the
Payments shall
be reduced so that the Payments provided to the Executive are the greatest (as
determined
by the Accountants) that may be provided without any such Payment being subject
to the
Excise Tax. If the Payments are to be reduced under this subsection 5(d), the
Executive
shall be given the opportunity to designate which Payments shall be reduced and
in what
order of priority.

                  (i)     If the Executive receives reduced Payments pursuant to
subsection 5(d),
                  or if it had been determined that no such reduction was
required, but it
                  nonetheless is established pursuant to the final determination
of a court or an
                  Internal Revenue Service proceeding that, notwithstanding the
good faith of
                  the Executive and the Company in applying the terms of
subsection 5(d), the
                  aggregate Payments to the Executive would result in any
Payment being
                  subject to the Excise Tax, and that a reduction pursuant to
subsection 5(d)
                  should have occurred, then the Executive shall be deemed for
all purposes to
                  have received a loan made on the date of the receipt of the
Payments in an
                  amount such that, after taking into consideration such loan,
no portion of the
                  aggregate Payments would be subject to the Excise Tax. The
Executive shall
                  have an obligation to repay such loan to the Company on
demand, together
                  with interest on such amount at the applicable Federal rate
(as defined in
                  Section 1274(d) of the Code) from the date of the Executive's
receipt of such
                  loan until the date of such repayment.

                  (ii)     If the Executive's Payments are reduced or are to be
reduced pursuant to
                  subsection 5(d), and it is determined that the Payments were
or are to be
                  reduced pursuant to subsection 5(d) to a greater extent than
was or is
                  necessary to avoid the Excise Tax or it is determined that the
Executive's
                  Payments should not be or should not have been reduced
pursuant to
                  subsection 5(d), then the Company shall promptly pay to the
Executive the
                  amount necessary so that, after such adjustment, the Executive
will have
                  received or be entitled to receive the maximum payments
payable under this
                  subsection 5(d), together with interest at the applicable
Federal rate (as
                  defined in Section 1274(d) of the Code) on amounts that were
incorrectly
                  reduced pursuant to subsection 5(d).

                  (iii)     Gross-Up Payment.

                              (A)      Anything in this Agreement to the
contrary notwithstanding, if
                                          it shall be determined that any
Payments would be subject to
                                          the Excise Tax or any interest or
penalties are incurred, and it
                                          is determined that the Payments should
not be reduced
                                          pursuant to subsection 5(d), then the
Executive shall be entitled
                                          to receive an additional payment (a
"Gross-Up Payment") in an
                                          amount such that after payment by the
Executive of all taxes
                                          (including any interest or penalties
imposed with respect to
                                          such taxes), including, without
limitation, any income taxes,
                                          employment taxes (and any interest and
penalties imposed with
                                          respect thereto) and Excise Taxes
imposed upon the Gross-Up
                                          Payment, the Executive retains an
amount of the Gross-Up
                                          Payment equal to the Excise Tax
imposed upon the Payments.

                               (B)      All determinations required to be made
under this subsection
                                          5(d)(iii), including whether and when
a Gross-Up Payment is
                                          required and the amount of such
Gross-up Payment and the
                                          assumptions to be utilized in arriving
at such determination,
                                          shall be made by the Accountants, who
shall provide detailed
                                          supporting calculations both to the
Company and the Executive
                                          within 15 business days of the receipt
of notice from the
                                          Executive that there has been a
Payment, or such earlier time as
                                          is requested by the Company. All fees
and expenses of the
                                          Accountants shall be borne solely by
the Company. Any
                                          Gross-Up Payment, as determined
pursuant to this subsection
                                          5(d)(iii), shall be paid by the
Company to the Executive within
                                          five days of the receipt of the
Accountants' determination.
                                          Any determination made independently
and in good faith by
                                          the Accountants shall be binding upon
the Company and the
                                          Executive. As a result of the
uncertainty in the application of
                                          Sections 280G and 4999 of the Code, at
the time of the initial
                                          determination by the Accountants
hereunder, it is possible that
                                          Gross-Up Payments which will not have
been made by the
                                          Company should have been made
("Underpayment") consistent
                                          with the calculations required to be
made hereunder. In the
                                          event that the Company exhausts its
remedies pursuant to
                                          subsection 5(d)(iii)(C) and the
Executive thereafter is required
                                          to make a payment of any Excise Tax,
the Accountants shall
                                          determine the amount of the
Underpayment that has occurred
                                          and any such Underpayment shall be
promptly paid by the
                                          Company to or for the benefit of the
Executive.

                              (C)       The Executive shall notify the Company
in writing of any
                                           claim by the Internal Revenue Service
that, if successful,
                                           would require the payment by the
Company of the Gross-Up
                                           Payment. Such notification shall be
given as soon as
                                           practicable but no later than thirty
business days after the
                                           Executive is informed in writing of
such claim and shall
                                           apprise the Company of the nature of
such claim and the date
                                           on which such claim is requested to
be paid. The Executive
                                           shall not pay such claim prior to the
expiration of the 30-day
                                           period following the date on which it
gives such notice to the
                                           Company (or such shorter period
ending on the date that any
                                           payment of taxes with respect to such
claim is due). If the
                                           Company notifies the Executive in
writing prior to the
                                           expiration of such period that it
desires to contest such claim,
                                           the Executive shall:

                                           (1)      give the Company any
information reasonably
                                                      requested by the Company
relating to such claim,

                                           (2)      take such action in
connection with contesting such
                                                      claim as the Company shall
reasonably request in
                                                      writing from time to time,
including, without limitation,
                                                      accepting legal
representation with respect to such
                                                      claim by an attorney
reasonably selected by the
                                                      Company,

                                           (3)       cooperate with the Company
in good faith in order
                                                      effectively to contest
such claim, and

                                            (4)      permit the Company to
participate in any proceedings
                                                       relating to such claim;

                                            provided, however, that the Company
shall bear and pay
                                            directly all costs and expenses
(including additional interest
                                            and penalties) incurred in
connection with such contest and
                                            shall indemnify and hold the
Executive harmless, on an after-
                                            tax basis, for any Excise Tax or
income tax (including interest
                                            and penalties with respect thereto)
imposed as a result of such
                                            representation and payment of costs
and expenses. Without
                                            limitation on the foregoing
provisions of this subsection
                                            5(d)(iii), the Company shall control
all proceedings taken in
                                            connection with such contest and, at
its sole option, may
                                            pursue or forego any and all
administrative appeals,
                                            proceedings, hearings and
conferences with the taxing
                                            authority in respect of such claim
and may, at its sole option,
                                            either direct the Executive to pay
the tax claimed and sue for a
                                            refund or contest the claim in any
permissible manner, and the
                                            Executive agrees to prosecute such
contest to a determination
                                            before any administrative tribunal,
in a court of initial
                                            jurisdiction and in one or more
appellate courts, as the
                                            Company shall determine; provided,
further, that if the
                                            Company directs the Executive to pay
such claim and sue for
                                            a refund, the Company shall advance
the amount of such
                                            payment to the Executive, on an
interest-free basis and shall
                                            indemnify and hold the Executive
harmless, on an after-tax
                                            basis, from any Excise Tax or income
tax (including interest
                                            or penalties with respect thereto)
imposed with respect to such
                                            advance or with respect to any
imputed income with respect
                                            to such advance; and provided,
further, that any extension of
                                            the statute of limitations relating
to payment of taxes for the
                                            taxable year of the Executive with
respect to which such
                                            contested amount is claimed to be
due is limited solely to
                                            such contested amount. Furthermore,
the Company's control
                                            of the contest shall be limited to
issues with respect to which a
                                            Gross-Up Payment would be payable
hereunder and the
                                            Executive shall be entitled to
settle or contest, as the case may
                                            be any other issue raised by the
Internal Revenue Service or
                                            any other taxing authority.

                              (D)        If, after the receipt by the Executive
of an amount advanced
                                            by the Company pursuant to
subsection 5(d)(iii)(C), the
                                            Executive becomes entitled to
receive any refund with respect
                                            to such claim, the Executive shall
(subject to the Company's
                                            complying with the requirements of
subsection 5(d)(iii))
                                            promptly pay to the Company the
amount of such refund
                                            (together with any interest paid or
credited thereon after taxes
                                            applicable thereto). If after the
receipt by the Executive of an
                                            amount advanced by the Company
pursuant to subsection
                                            5(d)(iii), a determination is made
that the Executive shall not
                                            be entitled to any refund with
respect to such claim and the
                                            Company does not notify the
Executive in writing of its intent
                                            to contest such denial of refund
prior to the expiration of 30
                                            days after such determination, then
such advance shall be
                                            forgiven and shall not be required
to be repaid and the amount
                                            of such advance shall offset, to the
extent thereof, the amount
                                            of Gross-Up Payment required to be
paid.

6.   Disability or Death. Upon the Executive's death or disability, the
provisions of
Sections 1, 2, 4, and 5 of this Agreement will terminate. This contract provides
no
benefits due to disability or death in addition to any death, disability and
other benefit
provided under the Company benefit plans in which the executive participates.
The
Executive shall be considered disabled if the Executive is entitled to long-term
disability
benefits under the Company's disability plan or policy.

7.   Cause. For purposes of this Agreement, the term "Cause" means (i)
intentional fraud
or material misappropriation with respect to the business or assets of the
Company, (ii)
persistent refusal or willful failure of the Executive to perform substantially
his duties
and responsibilities to the Company, other than an asserted responsibility which
would
give rise under Section 5(c) above to a right to terminate and have such
termination
considered an involuntary termination without Cause, which continues after the
Executive receives notice of such refusal or failure, (iii) conduct that
constitutes
disloyalty to the Company, and that materially damages the property, business or
reputation of the Company, or (iv) conviction of a felony involving moral
turpitude.

8.   Termination. This Agreement shall terminate upon the successful completion
of the
Term of this Agreement; provided, however, that if the Executive's employment is
terminated during the Term of this Agreement and the Company's and the
Executive's
obligations under Sections 5, 9 or 10 hereof have not been satisfied as of the
last day of
the Term of this Agreement, such obligations shall survive the expiration of the
Term of
this Agreement and shall remain in effect until such time as all such
obligations have
been satisfied. No additional payments are required by the termination of this
Agreement.

9.   Fees and Expenses. The Company will pay all reasonable fees and expenses,
if any,
(including, without limitation, legal fees and expenses) that are incurred by
the Executive
to enforce this Agreement and that result from a breach of this Agreement by the
Company, unless such fees and expenses result from a claim made by the Executive
that
is deemed by an arbitrator, mediator, or court, as applicable, to be frivolous
or made in
bad faith, in which case each party shall pay its own fees and expenses.

10.  Tax Withholding. The Company may withhold from all amounts payable under
this
Agreement an amount necessary to satisfy its income and payroll tax withholding
obligations.

11.  Assignment. The rights and obligations of the Company under this Agreement
will
inure to the benefit of and will be binding upon the successors and assigns of
the
Company. If the Company is consolidated or merged with or into another
corporation, or
if another entity purchases all or substantially all of the Company's assets,
the surviving
or acquiring corporation will succeed to the Company's rights and obligations
under this
Agreement. The Executive's rights under this Agreement may not be assigned or
transferred in whole or in part, except that the personal representative of the
Executive's
estate will receive any amounts payable under this Agreement after the death of
the
Executive.

12.  Rights Under this Agreement. The right to receive benefits under the
Agreement
will not give the Executive any proprietary interest in the Company or any of
its assets.
Benefits under the Agreement will be payable from the general assets of the
Company,
and there will be no required funding of amounts that may become payable under
the
Agreement. The Executive will for all purposes be a general creditor of the
Company.
The interest of the Executive under the Agreement cannot be assigned,
anticipated, sold,
encumbered or pledged and will not be subject to the claims of the Executive's
creditors.

13.  Notice. For purposes of this Agreement, notices and all other
communications to the
Executive must be in writing addressed to the Executive or his personal
representative at
his last known address. All notices to the Company must be directed to the
attention of
the Chief Executive Officer. Such other addresses may be used as either party
may have
furnished to the other in writing. Notices are effective when mailed if sent by
United
States registered mail, return receipt requested, postage prepaid. Notices sent
otherwise
are effective when received. Notwithstanding the forgoing, notices of change of
address
are effective only upon receipt.

14.  Miscellaneous. To the extent not governed by federal law, this Agreement
will be
construed in accordance with the law of the State of Maryland without reference
to its
conflict of laws rules. No provisions of this Agreement may be modified, waived
or
discharged unless such waiver, modification or discharge is agreed to in writing
and the
writing is signed by the Executive and the Company. A waiver of any breach of or
compliance with any provision or condition of this Agreement is not a waiver of
similar
or dissimilar provisions or conditions. The invalidity or unenforceability of
any
provision of this Agreement will not affect the validity or enforceability of
any other
provision of this Agreement, which will remain in full force and effect. This
Agreement
may be executed in one or more counterparts, all of which will be considered one
and the
same agreement. As of the date first above written, the Prior Agreement shall be
superceded in its entirety and shall no longer be of any force or effect.

WITNESS the following signatures.

PEPCO HOLDINGS, INC.                                         EXECUTIVE

       JOHN M. DERRICK, JR.                                    E. R. MAYBERRY
By:__________________________                    _________________________
     Chairman of the Board and Chief
     Executive Officer