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                               TABLE OF CONTENTS
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                                                              Page
<S>            <C>                                            <C>
 
               Objectives of the Plan                          1
 
    I.         Plan Components                                 2
 
 
    II.        Common Stock Options Program                    2
 
 
    III.       Dividend Rights Program                         3
 
 
    IV.        Performance-Based Restricted Stock Program      4
 
 
    V.         Specific Guidelines                             7
 
 
    VI.        Eligibility                                     8
 
 
    VII.       Issuance                                        8
 
 
    VIII.      Company Successors                              9
 
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                            OBJECTIVES OF THE PLAN


 .    Improve financial and operational performance of the Company by focusing
     executive attention on the long run total return to stockholders, including
     competitive growth in market price and dividend yield.

 .    Align executive interest with stockholder interest in a balanced fashion
     with predominant focus on long-term stock price appreciation and a strong
     secondary focus on dividend security and growth and executive stock
     ownership.

 .    Stimulate individual performance within the context of a team effort.

 .    Provide compensation levels that allow the Company to attract, retain, and
     motivate highly competent executives.

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I.   PLAN COMPONENTS

     The Compensation Committee of the Board of Directors has the authority to
     designate appropriate programs to carry out the objectives of the Long-Term
     Incentive Plan.  The Committee has broad authority to choose any
     combination of stock options, stock appreciation rights, restricted stock,
     performance units, performance shares, or other long-term programs to meet
     these objectives.

     Effective January 1, 1993, for the 1993 Plan Year and for awards and grants
     made under the Long-Term Incentive Plan (the "Plan") thereafter, the
     Compensation Committee has determined that given current tax laws and other
     economic considerations, the Performance-Based Restricted Common Stock
     Grants program is the appropriate program to be authorized under the Plan.

     No amendment to the Plan shall be deemed to affect any award already
     granted under the Plan for prior Plan Years.

II.  COMMON STOCK OPTIONS PROGRAMS

     This Program consists of Non-Qualified Stock Options encompassing the
     following characteristics:

     .    Granted at fair market value on date of grant.

     .    Gain is solely a function of stock price increases above the initial
          grant price.

     .    After a one-year holding period, 100% of the options are vested.

     .    Options are exercisable over a 10-year term or age 70, whichever is
          earlier.

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     .    At termination other than through retirement, death or disability,
          options that have been held less than one year are forfeited; options
          that have been held for more than one year are "exercisable" but may
          be exercised only for a period of three months from termination.

     .    Stock for stock swaps are permitted.

     .    For 1992, options to purchase shares of the Company's Common Stock
          were granted at a level to produce 20% of the targeted competitive
          gain.  Effective January 1, 1993, no new options will be granted under
          the Plan.

     .    Employees who retire within the calendar year when an option might be
          granted may have their options prorated based on remaining active
          employment, except as the Compensation Committee may otherwise decide.

III. DIVIDEND RIGHTS PROGRAM

     The Dividend Rights Program consists of a Dividend Rights Account for each
     participant encompassing the following characteristics:

     .    Dividends accrue to rights in an assigned account,

     .    Fixed date for payout is five years after date of grant.

     .    For 1992, Dividend Rights were granted at a level to produce 40% of
          the targeted competitive gain. Effective January 1, 1993, no new
          grants of Dividend Rights will be made under the Plan.

     .    Dividend Rights accounts do not accrue interest.

     .    Account balance is forfeited if participant's employment terminates
          other than through retirement, death or disability before the date of
          payout unless waived by the Compensation Committee.  Payout is made at
          time of retirement, death or disability.

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     .    Dividend Rights account balances payable prior to 1997 will be paid in
          cash.  Effective January 1, 1992, for the 1992 Plan Year and for
          Dividend Rights granted thereafter (which Dividend Rights are payable
          beginning in 1997), Dividend Rights account balances will be paid as
          described herein.  Subject to adjustment for fractional shares of
          Common Stock, 75% of each Dividend Rights account balance due will be
          paid to the participant in cash. 25% of cash Dividend Rights account
          balance due will be paid to the participant in shares of the Company's
          Common Stock, using, at the Company's option, either newly-issued or
          open-market shares (or a combination thereof).  The market value of
          such shares of Common Stock will be determined at the close of trading
          on the New York Stock Exchange on the first business day in February
          following the date on which the Dividend Rights account balance
          becomes payable.  If the portion of a Dividend Rights account balance
          to be paid in shares of the Company's Common Stock includes fractional
          shares, the value of such fractional shares will be paid as part of
          the cash payment made to the participant.

IV.  PERFORMANCE-BASED RESTRICTED STOCK PROGRAM

     The Performance-Based Restricted Stock Program will consist of conditional
     grants, subject to forfeiture, of performance-based restricted shares of
     the Company's Common Stock, using openmarket shares, encompassing the
     following characteristics:

     .    Vesting of final awards of performance-based restricted common stock
          shall occur, if at all, at the end of a four-year restriction period.

     .    The participant's ability to transfer or otherwise alienate or assign
          performance-based restricted shares of the Company's Common Stock

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          conditionally granted to him or her (as well as the ability to
          transfer the right to vote or direct the voting of those shares and
          receive dividend-related compensation) is restricted for a period of
          four years.

     .    The number of shares conditionally granted to a participant are
          subject to forfeiture or increase, depending on how the total return
          for Delmarva shareholders compares to a peer group of electric
          utilities at the end of the four-year restriction period, as follows:
<TABLE>
<CAPTION>
                             ====================================================
                                  Delmarva's Total
                                 Shareholder Return      Percent of Conditional
                                     Percentile               Grant Earned
                                (4-year cumulative)*       (no interpolation)
                             ----------------------------------------------------
                                <S>                      <C>
                                  90%    to    100%                         150%
                             ---------------------------------------------------- 
                                  75%   to    89.9%                         130%
                             ----------------------------------------------------
                                  60%   to    74.9%                         115%
                             ---------------------------------------------------- 
                                  50%   to    59.9%                         100%
                             ----------------------------------------------------
                                  40%   to    49.9%                          50%
                             ----------------------------------------------------
                                  35%   to    39.9%                          25%
                             ----------------------------------------------------
                                    less than 35%                             0%
                             ====================================================
</TABLE>

          *This column represents Delmarva's actual percentile ranking based on
          the peer group comparison at the end of the four-year restriction
          period.  There is no interpolation between steps.

     .    The participant receives compensation measured by dividends and may
          vote or direct the voting of performance-based restricted shares of
          Common Stock during the four-year restriction period.  No portion of
          such compensation paid to the participant during the restriction
          period will be forfeited if the performance criterion is not met.  No
          additional dividends will be paid, however, to the participant for
          prior periods if shares of Common Stock actually earned by and vested
          in the participant at the end of the four-year 

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          restriction period exceed the number of performance-based restricted
          shares initially granted to the participant.

     .    For 1992, awards of performance-based restricted shares of Common
          Stock were granted at a level to produce 40% of the potential gain.
          Effective January 1, 1993, awards of performance-based restricted
          shares of Common Stock are granted at a level to produce 100% of the
          targeted competitive gain.

     .    Conditional grants of performance-based restricted shares of Common
          Stock are forfeited in the event of termination, other than for
          reasons of retirement, death, or disability, unless the forfeiture is
          waived by the Compensation Committee.

     .    Restrictions on shares of Common Stock conditionally granted to
          participants who then become retired or disabled will lapse at the end
          of the four-year restriction period.  The participant's shares will be
          subject to forfeiture or increase at that time, on a pro rata basis,
          depending on the total return for Delmarva's shareholders over the
          four-year restriction period.

     .    In the event of a participant's death (including his or her death
          while retired or disabled), restrictions on his or her performance-
          based restricted shares of Common Stock will lapse, on a pro rata
          basis, immediately, without regard to whether the performance
          criterion is met at the end of the four-year restriction period.

     .    For purposes of this program, "pro rata" means the difference between
          the time a grant is made and the date of retirement, disability, or
          death as that period relates to the four-year restriction period.

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V.   SPECIFIC GUIDELINES

     Regardless of programs selected by the Compensation Committee, the
     following guidelines apply.

     The overall potential gains from the Plan are intended to be sufficient,
     when combined with other forms of compensation, to attract and retain
     highly competent executives and to motivate high levels of performance from
     individuals with the knowledge, skills and abilities to build long-run
     total return for shareholders, consistent with the Company's customer
     objectives for reliable energy supply at competitive prices. The Company
     will analyze surveys of long-term incentive plans to determine recommended
     target and grant levels.  Annually, the Compensation Committee will approve
     target and grant levels designed to accomplish this objective.

     The Compensation Committee will exercise its discretion to increase or
     decrease general grant levels depending upon its evaluation of management
     performance and its desire to provide additional individual incentive for
     future performance.

     However, it is assumed that in order to receive any grant, the eligible
     executive must be performing at a competent level.  Recommended adjustments
     for the Chairman and Chief Executive Officer will be made by the Chairman
     of the Compensation Committee.

VI.  ELIGIBILITY

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     Employees in jobs core graded at salary grade level 19 and above are
     eligible for participation in the Long-Term Incentive Plan including
     employees in the entry grade 18 to a job core graded 19.

VII. ISSUANCE

     Grants under the Long-Term Incentive Plan will be considered on a yearly
     basis subject to recommendation of senior management and approval of the
     Compensation Committee of the Board of Directors. At its discretion, the
     Compensation Committee may discontinue issuance of grants as it deems
     appropriate and may alter the Plan pursuant to authority granted by the
     stockholders.

     Upon recommendation by senior management, the Compensation Committee may
     also award grants for newly promoted or hired employees at any time.

     Appropriate grant instruments will be issued to participants for their
     review and execution.


VIII.  COMPANY SUCCESSORS

     In the event the Company becomes a party to a merger, consolidation, sale
     of substantially all of its assets, or any other corporate reorganization
     in which the Company will not be the surviving corporation or in which the
     holders of Company stock will receive securities of another corporation,
     the Company, prior to such merger, consolidation, sale of assets or
     reorganization, shall make payment of all dividends in the Dividend Rights
     Accounts or at the participants' option the ongoing obligation to make such
     payments shall be assumed by the surviving corporation.  In 

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     the event that the change in ownership of the Company through the purchase
     by an individual or group of individuals acting in concert of at least 25%
     of the voting securities of the Company takes place, all dividends in the
     Dividend Rights Account will be immediately paid or, at the employees
     option, the ongoing obligation to make such payments will continue.

     All rights with respect to options granted and vested will likewise remain
     exercisable for their ten-year lives in the event of reorganizations or
     changes in ownership as outlined in this Section.

     Likewise, in the event of reorganizations or changes in ownership as
     outlined in this Section, all restrictions on performance-based restricted
     shares of Common Stock will lapse immediately, without regard to
     performance criterion then or at the end of any four-year Performance
     Period, and shares of Common Stock free of any restrictive legend shall be
     issued to the participant or his legal representative.

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