SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE GAS AND ELECTRIC  COMPANY (the "Company") and BRUCE M. AMBLER
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term  "Company"  shall be deemed to include  any  successor  company,  and where
applicable,  shall be deemed to  include  Constellation  Holdings,  Inc.  or any
successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.      Definitions.

                  1.1     Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2     Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3     Qualifying Termination.

<PAGE>


                  (a)     The  occurrence of any one or more of the following
events within  twenty-four calendar months after the Effective Time shall
constitute a "Qualifying Termination":

                  (i)     The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                  (ii)    The Executive's resignation for Good Reason (as
         defined in Section 1.6);

                  (iii)   Failure or refusal by a successor  company to assume
         the Company's  obligations under this Agreement in its entirety, as
         required by Section 9 herein; or

                  (iv)    Commission  by the  Company of a material breach of
         any of the  provisions  of this Agreement.

                  (b)     A Qualifying  Termination  also shall include a
termination of the  Executive's employment, without Cause, from the date hereof,
but prior to the Effective Time.

                  (c)     A Qualifying  Termination  shall not include a
termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                  1.4     Ineligible  to Retire.  Ineligible  to Retire,  means
an Executive  who has not either (i)  attained  age 55 and completed 20 years of
service with the Company and any  successor  company or (ii)  attained age 60
and  completed  one year of service with the Company and any  successor
company,  upon the  occurrence of a Qualifying Termination.

                  1.5     Eligible to Retire.        Eligible  to Retire,  means
an  Executive  who has either (i)  attained  age 55 and completed 20 years of
service with the Company and any successor  company or (ii) attained age 60 with
one year of service with the Company and any successor  company,  upon the
occurrence  of a  Qualifying Termination.

                  1.6     Good  Reason.  Good Reason  means,  without the
Executive's  express  written consent,  the  occurrence  (i) after the

<PAGE>

Effective Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                  (a)     The  assignment to the  Executive of duties materially
inconsistent  with the Executive's  authorities,  duties, responsibilities,
and  status  (including offices,  title and reporting relationships)  as an
executive and/or officer of the Company,  or a material reduction or  alteration
in the nature or status of the Executive's authorities, duties, or
responsibilities from those in effect as of  ninety  days  prior  to the
Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                  (b)     A  reduction  by the  Company of the Executive's  base
salary in effect at the Effective Time (or in the case of a reduction  after the
date hereof,  but prior to the Effective Time, a reduction by the Company of the
Executive's base salary in effect on the date  hereof)  or as the same shall be
increased  from time to time,  unless such reduction is less than ten percent
(10%) and it is either (i) replaced by an incentive opportunity  equal in value;
or is (ii) consistent and proportional  with  an overall  reduction  in
management  compensation  due to extraordinary  business conditions,   including
but  not  limited  to  reduced profitability and other financial stress (i.e.,
the base salary of the Executive will not be singled out for reduction in a
manner  inconsistent with a reduction imposed on other executives of the
Company);

                  (c)     The  relocation  of  the  Executive's office  more
than  50  miles  from  the Executive's  office at the Effective Time (or in the
case of a relocation  after the  date  hereof,  but  prior  to the  Effective
Time,  a  relocation  of the Executive's  office more than 50 miles from the
Executive's  office on the date hereof).

                  The Executive's  right to terminate  employment for Good
Reason shall not be affected by the Executive's  incapacity due to physical or
mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.


<PAGE>

                  1.7     Cause.  Cause shall mean the occurrence of any one or
more of the following:

                  (a)     The Executive is convicted of a felony involving moral
turpitude; or

                  (b)     The Executive  engages in conduct or activities that
constitutes  disloyalty to the Company and such conduct or activities are
materially  damaging to the property,  business or reputation of the Company; or

                  (c)     The  Executive  persistently  fails or  refuses  to
comply  with  any  written direction  of an  authorized  representative  of the
Company  other than a  directive  constituting  an  assignment described in
Section 1.6(a); or

                  (d)     The  Executive  embezzles  or  knowingly,  and  with
intent,   misappropriates property of the Company, or unlawfully appropriates
any corporate opportunity of the Company.

                  1.8     Annual Award Amount. The average of the two highest
annual incentive  awards under the Company's  Executive  Incentive  Plan (or the
annual cash  incentive  plan  maintained by a successor  company) paid in the
last five years to the Executive prior to the occurrence of the Qualifying
Termination.

                  2.      Severance Benefits for an Executive Ineligible to
Retire.  Upon the occurrence of a Qualifying Termination with respect to an
Executive who is Ineligible to Retire:

                  (a)     Severance Payment:  The Company shall pay to the
Executive an amount equal to two and one-fourth  times the Executive's  annual
base salary (as in effect on the date of the  Qualifying  Termination,  not
reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                  (b)     Severance Health Benefits. For the thirty-six month
period commencing on the occurrence of such Qualifying  Termination,  the
Company shall provide to the Executive and the Executive's  family medical and
dental benefits as provided to other executive officers who remain employed by
the Company.  The Executive  shall be  required  to make  payments  for such
coverage in


<PAGE>

the same amount as is required of executive officers who remain
employed by the Company.

                  (c)     Split  Dollar.  The  Qualifying   Termination  shall
not constitute a termination of the Split Dollar  Agreement  between the Company
and the Executive (or the split dollar agreement between a successor company and
the Executive),  and the  Executive  shall  be  deemed  to have  retired  upon
such Qualifying Termination for purposes of such Split Dollar Agreement (or the
split dollar agreement between a successor company and the Executive).

                  3.      Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)     Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)     Supplemental   Retirement   Benefits.   For  purposes
of determining the Executive's supplemental retirement benefits which the
Executive is entitled to under the Company's  Executive Benefits Plan (or the
supplemental retirement  plan  maintained  by a  successor  company),  the
Early  Retirement Adjustment  Factor  (as such term is defined in the  Company's
Pension  Plan or within  the  meaning  of the  tax  qualified  retirement  plan
maintained  by a successor company) will be one (1).

                  (c)     Severance  Health  Benefits.  The Company shall
provide to the Executive and the Executive's family medical and dental benefits
on the same basis and on the same terms as any retiree who has attained age 65
and completed the greater of 20 years or actual years of service.

                  (d)     Retirement.  The  Executive  shall be  treated  as
having retired at the Company's  request for purposes of all of the  Company's
benefit plans (or the benefit plans maintained by a successor company).


<PAGE>

                  4.      Code Section 28OG.

                  4.1     Limitations.  Notwithstanding  Section 2 and 3, in the
event  that a change in ownership or control (within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code")) of the Company
occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)     the  Executive  would incur an excise tax under
Section 4999 of Code,  and the Company  would be denied a deduction  under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                  (b)     the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2     Executive's  Election.  If the  amounts to be paid to
the Executive are to be reduced under  paragraph 4.1 of this Section,  the
Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                  4.3     Later Adjustments.

                  (a)     If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of

<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in applying  the terms of this
Section,  the  aggregate  amount paid to the Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code, then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an obligation  to repay 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
excess until the date of such repayment.

                  (b)     In the event that it is  determined  for any reason
that the amount of "excess parachute  payments"  are less than  originally
calculated,  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
Section  without  any of such  payments constituting  an "excess  parachute
payment,"  together  with  interest on such amount at the  applicable  Federal
rate (as  defined in Section  1274(d) of the Code).

                  5.      Termination of Agreement.  This Agreement  shall
remain in effect from the date hereof until the last day of the  twenty-fourth
calendar  month  following  the Effective Time. Further,  upon the Effective
Time, this Agreement shall continue until the  Company  or its  successor  shall
have  fully  performed  all of its obligations thereunder with respect to the
Executive, with no future performance being possible. Notwithstanding the
foregoing, this Agreement shall terminate on the date the Company's Board of
Directors  decides by formal vote not to proceed with the Merger;  provided,
however, that in the event a Qualifying Termination occurs prior to such date,
this  Agreement  shall continue until the Company or its successor shall have
fully performed all of its obligations  thereunder with respect to the
Executive, with no further performance being possible.

                  6.      Amendment  of  Agreement.  Subject  to the  provisions
of Section  5,  this  Agreement  may  not be  amended  in any  manner  which has
a significant  adverse  effect on the rights of the Executive  without the
written consent  of the  Executive.


<PAGE>

Notwithstanding  the  foregoing,  at and after the Effective  Time,  this
Agreement may not be amended in any respect without the written consent of the
Executive.

                  7.      Construction.  Wherever any words are used herein in
the masculine  gender they shall be construed  as though they were also used in
the feminine  gender in all cases where they would so apply,  and  wherever any
words are used herein in the singular  form,  they shall be  construed  as
though  they were also used in the plural form in all cases where they would so
apply.

                  8.      Governing Law.  This Agreement shall be governed by
the laws of Maryland.

                  9.      Successors and Assigns.  This  Agreement  shall be
binding upon the Company and any assignee or successor in interest to the
Company.

                  10.     Indemnification.  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.

                  11.      Notice. Any notices,  requests,  demands, or other
communications  provided for by this Agreement  shall be sufficient  if in
writing and if sent by  registered or certified  mail to the Executive at the
last address he has filed in writing with the Company, or in the case of the
Company, to its principal offices.

                                          BALTIMORE GAS AND ELECTRIC COMPANY



                                          By: /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services



                                              /s/ Bruce M. Ambler
                                              BRUCE M. AMBLER


<PAGE>

                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE GAS AND ELECTRIC  COMPANY (the "Company") and THOMAS F. BRADY
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.       Definitions.

                  1.1      Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2      Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.



<PAGE>

                            (a)    The  occurrence of any one or more of the
following  events within  twenty-four calendar months after the Effective Time
shall constitute a "Qualifying Termination":

                            (i)    The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                            (ii)   The  Executive's  resignation for Good
         Reason  (as  defined  in Section 1.6);

                            (iii)  Failure or refusal by a successor  company to
         assume the Company's  obligations under this Agreement in its entirety,
         as required by Section 9 herein; or

                            (iv)   Commission  by the  Company  of a  material
         breach of any of the provisions of this Agreement.

                            (b)    A Qualifying  Termination  also shall include
a termination of the  Executive's employment, without Cause, from the date
hereof, but prior to the Effective Time.

                            (c)     A Qualifying  Termination  shall not include
a  termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                            1.4     Ineligible  to Retire.  Ineligible  to
Retire,  means an Executive  who has not either (i)  attained  age 55 and
completed 20 years of service with the Company and any  successor  company or
(ii)  attained age 60 and  completed  one year of service with the Company and
any  successor  company,  upon the  occurrence of a Qualifying Termination.

                            1.5     Eligible to Retire.  Eligible  to Retire,
means  an  Executive  who has either (i)  attained  age 55 and completed 20
years of service with the Company and any successor  company or (ii) attained
age 60 with one year of service with the Company and any successor  company,
upon the  occurrence  of a  Qualifying Termination.

                            1.6     Good  Reason.  Good Reason  means,  without
the  Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                            (a)     The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                            (b)     A  reduction  by the  Company of the
Executive's  base salary in effect at the Effective Time (or in the case of a
reduction  after the date hereof,  but prior to the Effective Time, a reduction
by the Company of the Executive's base salary in effect on the date  hereof)  or
as the same shall be  increased  from time to time,  unless such reduction is
less than ten percent (10%) and it is either (i) replaced by an incentive
opportunity  equal in value; or is (ii) consistent and proportional  with  an
overall  reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                            (c)     The  relocation  of  the  Executive's
office  more  than  50  miles  from  the Executive's  office at the Effective
Time (or in the case of a relocation  after the  date  hereof,  but  prior  to
the  Effective  Time,  a  relocation  of the Executive's  office more than 50
miles from the  Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.


<PAGE>

                  1.7     Cause.  Cause shall mean the occurrence of any one or
more of the following:

                  (a)     The Executive is convicted of a felony involving moral
turpitude; or

                  (b)     The Executive  engages in conduct or activities that
constitutes  disloyalty to the Company and such conduct or activities are
materially  damaging to the property,  business or reputation of the Company; or

                  (c)     The  Executive  persistently  fails or  refuses  to
comply  with  any  written direction  of an  authorized  representative  of the
Company  other than a  directive  constituting  an  assignment described in
Section 1.6(a); or

                  (d)     The  Executive  embezzles  or  knowingly,  and  with
intent,   misappropriates property of the Company, or unlawfully appropriates
any corporate opportunity of the Company.

                  1.8     Annual Award Amount. The average of the two highest
annual incentive  awards under the Company's  Executive  Incentive  Plan (or the
annual cash  incentive  plan  maintained by a successor  company) paid in the
last five years to the Executive prior to the occurrence of the Qualifying
Termination.

                  2.      Severance Benefits for an Executive  Ineligible to
Retire.  Upon the occurrence of a Qualifying Termination with respect to an
Executive who is Ineligible to Retire:

                  (a)     Severance Payment:  The Company shall pay to the
Executive an amount equal to two and one-fourth  times the Executive's  annual
base salary (as in effect on the date of the  Qualifying  Termination,  not
reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                  (b)     Severance Health Benefits. For the thirty-six month
period commencing on the occurrence of such Qualifying  Termination,  the
Company shall provide to the Executive and the Executive's  family medical and
dental benefits as provided to other executive officers who remain employed by
the Company.  The Executive  shall be  required  to make  payments  for such
coverage in


<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)     Split  Dollar.  The  Qualifying   Termination  shall
not constitute a termination of the Split Dollar  Agreement  between the Company
and the Executive (or the split dollar agreement between a successor company and
the Executive),  and the  Executive  shall  be  deemed  to have  retired  upon
such Qualifying Termination for purposes of such Split Dollar Agreement (or the
split dollar agreement between a successor company and the Executive).

                  3.      Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)     Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)     Supplemental   Retirement   Benefits.   For  purposes
of determining the Executive's supplemental retirement benefits which the
Executive is entitled to under the Company's  Executive Benefits Plan (or the
supplemental retirement  plan  maintained  by a  successor  company),  the
Early  Retirement Adjustment  Factor  (as such term is defined in the  Company's
Pension  Plan or within  the  meaning  of the  tax  qualified  retirement  plan
maintained  by a successor company) will be one (1).

                  (c)     Severance  Health  Benefits.  The Company shall
provide to the Executive and the Executive's family medical and dental benefits
on the same basis and on the same terms as any retiree who has attained age 65
and completed the greater of 20 years or actual years of service.

                  (d)     Retirement.  The  Executive  shall be  treated  as
having retired at the Company's  request for purposes of all of the  Company's
benefit plans (or the benefit plans maintained by a successor company).


<PAGE>

                  4.      Code Section 28OG.

                  4.1     Limitations.  Notwithstanding  Section 2 and 3, in the
event  that a change in ownership or control (within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code")) of the Company
occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)     the  Executive  would incur an excise tax under
Section 4999 of Code,  and the Company  would be denied a deduction  under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                   (b)    the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2     Executive's  Election.  If the  amounts to be paid to
the Executive are to be reduced under  paragraph 4.1 of this Section,  the
Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                  4.3     Later Adjustments.

                  (a)     If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of

<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in applying  the terms of this
Section,  the  aggregate  amount paid to the Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code, then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an obligation  to repay 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
excess until the date of such repayment.

                  (b)     In the event that it is  determined  for any reason
that the amount of "excess parachute  payments"  are less than  originally
calculated,  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
Section  without  any of such  payments constituting  an "excess  parachute
payment,"  together  with  interest on such amount at the  applicable  Federal
rate (as  defined in Section  1274(d) of the Code).

                  5.      Termination of Agreement.  This Agreement  shall
remain in effect from the date hereof until the last day of the  twenty-fourth
calendar  month  following  the Effective Time. Further,  upon the Effective
Time, this Agreement shall continue until the  Company  or its  successor  shall
have  fully  performed  all of its obligations thereunder with respect to the
Executive, with no future performance being possible. Notwithstanding the
foregoing, this Agreement shall terminate on the date the Company's Board of
Directors  decides by formal vote not to proceed with the Merger;  provided,
however, that in the event a Qualifying Termination occurs prior to such date,
this  Agreement  shall continue until the Company or its successor shall have
fully performed all of its obligations  thereunder with respect to the
Executive, with no further performance being possible.

                  6.      Amendment  of  Agreement.  Subject  to the  provisions
of Section  5,  this  Agreement  may  not be  amended  in any  manner  which has
a significant  adverse  effect on the rights of the Executive  without the
written consent  of the  Executive.


<PAGE>

Notwithstanding  the  foregoing,  at and after the Effective  Time,  this
Agreement may not be amended in any respect without the written consent of the
Executive.

                  7.      Construction.  Wherever any words are used herein in
the masculine  gender they shall be construed  as though they were also used in
the feminine  gender in all cases where they would so apply,  and  wherever any
words are used herein in the singular  form,  they shall be  construed  as
though  they were also used in the plural form in all cases where they would so
apply.

                  8.      Governing Law.  This Agreement shall be governed by
the laws of Maryland.

                  9.      Successors and Assigns.  This  Agreement  shall be
binding upon the Company and any assignee or successor in interest to the
Company.

                  10.     Indemnification.  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.

                  11.     Notice. Any notices,  requests,  demands, or other
communications  provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has filed in writing with the Company, or in the case of the Company, to its
principal offices.

                                         BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services


                                              /s/ Thomas F. Brady
                                              THOMAS F. BRADY


<PAGE>

                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE GAS AND ELECTRIC  COMPANY (the  "Company") and DAVID A. BRUNE
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.      Definitions.

                  1.1     Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2     Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3     Qualifying Termination.


<PAGE>

                            (a)    The  occurrence of any one or more of the
following  events within  twenty-four calendar months after the Effective Time
shall constitute a "Qualifying Termination":

                            (i)    The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                            (ii)   The Executive's resignation for Good Reason
         (as defined in Section 1.6);

                            (iii)  Failure or refusal by a successor  company to
         assume the Company's  obligations under this Agreement in its entirety,
         as required by Section 9 herein; or

                            (iv)   Commission  by the  Company of a material
         breach of any of the  provisions  of this Agreement.

                            (b)    A Qualifying  Termination  also shall include
a termination of the  Executive's employment, without Cause, from the date
hereof, but prior to the Effective Time.

                            (c)     A Qualifying  Termination  shall not include
a  termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                            1.4     Ineligible  to Retire.  Ineligible  to
Retire,  means an Executive  who has not either (i)  attained  age 55 and
completed 20 years of service with the Company and any  successor  company or
(ii)  attained age 60 and  completed  one year of service with the Company and
any  successor  company,  upon the  occurrence of a Qualifying Termination.

                            1.5     Eligible to Retire.  Eligible  to  Retire,
means  an  Executive  who has either (i)  attained  age 55 and  completed 20
years of service with the Company and any successor  company or (ii) attained
age 60 with one year of service with the Company and any  successor  company,
upon the  occurrence  of a  Qualifying Termination.

                            1.6     Good  Reason.  Good Reason  means,  without
the  Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                            (a)     The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                            (b)     A  reduction  by the  Company of the
Executive's  base salary in effect at the Effective Time (or in the case of a
reduction  after the date hereof,  but prior to the Effective Time, a reduction
by the Company of the Executive's base salary in effect on the date  hereof)  or
as the same shall be  increased  from time to time,  unless such reduction is
less than ten percent (10%) and it is either (i) replaced by an incentive
opportunity  equal in value; or is (ii) consistent and proportional  with  an
overall  reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                            (c)     The  relocation  of  the  Executive's
office  more  than  50  miles  from  the Executive's  office at the Effective
Time (or in the case of a relocation  after the  date  hereof,  but  prior  to
the  Effective  Time,  a  relocation  of the Executive's  office more than 50
miles from the  Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.


<PAGE>

                  1.7     Cause.  Cause shall mean the occurrence of any one or
more of the following:

                  (a)     The Executive is convicted of a felony involving moral
turpitude; or

                  (b)     The Executive  engages in conduct or activities that
constitutes  disloyalty to the Company and such conduct or activities are
materially  damaging to the property,  business or reputation of the Company; or

                  (c)     The  Executive  persistently  fails or  refuses  to
comply  with  any  written direction  of an  authorized  representative  of the
Company  other than a  directive  constituting  an  assignment described in
Section 1.6(a); or

                  (d)     The  Executive  embezzles  or  knowingly,  and  with
intent,   misappropriates property of the Company, or unlawfully appropriates
any corporate opportunity of the Company.

                  1.8     Annual Award Amount. The average of the two highest
annual incentive  awards under the Company's  Executive  Incentive  Plan (or the
annual cash  incentive  plan  maintained by a successor  company) paid in the
last five years to the Executive prior to the occurrence of the Qualifying
Termination.

                  2.      Severance Benefits for an Executive  Ineligible to
Retire.  Upon the occurrence of a Qualifying Termination with respect to an
Executive who is Ineligible to Retire:

                  (a)     Severance Payment:  The Company shall pay to the
Executive an amount equal to two and one-fourth  times the Executive's  annual
base salary (as in effect on the date of the  Qualifying  Termination,  not
reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                  (b)     Severance Health Benefits. For the thirty-six month
period commencing on the occurrence of such Qualifying  Termination,  the
Company shall provide to the Executive and the Executive's  family medical and
dental benefits as provided to other executive officers who remain employed by
the Company.  The Executive  shall be  required  to make  payments  for such
coverage in


<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)     Split  Dollar.  The  Qualifying   Termination  shall
not constitute a termination of the Split Dollar  Agreement  between the Company
and the Executive (or the split dollar agreement between a successor company and
the Executive),  and the  Executive  shall  be  deemed  to have  retired  upon
such Qualifying Termination for purposes of such Split Dollar Agreement (or the
split dollar agreement between a successor company and the Executive).

                  3.      Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)     Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)     Supplemental   Retirement   Benefits.   For  purposes
of determining the Executive's supplemental retirement benefits which the
Executive is entitled to under the Company's  Executive Benefits Plan (or the
supplemental retirement  plan  maintained  by a  successor  company),  the
Early  Retirement Adjustment  Factor  (as such term is defined in the  Company's
Pension  Plan or within  the  meaning  of the  tax  qualified  retirement  plan
maintained  by a successor company) will be one (1).

                  (c)     Severance  Health  Benefits.  The Company shall
provide to the Executive and the Executive's family medical and dental benefits
on the same basis and on the same terms as any retiree who has attained age 65
and completed the greater of 20 years or actual years of service.

                  (d)     Retirement.  The  Executive  shall be  treated  as
having retired at the Company's  request for purposes of all of the  Company's
benefit plans (or the benefit plans maintained by a successor company).


<PAGE>

                  4.      Code Section 28OG.

                  4.1     Limitations.  Notwithstanding  Section 2 and 3, in the
event  that a change in ownership or control (within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code")) of the Company
occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)     the  Executive  would incur an excise tax under
Section 4999 of Code,  and the Company  would be denied a deduction  under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                  (b)     the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2     Executive's  Election.  If the  amounts to be paid to
the Executive are to be reduced under  paragraph 4.1 of this Section,  the
Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                  4.3     Later Adjustments.

                  (a)     If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of

<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in applying  the terms of this
Section,  the  aggregate  amount paid to the Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code, then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an obligation  to repay 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
excess until the date of such repayment.

                  (b)     In the event that it is  determined  for any reason
that the amount of "excess parachute  payments"  are less than  originally
calculated,  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
Section  without  any of such  payments constituting  an "excess  parachute
payment,"  together  with  interest on such amount at the  applicable  Federal
rate (as  defined in Section  1274(d) of the Code).

                  5.      Termination of Agreement.  This Agreement  shall
remain in effect from the date hereof until the last day of the  twenty-fourth
calendar  month  following  the Effective Time. Further,  upon the Effective
Time, this Agreement shall continue until the  Company  or its  successor  shall
have  fully  performed  all of its obligations thereunder with respect to the
Executive, with no future performance being possible. Notwithstanding the
foregoing, this Agreement shall terminate on the date the Company's Board of
Directors  decides by formal vote not to proceed with the Merger;  provided,
however, that in the event a Qualifying Termination occurs prior to such date,
this  Agreement  shall continue until the Company or its successor shall have
fully performed all of its obligations  thereunder with respect to the
Executive, with no further performance being possible.

                  6.      Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.


<PAGE>

Notwithstanding the foregoing, at and after the Effective Time, this Agreement
may not be amended in any respect  without the written  consent of the
Executive.

                  7.      Construction.  Wherever any words are used herein in
the masculine  gender they shall be construed  as though they were also used in
the feminine  gender in all cases where they would so apply,  and  wherever any
words are used herein in the singular  form,  they shall be  construed  as
though  they were also used in the plural form in all cases where they would so
apply.

                  8.      Governing Law.  This Agreement shall be governed by
the laws of Maryland.

                  9.      Successors and Assigns.  This  Agreement  shall be
binding upon the Company and any assignee or successor in interest to the
Company.

                  10.     Indemnification.  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.

                  11.     Notice. Any notices,  requests,  demands, or other
communications  provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has filed in writing with the Company, or in the case of the Company, to its
principal offices.

                                         BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services



                                              /s/ David A. Brune
                                              DAVID A. BRUNE


<PAGE>

                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE GAS AND ELECTRIC  COMPANY (the "Company") and HERBERT D. COSS
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.      Definitions.

                  1.1     Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2     Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.



<PAGE>

                            (a)     The  occurrence of any one or more of the
following  events within  twenty-four calendar months after the Effective Time
shall constitute a "Qualifying Termination":

                            (i)    The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                            (ii)   The Executive's resignation for Good Reason
         (as defined in Section 1.6);

                            (iii)  Failure or refusal by a successor  company to
         assume the Company's  obligations under this Agreement in its entirety,
         as required by Section 9 herein; or

                            (iv)   Commission  by the  Company of a material
         breach of any of the  provisions  of this Agreement.

                            (b)     A Qualifying  Termination  also shall
include a termination of the  Executive's employment, without Cause, from the
date hereof, but prior to the Effective Time.

                            (c)     A Qualifying  Termination  shall not include
a  termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                            1.4     Ineligible  to Retire.  Ineligible  to
Retire,  means an Executive  who has not either (i)  attained  age 55 and
completed 20 years of service with the Company and any  successor  company or
(ii)  attained age 60 and  completed  one year of service with the Company and
any  successor  company,  upon the  occurrence of a Qualifying Termination.

                            1.5     Eligible to Retire.  Eligible  to  Retire,
means  an  Executive  who has either (i)  attained  age 55 and  completed 20
years of service with the Company and any successor  company or (ii) attained
age 60 with one year of service with the Company and any  successor  company,
upon the  occurrence  of a  Qualifying Termination.

                            1.6     Good  Reason.  Good Reason  means,  without
the  Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                            (a)     The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                            (b)     A  reduction  by the  Company of the
Executive's  base salary in effect at the Effective Time (or in the case of a
reduction  after the date hereof,  but prior to the Effective Time, a reduction
by the Company of the Executive's base salary in effect on the date  hereof)  or
as the same shall be  increased  from time to time,  unless such reduction is
less than ten percent (10%) and it is either (i) replaced by an incentive
opportunity  equal in value; or is (ii) consistent and proportional  with  an
overall  reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                            (c)     The  relocation  of  the  Executive's
office  more  than  50  miles  from  the Executive's  office at the Effective
Time (or in the case of a relocation  after the  date  hereof,  but  prior  to
the  Effective  Time,  a  relocation  of the Executive's  office more than 50
miles from the  Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.


<PAGE>

                  1.7      Cause.  Cause shall mean the occurrence of any one or
more of the following:

                  (a)     The Executive is convicted of a felony involving moral
turpitude; or

                  (b)     The Executive  engages in conduct or activities that
constitutes  disloyalty to the Company and such conduct or activities are
materially  damaging to the property,  business or reputation of the Company; or

                  (c)     The  Executive  persistently  fails or  refuses  to
comply  with  any  written direction  of an  authorized  representative  of the
Company  other than a  directive  constituting  an  assignment described in
Section 1.6(a); or

                  (d)     The  Executive  embezzles  or  knowingly,  and  with
intent,   misappropriates property of the Company, or unlawfully appropriates
any corporate opportunity of the Company.

                  1.8     Annual Award Amount.  The average of the two highest
annual  incentive  awards under the Company's  Executive Incentive Plan (or the
annual cash incentive plan maintained by a successor  company) paid in the last
five years to the Executive prior to the occurrence of the Qualifying
Termination.

                  2.      Severance Benefits for an Executive  Ineligible to
Retire.  Upon the occurrence of a Qualifying Termination with respect to an
Executive who is Ineligible to Retire:

                  (a)     Severance Payment:  The Company shall pay to the
Executive an amount equal to two and one-fourth  times the Executive's  annual
base salary (as in effect on the date of the  Qualifying  Termination,  not
reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                  (b)     Severance Health Benefits. For the thirty-six month
period commencing on the occurrence of such Qualifying  Termination,  the
Company shall provide to the Executive and the Executive's  family medical and
dental benefits as provided to other executive officers who remain employed by
the Company.  The Executive  shall be  required  to make  payments  for such
coverage in

<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)     Split  Dollar.  The  Qualifying   Termination  shall
not constitute a termination of the Split Dollar  Agreement  between the Company
and the Executive (or the split dollar agreement between a successor company and
the Executive),  and the  Executive  shall  be  deemed  to have  retired  upon
such Qualifying Termination for purposes of such Split Dollar Agreement (or the
split dollar agreement between a successor company and the Executive).

                  3.      Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)     Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)     Supplemental   Retirement   Benefits.   For  purposes
of determining the Executive's supplemental retirement benefits which the
Executive is entitled to under the Company's  Executive Benefits Plan (or the
supplemental retirement  plan  maintained  by a  successor  company),  the
Early  Retirement Adjustment  Factor  (as such term is defined in the  Company's
Pension  Plan or within  the  meaning  of the  tax  qualified  retirement  plan
maintained  by a successor company) will be one (1).

                  (c)     Severance  Health  Benefits.  The Company shall
provide to the Executive and the Executive's family medical and dental benefits
on the same basis and on the same terms as any retiree who has attained age 65
and completed the greater of 20 years or actual years of service.

                  (d)     Retirement.  The  Executive  shall be  treated  as
having retired at the Company's  request for purposes of all of the  Company's
benefit plans (or the benefit plans maintained by a successor company).


<PAGE>

                  4.      Code Section 28OG.

                  4.1     Limitations.  Notwithstanding  Section 2 and 3, in the
event  that a change in ownership or control (within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code")) of the Company
occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)     the  Executive  would incur an excise tax under
Section 4999 of Code,  and the Company  would be denied a deduction  under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                  (b)     the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2     Executive's  Election.  If the  amounts to be paid to
the Executive are to be reduced under  paragraph 4.1 of this Section,  the
Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                  4.3     Later Adjustments.

                  (a)     If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of


<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                  (b)     In the event that it is  determined  for any reason
that the amount of "excess parachute  payments"  are less than  originally
calculated,  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
Section  without  any of such  payments constituting  an "excess  parachute
payment,"  together  with  interest on such amount at the  applicable  Federal
rate (as  defined in Section  1274(d) of the Code).

                  5.      Termination of Agreement.  This Agreement  shall
remain in effect from the date hereof until the last day of the  twenty-fourth
calendar  month  following  the Effective Time. Further,  upon the Effective
Time, this Agreement shall continue until the  Company  or its  successor  shall
have  fully  performed  all of its obligations thereunder with respect to the
Executive, with no future performance being possible. Notwithstanding the
foregoing, this Agreement shall terminate on the date the Company's Board of
Directors  decides by formal vote not to proceed with the Merger;  provided,
however, that in the event a Qualifying Termination occurs prior to such date,
this  Agreement  shall continue until the Company or its successor shall have
fully performed all of its obligations  thereunder with respect to the
Executive, with no further performance being possible.

                  6.      Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.


<PAGE>

Notwithstanding the foregoing, at and after the Effective Time, this Agreement
may not be amended in any respect  without the written  consent of the
Executive.

                  7.      Construction.  Wherever any words are used herein in
the masculine  gender they shall be construed  as though they were also used in
the feminine  gender in all cases where they would so apply,  and  wherever any
words are used herein in the singular  form,  they shall be  construed  as
though  they were also used in the plural form in all cases where they would so
apply.

                  8.      Governing Law.  This Agreement shall be governed by
the laws of Maryland.

                  9.      Successors and Assigns.  This  Agreement  shall be
binding upon the Company and any assignee or successor in interest to the
Company.

                  10.     Indemnification.  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.

                  11.     Notice. Any notices,  requests,  demands, or other
communications  provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has filed in writing with the Company, or in the case of the Company, to its
principal offices.

                                         BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services



                                              /s/ Herbert D. Coss
                                              HERBERT D. COSS


<PAGE>

                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE GAS AND ELECTRIC  COMPANY (the "Company") and GEORGE C. CREEL
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.      Definitions.

                  1.1     Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2     Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3     Qualifying Termination.


<PAGE>

                            (a)   The  occurrence of any one or more of the
following  events within  twenty-four calendar months after the Effective Time
shall constitute a "Qualifying Termination":

                            (i)   The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                            (ii)  The Executive's resignation for Good Reason
         (as defined in Section 1.6);

                            (iii) Failure or refusal by a successor  company to
         assume the Company's  obligations under this Agreement in its entirety,
         as required by Section 9 herein; or

                            (iv)  Commission  by the  Company of a material
         breach of any of the  provisions  of this Agreement.

                            (b)   A Qualifying  Termination  also shall include
a termination of the  Executive's employment, without Cause, from the date
hereof, but prior to the Effective Time.

                            (c)   A Qualifying  Termination  shall not include a
termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                            1.4   Ineligible  to Retire.  Ineligible  to Retire,
means an Executive  who has not either (i)  attained  age 55 and  completed 20
years of service with the Company and any  successor  company or (ii)  attained
age 60 and  completed  one year of service with the Company and any  successor
company,  upon the  occurrence of a Qualifying Termination.

                            1.5   Eligible to Retire.  Eligible  to  Retire,
means  an  Executive  who has either (i)  attained  age 55 and  completed 20
years of service with the Company and any successor  company or (ii) attained
age 60 with one year of service with the Company and any  successor  company,
upon the  occurrence  of a  Qualifying Termination.

                            1.6   Good  Reason.  Good Reason  means,  without
the  Executive's  express  written consent,  the  occurrence  (i) after the



<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                            (a)     The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                            (b)     A  reduction  by the  Company of the
Executive's  base salary in effect at the Effective Time (or in the case of a
reduction  after the date hereof,  but prior to the Effective Time, a reduction
by the Company of the Executive's base salary in effect on the date  hereof)  or
as the same shall be  increased  from time to time,  unless such reduction is
less than ten percent (10%) and it is either (i) replaced by an incentive
opportunity  equal in value; or is (ii) consistent and proportional  with  an
overall  reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                            (c)     The  relocation  of  the  Executive's
office  more  than  50  miles  from  the Executive's  office at the Effective
Time (or in the case of a relocation  after the  date  hereof,  but  prior  to
the  Effective  Time,  a  relocation  of the Executive's  office more than 50
miles from the  Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.


<PAGE>

                  1.7     Cause.  Cause shall mean the occurrence of any one or
more of the following:

                  (a)     The Executive is convicted of a felony involving moral
turpitude; or

                  (b)     The Executive  engages in conduct or activities that
constitutes  disloyalty to the Company and such conduct or activities are
materially  damaging to the property,  business or reputation of the Company; or

                  (c)     The  Executive  persistently  fails or  refuses  to
comply  with  any  written direction  of an  authorized  representative  of the
Company  other than a  directive  constituting  an  assignment described in
Section 1.6(a); or

                  (d)     The  Executive  embezzles  or  knowingly,  and  with
intent,   misappropriates property of the Company, or unlawfully appropriates
any corporate opportunity of the Company.

                  1.8     Annual Award Amount.  The average of the two highest
annual  incentive  awards under the Company's  Executive Incentive Plan (or the
annual cash incentive plan maintained by a successor  company) paid in the last
five years to the Executive prior to the occurrence of the Qualifying
Termination.

                  2.      Severance Benefits for an Executive  Ineligible to
Retire.  Upon the occurrence of a Qualifying Termination with respect to an
Executive who is Ineligible to Retire:

                  (a) Severance Payment:  The Company shall pay to the Executive
an amount equal to two and one-fourth  times the Executive's  annual base salary
(as in effect on the date of the  Qualifying  Termination,  not  reduced  by any
reduction  described  in Section  1.6(b)  above) and Annual  Award  Amount.  The
payment shall be made in twenty-four equal monthly installments beginning on the
first day of the month following the Qualifying Termination.

                  (b) Severance Health Benefits. For the thirty-six month period
commencing on the occurrence of such Qualifying  Termination,  the Company shall
provide to the Executive and the Executive's  family medical and dental benefits
as provided to other executive officers who remain employed by the Company.  The
Executive  shall be  required  to make  payments  for such  coverage in



<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)  Split  Dollar.  The  Qualifying   Termination  shall  not
constitute a termination of the Split Dollar  Agreement  between the Company and
the Executive (or the split dollar agreement between a successor company and the
Executive),  and the  Executive  shall  be  deemed  to have  retired  upon  such
Qualifying Termination for purposes of such Split Dollar Agreement (or the split
dollar agreement between a successor company and the Executive).

                  3.   Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)  Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)  Supplemental   Retirement   Benefits.   For  purposes  of
determining the Executive's supplemental retirement benefits which the Executive
is entitled to under the Company's  Executive Benefits Plan (or the supplemental
retirement  plan  maintained  by a  successor  company),  the  Early  Retirement
Adjustment  Factor  (as such term is defined in the  Company's  Pension  Plan or
within  the  meaning  of the  tax  qualified  retirement  plan  maintained  by a
successor company) will be one (1).

                  (c)  Severance  Health  Benefits.  The Company shall provide
to the Executive and the Executive's family medical and dental benefits on the
same basis and on the same terms as any retiree who has attained age 65 and
completed the greater of 20 years or actual years of service.

                  (d)  Retirement.  The  Executive  shall be  treated  as having
retired at the Company's  request for purposes of all of the  Company's  benefit
plans (or the benefit plans maintained by a successor company).


<PAGE>

                  4.   Code Section 28OG.

                  4.1  Limitations.  Notwithstanding  Section 2 and 3, in the
event  that a change in ownership or control (within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code")) of the Company
occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)  the  Executive  would incur an excise tax under  Section
4999 of Code,  and the Company  would be denied a deduction  under  Section
280G of the Code of all or some of such amounts to be paid to the Executive, and

                  (b)  the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2  Executive's  Election.  If the  amounts to be paid to the
Executive are to be reduced under  paragraph 4.1 of this Section,  the Executive
shall be given the  opportunity to designate which benefits or payments shall be
reduced and in what order of priority.

                  4.3  Later Adjustments.

                  (a)  If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of

<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                            (b)     In the event that it is  determined  for any
reason  that the amount of "excess parachute  payments"  are less than
originally  calculated,  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  Section  without  any of such  payments constituting  an "excess
parachute  payment,"  together  with  interest on such amount at the  applicable
Federal  rate (as  defined in Section  1274(d) of the Code).

                            5.      Termination of Agreement.  This Agreement
shall remain in effect from the date hereof until the last day of the
twenty-fourth  calendar  month  following  the Effective Time. Further,  upon
the Effective Time, this Agreement shall continue until the  Company  or its
successor  shall  have  fully  performed  all of its obligations thereunder with
respect to the Executive, with no future performance being possible.
Notwithstanding the foregoing, this Agreement shall terminate on the date the
Company's Board of Directors  decides by formal vote not to proceed with the
Merger;  provided,  however, that in the event a Qualifying Termination occurs
prior to such date,  this  Agreement  shall continue until the Company or its
successor shall have fully performed all of its obligations  thereunder with
respect to the Executive, with no further performance being possible.

                            6.      Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.


<PAGE>

Notwithstanding the foregoing, at and after the Effective Time, this Agreement
may not be amended in any respect  without the written  consent of the
Executive.

                            7.      Construction.  Wherever any words are used
herein in the masculine  gender they shall be construed  as though they were
also used in the feminine  gender in all cases where they would so apply,  and
wherever any words are used herein in the singular  form,  they shall be
construed  as though  they were also used in the plural form in all cases where
they would so apply.

                            8.      Governing Law.  This Agreement shall be
governed by the laws of Maryland.

                            9.      Successors and Assigns.  This  Agreement
shall be binding upon the Company and any assignee or successor in interest to
the Company.

                            10.     Indemnification.  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.

                            11.     Notice. Any notices,  requests,  demands, or
other communications  provided for by this Agreement shall be sufficient if in
writing and if sent by registered or certified mail to the Executive at the last
address he has filed in writing with the Company, or in the case of the Company,
to its principal offices.

                                         BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services

                                              /s/ George C. Creel
                                              GEORGE C. CREEL


<PAGE>

                               SEVERANCE AGREEMENT


                  This Agreement is made the 31st day of December,  1995, by and
between  BALTIMORE GAS AND ELECTRIC COMPANY (the "Company") and CHARLES H. CRUSE
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.       Definitions.

                  1.1      Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2      Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.



<PAGE>

                            (a)    The  occurrence of any one or more of the
following  events within  twenty-four calendar months after the Effective Time
shall constitute a "Qualifying Termination":

                            (i)    The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                            (ii)   The Executive's resignation for Good Reason
         (as defined in Section 1.6);

                            (iii)  Failure or refusal by a successor  company to
         assume the Company's  obligations under this Agreement in its entirety,
         as required by Section 9 herein; or

                            (iv)   Commission by the Company of a material
         breach of any of the  provisions of this Agreement.

                            (b)    A Qualifying  Termination  also shall include
a termination of the  Executive's employment, without Cause, from the date
hereof, but prior to the Effective Time.

                            (c)    A Qualifying  Termination  shall not include
a  termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                            1.4    Ineligible  to Retire.  Ineligible  to
Retire,  means an Executive  who has not either (i)  attained  age 55 and
completed 20 years of service with the Company and any  successor  company or
(ii)  attained age 60 and  completed  one year of service with the Company and
any  successor  company,  upon the  occurrence of a Qualifying Termination.

                            1.5    Eligible to Retire.  Eligible  to  Retire,
means  an  Executive  who has either (i)  attained  age 55 and  completed 20
years of service with the Company and any successor  company or (ii) attained
age 60 with one year of service with the Company and any  successor  company,
upon the  occurrence  of a  Qualifying Termination.

                            1.6    Good  Reason.  Good Reason  means,  without
the  Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                            (a)     The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                            (b)     A  reduction  by the  Company of the
Executive's  base salary in effect at the Effective Time (or in the case of a
reduction  after the date hereof,  but prior to the Effective Time, a reduction
by the Company of the Executive's base salary in effect on the date  hereof)  or
as the same shall be  increased  from time to time,  unless such reduction is
less than ten percent (10%) and it is either (i) replaced by an incentive
opportunity  equal in value; or is (ii) consistent and proportional  with  an
overall  reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                            (c)     The  relocation  of  the  Executive's
office  more  than  50  miles  from  the Executive's  office at the Effective
Time (or in the case of a relocation  after the  date  hereof,  but  prior  to
the  Effective  Time,  a  relocation  of the Executive's  office more than 50
miles from the  Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.


<PAGE>

                            1.7     Cause.  Cause shall mean the occurrence of
any one or more of the following:

                            (a)     The Executive is convicted of a felony
involving moral turpitude; or

                            (b)     The Executive  engages in conduct or
activities that constitutes  disloyalty to the Company and such conduct or
activities are materially  damaging to the property,  business or reputation of
the Company; or

                            (c)     The  Executive  persistently  fails or
refuses  to  comply  with  any  written direction  of an  authorized
representative  of the Company  other than a  directive  constituting  an
assignment described in Section 1.6(a); or

                            (d)     The  Executive  embezzles  or  knowingly,
and  with  intent,   misappropriates property of the Company, or unlawfully
appropriates any corporate opportunity of the Company.

                            1.8     Annual Award Amount. The average of the two
highest annual incentive  awards under the Company's  Executive  Incentive  Plan
(or the annual cash  incentive  plan  maintained by a successor  company) paid
in the last five years to the Executive prior to the occurrence of the
Qualifying Termination.

                            2.      Severance Benefits for an Executive
Ineligible to Retire.  Upon the occurrence of a Qualifying Termination with
respect to an Executive who is Ineligible to Retire:

                            (a)     Severance Payment:  The Company shall pay to
the Executive an amount equal to two and one-fourth  times the Executive's
annual base salary (as in effect on the date of the  Qualifying  Termination,
not  reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                            (b)     Severance Health Benefits. For the
thirty-six month period commencing on the occurrence of such Qualifying
Termination,  the Company shall provide to the Executive and the Executive's
family medical and dental benefits as provided to other executive officers who
remain employed by the Company.  The Executive  shall be  required  to make
payments  for such  coverage in


<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)  Split  Dollar.  The  Qualifying   Termination  shall  not
constitute a termination of the Split Dollar  Agreement  between the Company and
the Executive (or the split dollar agreement between a successor company and the
Executive),  and the  Executive  shall  be  deemed  to have  retired  upon  such
Qualifying Termination for purposes of such Split Dollar Agreement (or the split
dollar agreement between a successor company and the Executive).

                  3.   Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)  Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)  Supplemental   Retirement   Benefits.   For  purposes  of
determining the Executive's supplemental retirement benefits which the Executive
is entitled to under the Company's  Executive Benefits Plan (or the supplemental
retirement  plan  maintained  by a  successor  company),  the  Early  Retirement
Adjustment  Factor  (as such term is defined in the  Company's  Pension  Plan or
within  the  meaning  of the  tax  qualified  retirement  plan  maintained  by a
successor company) will be one (1).

                  (c)  Severance  Health  Benefits.  The Company shall provide
to the Executive and the Executive's family medical and dental benefits on the
same basis and on the same terms as any retiree who has attained age 65 and
completed the greater of 20 years or actual years of service.

                  (d)  Retirement.  The  Executive  shall be  treated  as having
retired at the Company's  request for purposes of all of the  Company's  benefit
plans (or the benefit plans maintained by a successor company).


<PAGE>

                  4.      Code Section 28OG.

                  4.1     Limitations.  Notwithstanding  Section 2 and 3, in the
event  that a change in ownership or control (within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code")) of the Company
occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)     the  Executive  would incur an excise tax under
Section 4999 of Code,  and the Company  would be denied a deduction  under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                  (b)     the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2     Executive's  Election.  If the  amounts to be paid to
the Executive are to be reduced under  paragraph 4.1 of this Section,  the
Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                  4.3     Later Adjustments.

                  (a)     If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of


<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                            (b)     In the event that it is  determined  for any
reason  that the amount of "excess parachute  payments"  are less than
originally  calculated,  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  Section  without  any of such  payments constituting  an "excess
parachute  payment,"  together  with  interest on such amount at the  applicable
Federal  rate (as  defined in Section  1274(d) of the Code).

                            5.      Termination of Agreement.  This Agreement
shall remain in effect from the date hereof until the last day of the
twenty-fourth  calendar  month  following  the Effective Time. Further,  upon
the Effective Time, this Agreement shall continue until the  Company  or its
successor  shall  have  fully  performed  all of its obligations thereunder with
respect to the Executive, with no future performance being possible.
Notwithstanding the foregoing, this Agreement shall terminate on the date the
Company's Board of Directors  decides by formal vote not to proceed with the
Merger;  provided,  however, that in the event a Qualifying Termination occurs
prior to such date,  this  Agreement  shall continue until the Company or its
successor shall have fully performed all of its obligations  thereunder with
respect to the Executive, with no further performance being possible.

                            6.      Amendment  of  Agreement.  Subject  to the
provisions  of Section  5,  this  Agreement  may  not be  amended  in any
manner  which  has a significant  adverse  effect on the rights of the Executive
without the written consent  of the  Executive.


<PAGE>

Notwithstanding  the  foregoing,  at and  after the Effective  Time,  this
Agreement may not be amended in any respect  without the written consent of the
Executive.

                            7.      Construction.  Wherever any words are used
herein in the masculine  gender they shall be construed  as though they were
also used in the feminine  gender in all cases where they would so apply,  and
wherever any words are used herein in the singular  form,  they shall be
construed  as though  they were also used in the plural form in all cases where
they would so apply.

                            8.      Governing Law.  This Agreement shall be
governed by the laws of Maryland.

                            9.      Successors and Assigns.  This  Agreement
shall be binding upon the Company and any assignee or successor in interest to
the Company.

                            10.     Indemnification.  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.

                            11.     Notice. Any notices,  requests,  demands, or
other communications  provided for by this Agreement shall be sufficient if in
writing and if sent by registered or certified mail to the Executive at the last
address he has filed in writing with the Company, or in the case of the Company,
to its principal offices.

                                         BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services


                                              /s/ Charles H. Cruse
                                              CHARLES H. CRUSE



<PAGE>

                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE GAS AND ELECTRIC COMPANY (the "Company") and ROBERT E. DENTON
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.       Definitions.

                  1.1      Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2      Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.


<PAGE>

                            (a)    The  occurrence of any one or more of the
following  events within  twenty-four calendar months after the Effective Time
shall constitute a "Qualifying Termination":

                            (i)    The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                            (ii)   The Executive's resignation for Good Reason
         (as defined in Section 1.6);

                            (iii)  Failure or refusal by a successor  company to
         assume the Company's  obligations under this Agreement in its entirety,
         as required by Section 9 herein; or

                            (iv)   Commission  by the  Company of a material
         breach of any of the  provisions  of this Agreement.

                            (b)    A Qualifying  Termination  also shall include
a termination of the  Executive's employment, without Cause, from the date 
hereof, but prior to the Effective Time.

                            (c)    A Qualifying  Termination  shall not include
a  termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                            1.4    Ineligible  to Retire.  Ineligible  to
Retire,  means an Executive  who has not either (i)  attained  age 55 and
completed 20 years of service with the Company and any  successor  company or
(ii)  attained age 60 and  completed  one year of service with the Company and
any  successor  company,  upon the  occurrence of a Qualifying Termination.

                            1.5    Eligible to Retire.   Eligible  to  Retire,
means  an  Executive  who has either (i)  attained  age 55 and  completed 20
years of service with the Company and any successor  company or (ii) attained
age 60 with one year of service with the Company and any  successor  company,
upon the  occurrence  of a  Qualifying Termination.

                            1.6    Good  Reason.  Good Reason  means,  without
the  Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                            (a)     The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                            (b)     A  reduction  by the  Company of the
Executive's  base salary in effect at the Effective Time (or in the case of a
reduction  after the date hereof,  but prior to the Effective Time, a reduction
by the Company of the Executive's base salary in effect on the date  hereof)  or
as the same shall be  increased  from time to time,  unless such reduction is
less than ten percent (10%) and it is either (i) replaced by an incentive
opportunity  equal in value; or is (ii) consistent and proportional  with  an
overall  reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                            (c)     The  relocation  of  the  Executive's
office  more  than  50  miles  from  the Executive's  office at the Effective
Time (or in the case of a relocation  after the  date  hereof,  but  prior  to
the  Effective  Time,  a  relocation  of the Executive's  office more than 50
miles from the  Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.


<PAGE>

                            1.7     Cause.  Cause shall mean the occurrence of
any one or more of the following:

                            (a)     The Executive is convicted of a felony
involving moral turpitude; or

                            (b)     The Executive  engages in conduct or
activities that constitutes  disloyalty to the Company and such conduct or
activities are materially  damaging to the property,  business or reputation of
the Company; or

                            (c)     The  Executive  persistently  fails or
refuses  to  comply  with  any  written direction  of an  authorized
representative  of the Company  other than a  directive  constituting  an
assignment described in Section 1.6(a); or

                            (d)     The  Executive  embezzles  or  knowingly,
and  with  intent,   misappropriates property of the Company, or unlawfully
appropriates any corporate opportunity of the Company.

                            1.8     Annual Award Amount.  The average of the two
highest  annual  incentive  awards under the Company's  Executive Incentive Plan
(or the annual cash incentive plan maintained by a successor  company) paid in
the last five years to the Executive prior to the occurrence of the Qualifying
Termination.

                            2.      Severance Benefits for an Executive
Ineligible to Retire.  Upon the occurrence of a Qualifying Termination with
respect to an Executive who is Ineligible to Retire:

                            (a)    Severance Payment:  The Company shall pay to
the Executive an amount equal to two and one-fourth  times the Executive's
annual base salary (as in effect on the date of the  Qualifying  Termination,
not  reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                            (b)    Severance Health Benefits. For the thirty-six
month period commencing on the occurrence of such Qualifying  Termination,  the
Company shall provide to the Executive and the Executive's  family medical and
dental benefits as provided to other executive officers who remain employed by
the Company.  The Executive  shall be  required  to make  payments  for such
coverage in


<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)  Split  Dollar.  The  Qualifying   Termination  shall  not
constitute a termination of the Split Dollar  Agreement  between the Company and
the Executive (or the split dollar agreement between a successor company and the
Executive),  and the  Executive  shall  be  deemed  to have  retired  upon  such
Qualifying Termination for purposes of such Split Dollar Agreement (or the split
dollar agreement between a successor company and the Executive).

                  3.   Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)  Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)  Supplemental   Retirement   Benefits.   For  purposes  of
determining the Executive's supplemental retirement benefits which the Executive
is entitled to under the Company's  Executive Benefits Plan (or the supplemental
retirement  plan  maintained  by a  successor  company),  the  Early  Retirement
Adjustment  Factor  (as such term is defined in the  Company's  Pension  Plan or
within  the  meaning  of the  tax  qualified  retirement  plan  maintained  by a
successor company) will be one (1).

                  (c)  Severance  Health  Benefits.  The Company shall provide
to the Executive and the Executive's family medical and dental benefits on the
same basis and on the same terms as any retiree who has attained age 65 and
completed the greater of 20 years or actual years of service.

                  (d)  Retirement.  The  Executive  shall be  treated  as having
retired at the Company's  request for purposes of all of the  Company's  benefit
plans (or the benefit plans maintained by a successor company).


<PAGE>


                            4       Code Section 28OG.

                            4.1     Limitations.  Notwithstanding  Section 2 and
3, in the  event  that a change in ownership or control (within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")) of
the Company occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                            (a)     the  Executive  would incur an excise tax
under  Section 4999 of Code,  and the Company  would be denied a deduction under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                            (b)     the net after tax  benefits to the Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                            4.2     Executive's  Election.  If the  amounts to
be paid to the Executive are to be reduced under  paragraph 4.1 of this Section,
the Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                            4.3     Later Adjustments.

                            (a)     If  the  Executive  receives  reduced
payments  or  benefits  pursuant  to the preceding  paragraph,  or if it had
been  determined  that no such reduction was required,  but it nonetheless is
established pursuant to the final determination of

<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                            (b)     In the event that it is  determined  for any
reason  that the amount of "excess parachute  payments"  are less than
originally  calculated,  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  Section  without  any of such  payments constituting  an "excess
parachute  payment,"  together  with  interest on such amount at the  applicable
Federal  rate (as  defined in Section  1274(d) of the Code).

                            5.      Termination of Agreement.  This Agreement
shall remain in effect from the date hereof until the last day of the
twenty-fourth  calendar  month  following  the Effective Time. Further,  upon
the Effective Time, this Agreement shall continue until the  Company  or its
successor  shall  have  fully  performed  all of its obligations thereunder with
respect to the Executive, with no future performance being possible.
Notwithstanding the foregoing, this Agreement shall terminate on the date the
Company's Board of Directors  decides by formal vote not to proceed with the
Merger;  provided,  however, that in the event a Qualifying Termination occurs
prior to such date,  this  Agreement  shall continue until the Company or its
successor shall have fully performed all of its obligations  thereunder with
respect to the Executive, with no further performance being possible.

                            6.      Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.


<PAGE>

Notwithstanding the foregoing, at and after the Effective Time, this Agreement
may not be amended in any respect  without the written  consent of the
Executive.

                            7.      Construction.  Wherever any words are used
herein in the masculine  gender they shall be construed  as though they were
also used in the feminine  gender in all cases where they would so apply,  and
wherever any words are used herein in the singular  form,  they shall be
construed  as though  they were also used in the plural form in all cases where
they would so apply.

                            8.      Governing Law.  This Agreement shall be
governed by the laws of Maryland.

                            9.      Successors and Assigns.  This  Agreement
shall be binding upon the Company and any assignee or successor in interest to
the Company.

                            10.     Indemnification.  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.

                            11.     Notice. Any notices,  requests,  demands, or
other communications  provided for by this Agreement shall be sufficient if in
writing and if sent by registered or certified mail to the Executive at the last
address he has filed in writing with the Company, or in the case of the Company,
to its principal offices.

                                         BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services



                                              /s/ Robert E. Denton
                                              ROBERT E. DENTON


<PAGE>


                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE GAS AND ELECTRIC  COMPANY (the  "Company") and CARSERLO DOYLE
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.       Definitions.

                  1.1      Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2      Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.


<PAGE>

                  (a)      The  occurrence of any one or more of the following
events within  twenty-four calendar months after the Effective Time shall
constitute a "Qualifying Termination":

                  (i)      The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                  (ii)     The Executive's resignation for Good Reason (as
         defined in Section 1.6);

                  (iii)    Failure or refusal by a successor  company to assume
         the Company's  obligations under this Agreement in its entirety, as
         required by Section 9 herein; or

                  (iv)     Commission  by the  Company of a material  breach of
         any of the  provisions  of this Agreement.

                  (b)      A Qualifying  Termination  also shall include a
termination of the  Executive's employment, without Cause, from the date hereof,
but prior to the Effective Time.

                  (c)      A Qualifying  Termination  shall not include a
termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                  1.4      Ineligible  to Retire.  Ineligible  to Retire,  means
an Executive  who has not either (i)  attained  age 55 and  completed 20 years
of service with the Company and any  successor  company or (ii)  attained age 60
and  completed  one year of service with the Company and any  successor
company,  upon the  occurrence of a Qualifying Termination.

                  1.5      Eligible to Retire.  Eligible  to  Retire,  means  an
Executive  who has either (i)  attained  age 55 and  completed 20 years of
service with the Company and any successor  company or (ii) attained age 60 with
one year of service with the Company and any  successor  company,  upon the
occurrence  of a  Qualifying Termination.

                  1.6      Good  Reason.  Good Reason  means,  without  the
Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                  (a)      The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                  (b)      A  reduction  by the  Company of the  Executive's
base salary in effect at the Effective Time (or in the case of a reduction
after the date hereof,  but prior to the Effective Time, a reduction by the
Company of the Executive's base salary in effect on the date  hereof)  or as the
same shall be  increased  from time to time,  unless such reduction is less than
ten percent (10%) and it is either (i) replaced by an incentive  opportunity
equal in value; or is (ii) consistent and proportional  with  an  overall
reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                  (c)     The  relocation  of  the  Executive's  office  more
than  50  miles  from  the Executive's  office at the Effective Time (or in the
case of a relocation  after the  date  hereof,  but  prior  to  the  Effective
Time,  a  relocation  of the Executive's  office more than 50 miles from the
Executive's  office on the date hereof).

                  The Executive's  right to terminate  employment for Good
Reason shall not be affected by the Executive's  incapacity due to physical or
mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.



<PAGE>

                  1.7     Cause.  Cause shall mean the occurrence of any one or
more of the following:

                  (a)     The Executive is convicted of a felony involving moral
turpitude; or

                  (b)     The Executive  engages in conduct or activities that
constitutes  disloyalty to the Company and such conduct or activities are
materially  damaging to the property,  business or reputation of the Company; or

                  (c)     The  Executive  persistently  fails or  refuses  to
comply  with  any  written direction  of an  authorized  representative  of the
Company  other than a  directive  constituting  an  assignment described in
Section 1.6(a); or

                  (d)     The  Executive  embezzles  or  knowingly,  and  with
intent,   misappropriates property of the Company, or unlawfully appropriates
any corporate opportunity of the Company.

                  1.8     Annual Award Amount.  The average of the two highest
annual  incentive  awards under the Company's  Executive Incentive Plan (or the
annual cash incentive plan maintained by a successor  company) paid in the last
five years to the Executive prior to the occurrence of the Qualifying
Termination.

                  2.      Severance Benefits for an Executive  Ineligible to
Retire.  Upon the occurrence of a Qualifying Termination with respect to an
Executive who is Ineligible to Retire:

                  (a)     Severance Payment:  The Company shall pay to the
Executive an amount equal to two and one-fourth  times the Executive's  annual
base salary (as in effect on the date of the  Qualifying  Termination,  not
reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                  (b)     Severance Health Benefits. For the thirty-six month
period commencing on the occurrence of such Qualifying  Termination,  the
Company shall provide to the Executive and the Executive's  family medical and
dental benefits as provided to other executive officers who remain employed by
the Company.  The Executive  shall be  required  to make  payments  for such
coverage in


<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)     Split  Dollar.  The  Qualifying   Termination  shall
not constitute a termination of the Split Dollar  Agreement  between the Company
and the Executive (or the split dollar agreement between a successor company and
the Executive),  and the  Executive  shall  be  deemed  to have  retired  upon
such Qualifying Termination for purposes of such Split Dollar Agreement (or the
split dollar agreement between a successor company and the Executive).

                  3.       Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)      Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)      Supplemental   Retirement   Benefits.   For  purposes
of determining the Executive's supplemental retirement benefits which the
Executive is entitled to under the Company's  Executive Benefits Plan (or the
supplemental retirement  plan  maintained  by a  successor  company),  the
Early  Retirement Adjustment  Factor  (as such term is defined in the  Company's
Pension  Plan or within  the  meaning  of the  tax  qualified  retirement  plan
maintained  by a successor company) will be one (1).

                  (c)      Severance  Health  Benefits.  The Company shall
provide to the Executive and the Executive's family medical and dental benefits
on the same basis and on the same terms as any retiree who has attained age 65
and completed the greater of 20 years or actual years of service.

                  (d)      Retirement.  The  Executive  shall be  treated  as
having retired at the Company's  request for purposes of all of the  Company's
benefit plans (or the benefit plans maintained by a successor company).


<PAGE>

                            4.      Code Section 28OG.

                            4.1     Limitations.  Notwithstanding  Section 2 and
3, in the  event  that a change in ownership or control (within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")) of
the Company occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                            (a)     the  Executive  would incur an excise tax
under  Section 4999 of Code,  and the Company  would be denied a deduction under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                            (b)     the net after tax  benefits to the Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                            4.2     Executive's  Election.  If the  amounts to
be paid to the Executive are to be reduced under  paragraph 4.1 of this Section,
the Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                            4.3     Later Adjustments.

                            (a)     If  the  Executive  receives  reduced
payments  or  benefits  pursuant  to the preceding  paragraph,  or if it had
been  determined  that no such reduction was required,  but it nonetheless is
established pursuant to the final determination of

<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                            (b)     In the event that it is  determined  for any
reason  that the amount of "excess parachute  payments"  are less than
originally  calculated,  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  Section  without  any of such  payments constituting  an "excess
parachute  payment,"  together  with  interest on such amount at the  applicable
Federal  rate (as  defined in Section  1274(d) of the Code).

                            5.      Termination of Agreement.  This Agreement
shall remain in effect from the date hereof until the last day of the
twenty-fourth  calendar  month  following  the Effective Time. Further,  upon
the Effective Time, this Agreement shall continue until the  Company  or its
successor  shall  have  fully  performed  all of its obligations thereunder with
respect to the Executive, with no future performance being possible.
Notwithstanding the foregoing, this Agreement shall terminate on the date the
Company's Board of Directors  decides by formal vote not to proceed with the
Merger;  provided,  however, that in the event a Qualifying Termination occurs
prior to such date,  this  Agreement  shall continue until the Company or its
successor shall have fully performed all of its obligations  thereunder with
respect to the Executive, with no further performance being possible.

                            6.      Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.


<PAGE>

Notwithstanding the foregoing, at and after the Effective Time, this Agreement
may not be amended in any respect  without the written  consent of the
Executive.

                            7.      Construction.  Wherever any words are used
herein in the masculine  gender they shall be construed  as though they were
also used in the feminine  gender in all cases where they would so apply,  and
wherever any words are used herein in the singular  form,  they shall be
construed  as though  they were also used in the plural form in all cases where
they would so apply.

                            8.      Governing Law.  This Agreement shall be
governed by the laws of Maryland.

                            9.      Successors and Assigns.  This  Agreement
shall be binding upon the Company and any assignee or successor in interest to
the Company.

                            10.     Indemnification.  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.

                            11.     Notice. Any notices,  requests,  demands, or
other communications  provided for by this Agreement shall be sufficient if in
writing and if sent by registered or certified mail to the Executive at the last
address he has filed in writing with the Company, or in the case of the Company,
to its principal offices.

                                         BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services



                                              /s/ Carserlo Doyle
                                              CARSERLO DOYLE


<PAGE>


                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between BALTIMORE GAS AND ELECTRIC COMPANY (the "Company") and JON M. FILES (the
"Executive").  For purposes of Sections 1 through 11 of this  Agreement the term
"Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.       Definitions.

                  1.1      Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2      Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.



<PAGE>

                            (a)    The  occurrence of any one or more of the
following  events within  twenty-four calendar months after the Effective Time
shall constitute a "Qualifying Termination":

                            (i)    The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                            (ii)   The Executive's resignation for Good Reason
         (as defined in Section 1.6);

                            (iii)  Failure or refusal by a successor  company to
         assume the Company's  obligations under this Agreement in its entirety,
         as required by Section 9 herein; or

                            (iv)   Commission  by the  Company of a material
         breach of any of the  provisions  of this Agreement.

                            (b)    A Qualifying  Termination  also shall include
a termination of the  Executive's employment, without Cause, from the date
hereof, but prior to the Effective Time.

                            (c)    A Qualifying  Termination  shall not include
a  termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                            1.4    Ineligible  to Retire.  Ineligible  to
Retire,  means an Executive  who has not either (i)  attained  age 55 and
completed 20 years of service with the Company and any  successor  company or
(ii)  attained age 60 and  completed  one year of service with the Company and
any  successor  company,  upon the  occurrence of a Qualifying Termination.

                            1.5    Eligible to Retire.        Eligible  to
Retire,  means  an  Executive  who has either (i)  attained  age 55 and
completed 20 years of service with the Company and any successor  company or
(ii) attained age 60 with one year of service with the Company and any
successor  company,  upon the  occurrence  of a  Qualifying Termination.

                            1.6    Good  Reason.  Good Reason  means,  without
the  Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                            (a)     The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                            (b)     A  reduction  by the  Company of the
Executive's  base salary in effect at the Effective Time (or in the case of a
reduction  after the date hereof,  but prior to the Effective Time, a reduction
by the Company of the Executive's base salary in effect on the date  hereof)  or
as the same shall be  increased  from time to time,  unless such reduction is
less than ten percent (10%) and it is either (i) replaced by an incentive
opportunity  equal in value; or is (ii) consistent and proportional  with  an
overall  reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                            (c)     The  relocation  of  the  Executive's
office  more  than  50  miles  from  the Executive's  office at the Effective
Time (or in the case of a relocation  after the  date  hereof,  but  prior  to
the  Effective  Time,  a  relocation  of the Executive's  office more than 50
miles from the  Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.


<PAGE>

                            1.7     Cause.  Cause shall mean the occurrence of
any one or more of the following:

                            (a)     The Executive is convicted of a felony
involving moral turpitude; or

                            (b)     The Executive  engages in conduct or
activities that constitutes  disloyalty to the Company and such conduct or
activities are materially  damaging to the property,  business or reputation of
the Company; or

                            (c)     The  Executive  persistently  fails or
refuses  to  comply  with  any  written direction  of an  authorized
representative  of the Company  other than a  directive  constituting  an
assignment described in Section 1.6(a); or

                            (d)     The  Executive  embezzles  or  knowingly,
and  with  intent,   misappropriates property of the Company, or unlawfully
appropriates any corporate opportunity of the Company.

                            1.8     Annual Award Amount.  The average of the two
highest  annual  incentive  awards under the Company's  Executive Incentive Plan
(or the annual cash incentive plan maintained by a successor  company) paid in
the last five years to the Executive prior to the occurrence of the Qualifying
Termination.

                            2.      Severance Benefits for an Executive
Ineligible to Retire.  Upon the occurrence of a Qualifying Termination with
respect to an Executive who is Ineligible to Retire:

                            (a)     Severance Payment:  The Company shall pay to
the Executive an amount equal to two and one-fourth  times the Executive's
annual base salary (as in effect on the date of the  Qualifying  Termination,
not  reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                            (b)     Severance Health Benefits. For the
thirty-six month period commencing on the occurrence of such Qualifying
Termination,  the Company shall provide to the Executive and the Executive's
family medical and dental benefits as provided to other executive officers who
remain employed by the Company.  The Executive  shall be  required  to make
payments  for such  coverage in



<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)  Split  Dollar.  The  Qualifying   Termination  shall  not
constitute a termination of the Split Dollar  Agreement  between the Company and
the Executive (or the split dollar agreement between a successor company and the
Executive),  and the  Executive  shall  be  deemed  to have  retired  upon  such
Qualifying Termination for purposes of such Split Dollar Agreement (or the split
dollar agreement between a successor company and the Executive).

                  3.   Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)  Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)  Supplemental   Retirement   Benefits.   For  purposes  of
determining the Executive's supplemental retirement benefits which the Executive
is entitled to under the Company's  Executive Benefits Plan (or the supplemental
retirement  plan  maintained  by a  successor  company),  the  Early  Retirement
Adjustment  Factor  (as such term is defined in the  Company's  Pension  Plan or
within  the  meaning  of the  tax  qualified  retirement  plan  maintained  by a
successor company) will be one (1).

                  (c)  Severance  Health  Benefits.  The Company shall provide
to the Executive and the Executive's family medical and dental benefits on the
same basis and on the same terms as any retiree who has attained age 65 and
completed the greater of 20 years or actual years of service.

                  (d)  Retirement.  The  Executive  shall be  treated  as having
retired at the Company's  request for purposes of all of the  Company's  benefit
plans (or the benefit plans maintained by a successor company).



<PAGE>


                            4.      Code Section 28OG.

                            4.1     Limitations.  Notwithstanding  Section 2 and
3, in the  event  that a change in ownership or control (within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")) of
the Company occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                            (a)     the  Executive  would incur an excise tax
under  Section 4999 of Code,  and the Company  would be denied a deduction
under  Section  280G of the Code of all or some of such amounts to be paid to
the Executive, and

                            (b)     the net after tax  benefits to the Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                             4.2    Executive's  Election.  If the  amounts to
be paid to the Executive are to be reduced under  paragraph 4.1 of this Section,
the Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                             4.3    Later Adjustments.

                             (a)    If  the  Executive  receives  reduced
payments  or  benefits  pursuant  to the preceding  paragraph,  or if it had
been  determined  that no such reduction was required,  but it nonetheless is
established pursuant to the final determination of


<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                            (b)     In the event that it is  determined  for any
reason  that the amount of "excess parachute  payments"  are less than
originally  calculated,  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  Section  without  any of such  payments constituting  an "excess
parachute  payment,"  together  with  interest on such amount at the  applicable
Federal  rate (as  defined in Section  1274(d) of the Code).

                            5.      Termination of Agreement.  This Agreement
shall remain in effect from the date hereof until the last day of the
twenty-fourth  calendar  month  following  the Effective Time. Further,  upon
the Effective Time, this Agreement shall continue until the  Company  or its
successor  shall  have  fully  performed  all of its obligations thereunder with
respect to the Executive, with no future performance being possible.
Notwithstanding the foregoing, this Agreement shall terminate on the date the
Company's Board of Directors  decides by formal vote not to proceed with the
Merger;  provided,  however, that in the event a Qualifying Termination occurs
prior to such date,  this  Agreement  shall continue until the Company or its
successor shall have fully performed all of its obligations  thereunder with
respect to the Executive, with no further performance being possible.

                            6.      Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.


<PAGE>

Notwithstanding the foregoing, at and after the Effective Time, this Agreement
may not be amended in any respect  without the written  consent of the
Executive.

                            7.      Construction.  Wherever any words are used
herein in the masculine  gender they shall be construed  as though they were
also used in the feminine  gender in all cases where they would so apply,  and
wherever any words are used herein in the singular  form,  they shall be
construed  as though  they were also used in the plural form in all cases where
they would so apply.

                            8.      Governing Law.  This Agreement shall be
governed by the laws of Maryland.

                            9.      Successors and Assigns.  This  Agreement
shall be binding upon the Company and any assignee or successor in interest to
the Company.

                            10.     Indemnification.  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.

                            11.     Notice. Any notices,  requests,  demands, or
other communications  provided for by this Agreement shall be sufficient if in
writing and if sent by registered or certified mail to the Executive at the last
address he has filed in writing with the Company, or in the case of the Company,
to its principal offices.

                                            BALTIMORE GAS AND ELECTRIC COMPANY



                                            By:   /s/ Christian H. Poindexter
                                                  Christian H. Poindexter
                                                  Chairman of the Board



                                                  /s/ Jon M. Files
                                                  JON M. FILES


<PAGE>


                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE GAS AND ELECTRIC COMPANY (the "Company") and SHARON HOSTETTER
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote her time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.       Definitions.

                  1.1      Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2      Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.


<PAGE>


                            (a)    The  occurrence of any one or more of the
following  events within  twenty-four calendar months after the Effective Time
shall constitute a "Qualifying Termination":

                            (i)    The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                            (ii)   The Executive's resignation for Good Reason
         (as defined in Section 1.6);

                            (iii)  Failure or refusal by a successor  company to
         assume the Company's  obligations under this Agreement in its entirety,
         as required by Section 9 herein; or

                            (iv)   Commission  by the  Company of a material
         breach of any of the  provisions  of this Agreement.

                            (b)    A Qualifying  Termination  also shall include
a termination of the  Executive's employment, without Cause, from the date
hereof, but prior to the Effective Time.

                            (c)    A Qualifying  Termination  shall not include
a  termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                            1.4    Ineligible  to Retire.  Ineligible  to
Retire,  means an Executive  who has not either (i)  attained  age 55 and
completed 20 years of service with the Company and any  successor  company or
(ii)  attained age 60 and  completed  one year of service with the Company and
any  successor  company,  upon the  occurrence of a Qualifying Termination.

                            1.5    Eligible to Retire.        Eligible  to
Retire,  means  an  Executive  who has either (i)  attained  age 55 and
completed 20 years of service with the Company and any successor  company or
(ii) attained age 60 with one year of service with the Company and any
successor  company,  upon the  occurrence  of a  Qualifying Termination.

                            1.6    Good  Reason.  Good Reason  means,  without
the  Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                            (a)     The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                            (b)     A  reduction  by the  Company of the
Executive's  base salary in effect at the Effective Time (or in the case of a
reduction  after the date hereof,  but prior to the Effective Time, a reduction
by the Company of the Executive's base salary in effect on the date  hereof)  or
as the same shall be  increased  from time to time,  unless such reduction is
less than ten percent (10%) and it is either (i) replaced by an incentive
opportunity  equal in value; or is (ii) consistent and proportional  with  an
overall  reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                            (c)     The  relocation  of  the  Executive's
office  more  than  50  miles  from  the Executive's  office at the Effective
Time (or in the case of a relocation  after the  date  hereof,  but  prior  to
the  Effective  Time,  a  relocation  of the Executive's  office more than 50
miles from the  Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.



<PAGE>

                            1.7     Cause.  Cause shall mean the occurrence of
any one or more of the following:

                            (a)     The Executive is convicted of a felony
involving moral turpitude; or

                            (b)     The Executive  engages in conduct or
activities that constitutes  disloyalty to the Company and such conduct or
activities are materially  damaging to the property,  business or reputation of
the Company; or

                            (c)     The  Executive  persistently  fails or
refuses  to  comply  with  any  written direction  of an  authorized
representative  of the Company  other than a  directive  constituting  an
assignment described in Section 1.6(a); or

                            (d)     The  Executive  embezzles  or  knowingly,
and  with  intent,   misappropriates property of the Company, or unlawfully
appropriates any corporate opportunity of the Company.

                            1.8     Annual Award Amount.  The average of the two
highest  annual  incentive  awards under the Company's  Executive Incentive Plan
(or the annual cash incentive plan maintained by a successor  company) paid in
the last five years to the Executive prior to the occurrence of the Qualifying
Termination.

                            2.      Severance Benefits for an Executive
Ineligible to Retire.  Upon the occurrence of a Qualifying Termination with
respect to an Executive who is Ineligible to Retire:

                            (a)     Severance Payment:  The Company shall pay to
the Executive an amount equal to two and one-fourth  times the Executive's
annual base salary (as in effect on the date of the  Qualifying  Termination,
not  reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                            (b)     Severance Health Benefits. For the
thirty-six month period commencing on the occurrence of such Qualifying
Termination,  the Company shall provide to the Executive and the Executive's
family medical and dental benefits as provided to other executive officers who
remain employed by the Company.  The Executive  shall be  required  to make
payments  for such  coverage in


<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)  Split  Dollar.  The  Qualifying   Termination  shall  not
constitute a termination of the Split Dollar  Agreement  between the Company and
the Executive (or the split dollar agreement between a successor company and the
Executive),  and the  Executive  shall  be  deemed  to have  retired  upon  such
Qualifying Termination for purposes of such Split Dollar Agreement (or the split
dollar agreement between a successor company and the Executive).

                  3.   Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)  Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)  Supplemental   Retirement   Benefits.   For  purposes  of
determining the Executive's supplemental retirement benefits which the Executive
is entitled to under the Company's  Executive Benefits Plan (or the supplemental
retirement  plan  maintained  by a  successor  company),  the  Early  Retirement
Adjustment  Factor  (as such term is defined in the  Company's  Pension  Plan or
within  the  meaning  of the  tax  qualified  retirement  plan  maintained  by a
successor company) will be one (1).

                  (c)  Severance  Health  Benefits.  The Company shall provide
to the Executive and the Executive's family medical and dental benefits on the
same basis and on the same terms as any retiree who has attained age 65 and
completed the greater of 20 years or actual years of service.

                  (d)  Retirement.  The  Executive  shall be  treated  as having
retired at the Company's  request for purposes of all of the  Company's  benefit
plans (or the benefit plans maintained by a successor company).



<PAGE>

                  4.      Code Section 28OG.

                  4.1     Limitations.  Notwithstanding  Section 2 and 3, in the
event  that a change in ownership or control (within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code")) of the Company
occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)     the  Executive  would incur an excise tax under
Section 4999 of Code,  and the Company  would be denied a deduction  under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                  (b)     the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2     Executive's  Election.  If the  amounts to be paid to
the Executive are to be reduced under  paragraph 4.1 of this Section,  the
Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                  4.3     Later Adjustments.

                  (a)     If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of


<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for her benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                            (b)     In the event that it is  determined  for any
reason  that the amount of "excess parachute  payments"  are less than
originally  calculated,  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  Section  without  any of such  payments constituting  an "excess
parachute  payment,"  together  with  interest on such amount at the  applicable
Federal  rate (as  defined in Section  1274(d) of the Code).

                            5.      Termination of Agreement.  This Agreement
shall remain in effect from the date hereof until the last day of the
twenty-fourth  calendar  month  following  the Effective Time. Further,  upon
the Effective Time, this Agreement shall continue until the  Company  or its
successor  shall  have  fully  performed  all of its obligations thereunder with
respect to the Executive, with no future performance being possible.
Notwithstanding the foregoing, this Agreement shall terminate on the date the
Company's Board of Directors  decides by formal vote not to proceed with the
Merger;  provided,  however, that in the event a Qualifying Termination occurs
prior to such date,  this  Agreement  shall continue until the Company or its
successor shall have fully performed all of its obligations  thereunder with
respect to the Executive, with no further performance being possible.

                            6.      Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.



<PAGE>

Notwithstanding the foregoing, at and after the Effective Time, this Agreement
may not be amended in any respect  without the written  consent of the
Executive.

                            7.      Construction.  Wherever any words are used
herein in the  feminine  gender they shall be construed as though they were also
used in the masculine  gender in all cases where they would so apply,  and
wherever any words are used herein in the singular  form,  they shall be
construed  as though  they were also used in the plural form in all cases where
they would so apply.

                            8.      Governing Law.  This Agreement shall be
governed by the laws of Maryland.

                            9.      Successors and Assigns.  This  Agreement
shall be binding upon the Company and any assignee or successor in interest to
the Company.

                            10.     Indemnification.  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.

                            11.     Notice. Any notices,  requests,  demands, or
other communications  provided for by this Agreement shall be sufficient if in
writing and if sent by registered or certified  mail to the  Executive  at the
last  address she has filed in writing with the Company, or in the case of the
Company, to its principal offices.

                                         BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services



                                              /s/ Sharon Hostetter
                                              SHARON HOSTETTER



<PAGE>

                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE GAS AND ELECTRIC COMPANY (the "Company") and RONALD W. LOWMAN
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.       Definitions.

                  1.1      Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2      Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.


<PAGE>

                  (a)      The  occurrence of any one or more of the following
events within  twenty-four calendar months after the Effective Time shall
constitute a "Qualifying Termination":

                  (i)      The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                  (ii)     The Executive's resignation for Good Reason (as
         defined in Section 1.6);

                  (iii)    Failure or refusal by a successor  company to assume
         the Company's  obligations under this Agreement in its entirety, as
         required by Section 9 herein; or

                  (iv)     Commission  by the  Company of a material  breach of
         any of the  provisions  of this Agreement.

                  (b)      A Qualifying  Termination  also shall include a
termination of the  Executive's employment, without Cause, from the date hereof,
but prior to the Effective Time.

                  (c)      A Qualifying  Termination  shall not include a
termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                  1.4      Ineligible  to Retire.  Ineligible  to Retire,  means
an Executive  who has not either (i)  attained  age 55 and  completed 20 years
of service with the Company and any  successor  company or (ii)  attained age 60
and  completed  one year of service with the Company and any  successor
company,  upon the  occurrence of a Qualifying Termination.

                  1.5      Eligible to Retire.        Eligible  to  Retire,
means  an  Executive  who has either (i)  attained  age 55 and  completed 20
years of service with the Company and any successor  company or (ii) attained
age 60 with one year of service with the Company and any  successor  company,
upon the  occurrence  of a  Qualifying Termination.

                  1.6      Good  Reason.  Good Reason  means,  without  the
Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                  (a)      The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                  (b)      A  reduction  by the  Company of the  Executive's
base salary in effect at the Effective Time (or in the case of a reduction
after the date hereof,  but prior to the Effective Time, a reduction by the
Company of the Executive's base salary in effect on the date  hereof)  or as the
same shall be  increased  from time to time,  unless such reduction is less than
ten percent (10%) and it is either (i) replaced by an incentive  opportunity
equal in value; or is (ii) consistent and proportional  with  an  overall
reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                  (c)     The  relocation  of  the  Executive's  office  more
than  50  miles  from  the Executive's  office at the Effective Time (or in the
case of a relocation  after the  date  hereof,  but  prior  to  the  Effective
Time,  a  relocation  of the Executive's  office more than 50 miles from the
Executive's  office on the date hereof).

                  The Executive's  right to terminate  employment for Good
Reason shall not be affected by the Executive's  incapacity due to physical or
mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.


<PAGE>

                  1.7     Cause.  Cause shall mean the occurrence of any one or
more of the following:

                  (a)     The Executive is convicted of a felony involving moral
turpitude; or

                  (b)     The Executive  engages in conduct or activities that
constitutes  disloyalty to the Company and such conduct or activities are
materially  damaging to the property,  business or reputation of the Company; or

                  (c)     The  Executive  persistently  fails or  refuses  to
comply  with  any  written direction  of an  authorized  representative  of the
Company  other than a  directive  constituting  an  assignment described in
Section 1.6(a); or

                  (d)     The  Executive  embezzles  or  knowingly,  and  with
intent,   misappropriates property of the Company, or unlawfully appropriates
any corporate opportunity of the Company.

                  1.8     Annual Award Amount.  The average of the two highest
annual  incentive  awards under the Company's  Executive Incentive Plan (or the
annual cash incentive plan maintained by a successor  company) paid in the last
five years to the Executive prior to the occurrence of the Qualifying
Termination.

                  2.      Severance Benefits for an Executive  Ineligible to
Retire.  Upon the occurrence of a Qualifying Termination with respect to an
Executive who is Ineligible to Retire:

                  (a)     Severance Payment:  The Company shall pay to the
Executive an amount equal to two and one-fourth  times the Executive's  annual
base salary (as in effect on the date of the  Qualifying  Termination,  not
reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                  (b)     Severance Health Benefits. For the thirty-six month
period commencing on the occurrence of such Qualifying  Termination,  the
Company shall provide to the Executive and the Executive's  family medical and
dental benefits as provided to other executive officers who remain employed by
the Company.  The Executive  shall be  required  to make  payments  for such
coverage in


<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)     Split  Dollar.  The  Qualifying   Termination  shall
not constitute a termination of the Split Dollar  Agreement  between the Company
and the Executive (or the split dollar agreement between a successor company and
the Executive),  and the  Executive  shall  be  deemed  to have  retired  upon
such Qualifying Termination for purposes of such Split Dollar Agreement (or the
split dollar agreement between a successor company and the Executive).

                  3.      Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)     Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)     Supplemental   Retirement   Benefits.   For  purposes
of determining the Executive's supplemental retirement benefits which the
Executive is entitled to under the Company's  Executive Benefits Plan (or the
supplemental retirement  plan  maintained  by a  successor  company),  the
Early  Retirement Adjustment  Factor  (as such term is defined in the  Company's
Pension  Plan or within  the  meaning  of the  tax  qualified  retirement  plan
maintained  by a successor company) will be one (1).

                  (c)     Severance  Health  Benefits.  The Company shall
provide to the Executive and the Executive's family medical and dental benefits
on the same basis and on the same terms as any retiree who has attained age 65
and completed the greater of 20 years or actual years of service.

                  (d)     Retirement.  The  Executive  shall be  treated  as
having retired at the Company's  request for purposes of all of the  Company's
benefit plans (or the benefit plans maintained by a successor company).


<PAGE>

                  4.      Code Section 28OG.

                  4.1     Limitations.  Notwithstanding  Section 2 and 3, in the
event  that a change in ownership or control (within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code")) of the Company
occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)     the  Executive  would incur an excise tax under
Section 4999 of Code,  and the Company  would be denied a deduction  under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                  (b)     the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2     Executive's  Election.  If the  amounts to be paid to
the Executive are to be reduced under  paragraph 4.1 of this Section,  the
Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                  4.3     Later Adjustments.

                  (a)     If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of


<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                  (b)     In the event that it is  determined  for any reason
that the amount of "excess parachute  payments"  are less than  originally
calculated,  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
Section  without  any of such  payments constituting  an "excess  parachute
payment,"  together  with  interest on such amount at the  applicable  Federal
rate (as  defined in Section  1274(d) of the Code).

                   5.      Termination of Agreement.  This Agreement  shall
remain in effect from the date hereof until the last day of the  twenty-fourth
calendar  month  following  the Effective Time. Further,  upon the Effective
Time, this Agreement shall continue until the  Company  or its  successor  shall
have  fully  performed  all of its obligations thereunder with respect to the
Executive, with no future performance being possible. Notwithstanding the
foregoing, this Agreement shall terminate on the date the Company's Board of
Directors  decides by formal vote not to proceed with the Merger;  provided,
however, that in the event a Qualifying Termination occurs prior to such date,
this  Agreement  shall continue until the Company or its successor shall have
fully performed all of its obligations  thereunder with respect to the
Executive, with no further performance being possible.

                   6.      Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.  Notwithstanding the
foregoing, at and after the Effective Time, this Agreement may not be amended in
any respect  without the written  consent of the Executive.


<PAGE>

                   7.      Construction.  Wherever any words are used herein in
the masculine  gender they shall be construed  as though they were also used in
the feminine  gender in all cases where they would so apply,  and  wherever any
words are used herein in the singular  form,  they shall be  construed  as
though  they were also used in the plural form in all cases where they would so
apply.

                   8.      Governing Law.  This Agreement shall be governed by
the laws of Maryland.

                   9.      Successors and Assigns.  This  Agreement  shall be
binding upon the Company and any assignee or successor in interest to the
Company.

                   10.     Indemnification.  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.

                   11.     Notice. Any notices,  requests,  demands, or other
communications  provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has filed in writing with the Company, or in the case of the Company, to its
principal offices.

                                            BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services



                                              /s/ Ronald W. Lowman
                                              RONALD W. LOWMAN



<PAGE>

                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE  GAS AND  ELECTRIC  COMPANY  (the  "Company")  and G.  DOWELL
SCHWARTZ,  JR. (the "Executive").  For purposes of Sections 1 through 11 of this
Agreement the term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.       Definitions.

                  1.1      Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2      Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.


<PAGE>

                  (a)      The  occurrence of any one or more of the following
events within  twenty-four calendar months after the Effective Time shall
constitute a "Qualifying Termination":

                  (i)      The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                  (ii)     The Executive's resignation for Good Reason (as
         defined in Section 1.6);

                  (iii)    Failure or refusal by a successor  company to assume
         the Company's  obligations under this Agreement in its entirety, as
         required by Section 9 herein; or

                  (iv)     Commission  by the  Company of a material  breach of
         any of the  provisions  of this Agreement.

                  (b)      A Qualifying  Termination  also shall include a
termination of the  Executive's employment, without Cause, from the date hereof,
but prior to the Effective Time.

                  (c)      A Qualifying  Termination  shall not include a
termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                  1.4      Ineligible  to Retire.  Ineligible  to Retire,  means
an Executive  who has not either (i)  attained  age 55 and  completed 20 years
of service with the Company and any  successor  company or (ii)  attained age 60
and  completed  one year of service with the Company and any  successor
company,  upon the  occurrence of a Qualifying Termination.

                  1.5      Eligible to Retire.        Eligible  to  Retire,
means  an  Executive  who has either (i)  attained  age 55 and  completed 20
years of service with the Company and any successor  company or (ii) attained
age 60 with one year of service with the Company and any  successor  company,
upon the  occurrence  of a  Qualifying Termination.

                  1.6      Good  Reason.  Good Reason  means,  without  the
Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                  (a)      The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                  (b)      A  reduction  by the  Company of the  Executive's
base salary in effect at the Effective Time (or in the case of a reduction
after the date hereof,  but prior to the Effective Time, a reduction by the
Company of the Executive's base salary in effect on the date  hereof)  or as the
same shall be  increased  from time to time,  unless such reduction is less than
ten percent (10%) and it is either (i) replaced by an incentive  opportunity
equal in value; or is (ii) consistent and proportional  with  an  overall
reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                  (c)      The  relocation  of  the  Executive's  office  more
than  50  miles  from  the Executive's  office at the Effective Time (or in the
case of a relocation  after the  date  hereof,  but  prior  to  the  Effective
Time,  a  relocation  of the Executive's  office more than 50 miles from the
Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.


<PAGE>

                  1.7      Cause.  Cause shall mean the occurrence of any one or
more of the following:

                  (a)      The Executive is convicted of a felony involving
moral turpitude; or

                  (b)      The Executive  engages in conduct or activities that
constitutes  disloyalty to the Company and such conduct or activities are
materially  damaging to the property,  business or reputation of the Company; or

                  (c)      The  Executive  persistently  fails or  refuses  to
comply  with  any  written direction  of an  authorized  representative  of the
Company  other than a  directive  constituting  an  assignment described in
Section 1.6(a); or

                  (d)      The  Executive  embezzles  or  knowingly,  and  with
intent,   misappropriates property of the Company, or unlawfully appropriates
any corporate opportunity of the Company.

                  1.8      Annual Award Amount.  The average of the two highest
annual  incentive  awards under the Company's  Executive Incentive Plan (or the
annual cash incentive plan maintained by a successor  company) paid in the last
five years to the Executive prior to the occurrence of the Qualifying
Termination.

                  2.       Severance Benefits for an Executive  Ineligible to
Retire.  Upon the occurrence of a Qualifying Termination with respect to an
Executive who is Ineligible to Retire:

                  (a)      Severance Payment:  The Company shall pay to the
Executive an amount equal to two and one-fourth  times the Executive's  annual
base salary (as in effect on the date of the  Qualifying  Termination,  not
reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                  (b)      Severance Health Benefits. For the thirty-six month
period commencing on the occurrence of such Qualifying  Termination,  the
Company shall provide to the Executive and the Executive's  family medical and
dental benefits as provided to other executive officers who remain employed by
the Company.  The Executive  shall be  required  to make  payments  for such
coverage in


<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)      Split  Dollar.  The  Qualifying   Termination  shall
not constitute a termination of the Split Dollar  Agreement  between the Company
and the Executive (or the split dollar agreement between a successor company and
the Executive),  and the  Executive  shall  be  deemed  to have  retired  upon
such Qualifying Termination for purposes of such Split Dollar Agreement (or the
split dollar agreement between a successor company and the Executive).

                  3.       Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)      Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)      Supplemental   Retirement   Benefits.   For  purposes
of determining the Executive's supplemental retirement benefits which the
Executive is entitled to under the Company's  Executive Benefits Plan (or the
supplemental retirement  plan  maintained  by a  successor  company),  the
Early  Retirement Adjustment  Factor  (as such term is defined in the  Company's
Pension  Plan or within  the  meaning  of the  tax  qualified  retirement  plan
maintained  by a successor company) will be one (1).

                  (c)      Severance  Health  Benefits.  The Company shall
provide to the Executive and the Executive's family medical and dental benefits
on the same basis and on the same terms as any retiree who has attained age 65
and completed the greater of 20 years or actual years of service.

                  (d)      Retirement.  The  Executive  shall be  treated  as
having retired at the Company's  request for purposes of all of the  Company's
benefit plans (or the benefit plans maintained by a successor company).


<PAGE>

                  4.       Code Section 28OG.

                  4.1      Limitations.  Notwithstanding  Section 2 and 3, in
the  event  that a change in ownership or control (within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code")) of the
Company occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)      the  Executive  would incur an excise tax under
Section 4999 of Code,  and the Company  would be denied a deduction  under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                  (b)      the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2      Executive's  Election.  If the  amounts to be paid to
the Executive are to be reduced under  paragraph 4.1 of this Section,  the
Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                  4.3      Later Adjustments.

                  (a)      If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of


<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                  (b)      In the event that it is  determined  for any reason
that the amount of "excess parachute  payments"  are less than  originally
calculated,  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
Section  without  any of such  payments constituting  an "excess  parachute
payment,"  together  with  interest on such amount at the  applicable  Federal
rate (as  defined in Section  1274(d) of the Code).

                  5.       Termination of Agreement.  This Agreement  shall
remain in effect from the date hereof until the last day of the  twenty-fourth
calendar  month  following  the Effective Time. Further,  upon the Effective
Time, this Agreement shall continue until the  Company  or its  successor  shall
have  fully  performed  all of its obligations thereunder with respect to the
Executive, with no future performance being possible. Notwithstanding the
foregoing, this Agreement shall terminate on the date the Company's Board of
Directors  decides by formal vote not to proceed with the Merger;  provided,
however, that in the event a Qualifying Termination occurs prior to such date,
this  Agreement  shall continue until the Company or its successor shall have
fully performed all of its obligations  thereunder with respect to the
Executive, with no further performance being possible.

                  6.       Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.


<PAGE>

Notwithstanding the foregoing, at and after the Effective Time, this Agreement
may not be amended in any respect  without the written  consent of the
Executive.

                  7.       Construction.  Wherever any words are used herein in
the masculine  gender they shall be construed  as though they were also used in
the feminine  gender in all cases where they would so apply,  and  wherever any
words are used herein in the singular  form,  they shall be  construed  as
though  they were also used in the plural form in all cases where they would so
apply.

                  8.       Governing Law.  This Agreement shall be governed by
the laws of Maryland.

                  9.       Successors and Assigns.  This  Agreement  shall be
binding upon the Company and any assignee or successor in interest to the
Company.

                  10.      Indemnification.  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.

                  11.      Notice. Any notices,  requests,  demands, or other
communications  provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has filed in writing with the Company, or in the case of the Company, to its
principal offices.

                                            BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services



                                              /s/ G. Dowell Schwartz, Jr.
                                              G. DOWELL SCHWARTZ, JR.



<PAGE>

                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE  GAS AND  ELECTRIC  COMPANY  (the  "Company")  and CHARLES W.
SHIVERY  (the  "Executive").  For  purposes  of  Sections  1 through  11 of this
Agreement the term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.       Definitions.

                  1.1      Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2      Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.


<PAGE>

                  (a)      The  occurrence of any one or more of the following
events within  twenty-four calendar months after the Effective Time shall
constitute a "Qualifying Termination":

                  (i)      The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                  (ii)     The Executive's resignation for Good Reason (as
         defined in Section 1.6);

                  (iii)    Failure or refusal by a successor  company to assume
         the Company's  obligations under this Agreement in its entirety, as
         required by Section 9 herein; or

                  (iv)     Commission  by the  Company of a material  breach of
         any of the  provisions  of this Agreement.

                  (b)      A Qualifying  Termination  also shall include a
termination of the  Executive's employment, without Cause, from the date hereof,
but prior to the Effective Time.

                  (c)      A Qualifying  Termination  shall not include a
termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                  1.4      Ineligible  to Retire.  Ineligible  to Retire,  means
an Executive  who has not either (i)  attained  age 55 and  completed 20 years
of service with the Company and any  successor  company or (ii)  attained age 60
and  completed  one year of service with the Company and any  successor
company,  upon the  occurrence of a Qualifying Termination.

                  1.5      Eligible to Retire.        Eligible  to  Retire,
means  an  Executive  who has either (i)  attained  age 55 and  completed 20
years of service with the Company and any successor  company or (ii) attained
age 60 with one year of service with the Company and any  successor  company,
upon the  occurrence  of a  Qualifying Termination.

                  1.6      Good  Reason.  Good Reason  means,  without  the
Executive's  express  written consent,  the  occurrence  (i) after the



<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                  (a)      The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                  (b)      A  reduction  by the  Company of the  Executive's
base salary in effect at the Effective Time (or in the case of a reduction
after the date hereof,  but prior to the Effective Time, a reduction by the
Company of the Executive's base salary in effect on the date  hereof)  or as the
same shall be  increased  from time to time,  unless such reduction is less than
ten percent (10%) and it is either (i) replaced by an incentive  opportunity
equal in value; or is (ii) consistent and proportional  with  an  overall
reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                  (c)      The  relocation  of  the  Executive's  office  more
than  50  miles  from  the Executive's  office at the Effective Time (or in the
case of a relocation  after the  date  hereof,  but  prior  to  the  Effective
Time,  a  relocation  of the Executive's  office more than 50 miles from the
Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.



<PAGE>


                  1.7      Cause.  Cause shall mean the occurrence of any one or
more of the following:

                  (a)      The Executive is convicted of a felony involving
moral turpitude; or

                  (b)      The Executive  engages in conduct or activities that
constitutes  disloyalty to the Company and such conduct or activities are
materially  damaging to the property,  business or reputation of the Company; or

                  (c)      The  Executive  persistently  fails or  refuses  to
comply  with  any  written direction  of an  authorized  representative  of the
Company  other than a  directive  constituting  an  assignment described in
Section 1.6(a); or

                  (d)      The  Executive  embezzles  or  knowingly,  and  with
intent,   misappropriates property of the Company, or unlawfully appropriates
any corporate opportunity of the Company.

                  1.8      Annual Award Amount.  The average of the two highest
annual  incentive  awards under the Company's  Executive Incentive Plan (or the
annual cash incentive plan maintained by a successor  company) paid in the last
five years to the Executive prior to the occurrence of the Qualifying
Termination.

                  2.       Severance Benefits for an Executive  Ineligible to
Retire.  Upon the occurrence of a Qualifying Termination with respect to an
Executive who is Ineligible to Retire:

                  (a)      Severance Payment:  The Company shall pay to the
Executive an amount equal to two and one-fourth  times the Executive's  annual
base salary (as in effect on the date of the  Qualifying  Termination,  not
reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                  (b)      Severance Health Benefits. For the thirty-six month
period commencing on the occurrence of such Qualifying  Termination,  the
Company shall provide to the Executive and the Executive's  family medical and
dental benefits as provided to other executive officers who remain employed by
the Company.  The Executive  shall be  required  to make  payments  for such
coverage in


<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)      Split  Dollar.  The  Qualifying   Termination  shall
not constitute a termination of the Split Dollar  Agreement  between the Company
and the Executive (or the split dollar agreement between a successor company and
the Executive),  and the  Executive  shall  be  deemed  to have  retired  upon
such Qualifying Termination for purposes of such Split Dollar Agreement (or the
split dollar agreement between a successor company and the Executive).

                  3.       Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)      Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)      Supplemental   Retirement   Benefits.   For  purposes
of determining the Executive's supplemental retirement benefits which the
Executive is entitled to under the Company's  Executive Benefits Plan (or the
supplemental retirement  plan  maintained  by a  successor  company),  the
Early  Retirement Adjustment  Factor  (as such term is defined in the  Company's
Pension  Plan or within  the  meaning  of the  tax  qualified  retirement  plan
maintained  by a successor company) will be one (1).

                  (c)      Severance  Health  Benefits.  The Company shall
provide to the Executive and the Executive's family medical and dental benefits
on the same basis and on the same terms as any retiree who has attained age 65
and completed the greater of 20 years or actual years of service.

                  (d)      Retirement.  The  Executive  shall be  treated  as
having retired at the Company's  request for purposes of all of the  Company's
benefit plans (or the benefit plans maintained by a successor company).



<PAGE>

                  4.       Code Section 28OG.

                  4.1      Limitations.  Notwithstanding  Section 2 and 3, in
the  event  that a change in ownership or control (within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code")) of the
Company occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)      the  Executive  would incur an excise tax under
Section 4999 of Code,  and the Company  would be denied a deduction  under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                  (b)      the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2      Executive's  Election.  If the  amounts to be paid to
the Executive are to be reduced under  paragraph 4.1 of this Section,  the
Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                  4.3      Later Adjustments.

                  (a)      If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of


<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                  (b)      In the event that it is  determined  for any reason
that the amount of "excess parachute  payments"  are less than  originally
calculated,  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
Section  without  any of such  payments constituting  an "excess  parachute
payment,"  together  with  interest on such amount at the  applicable  Federal
rate (as  defined in Section  1274(d) of the Code).

                  5.       Termination of Agreement.  This Agreement  shall
remain in effect from the date hereof until the last day of the  twenty-fourth
calendar  month  following  the Effective Time. Further,  upon the Effective
Time, this Agreement shall continue until the  Company  or its  successor  shall
have  fully  performed  all of its obligations thereunder with respect to the
Executive, with no future performance being possible. Notwithstanding the
foregoing, this Agreement shall terminate on the date the Company's Board of
Directors  decides by formal vote not to proceed with the Merger;  provided,
however, that in the event a Qualifying Termination occurs prior to such date,
this  Agreement  shall continue until the Company or its successor shall have
fully performed all of its obligations  thereunder with respect to the
Executive, with no further performance being possible.

                  6.       Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.


<PAGE>

Notwithstanding the foregoing, at and after the Effective Time, this Agreement
may not be amended in any respect  without the written  consent of the
Executive.

                  7.       Construction.  Wherever any words are used herein in
the masculine  gender they shall be construed  as though they were also used in
the feminine  gender in all cases where they would so apply,  and  wherever any
words are used herein in the singular  form,  they shall be  construed  as
though  they were also used in the plural form in all cases where they would so
apply.

                  8.       Governing Law.  This Agreement shall be governed by
the laws of Maryland.

                  9.       Successors and Assigns.  This  Agreement  shall be
binding upon the Company and any assignee or successor in interest to the
Company.

                  10.      Indemnification.  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.

                   11.      Notice. Any notices,  requests,  demands, or other
communications  provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has filed in writing with the Company, or in the case of the Company, to its
principal offices.

                                         BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services



                                              /s/ Charles W. Shivery
                                              CHARLES W. SHIVERY



<PAGE>


                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between BALTIMORE GAS AND ELECTRIC COMPANY (the "Company") and JOSEPH A. TIERNAN
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.       Definitions.

                  1.1      Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2      Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.


<PAGE>

                  (a)      The  occurrence of any one or more of the following
events within  twenty-four calendar months after the Effective Time shall
constitute a "Qualifying Termination":

                  (i)      The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                  (ii)     The Executive's resignation for Good Reason (as
         defined in Section 1.6);

                  (iii)    Failure or refusal by a successor  company to assume
         the Company's  obligations under this Agreement in its entirety, as
         required by Section 9 herein; or

                  (iv)     Commission  by the  Company of a material  breach of
         any of the  provisions  of this Agreement.

                  (b)      A Qualifying  Termination  also shall include a
termination of the  Executive's employment, without Cause, from the date hereof,
but prior to the Effective Time.

                  (c)      A Qualifying  Termination  shall not include a
termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                  1.4      Ineligible  to Retire.  Ineligible  to Retire,  means
an Executive  who has not either (i)  attained  age 55 and  completed 20 years
of service with the Company and any  successor  company or (ii)  attained age 60
and  completed  one year of service with the Company and any  successor
company,  upon the  occurrence of a Qualifying Termination.

                  1.5      Eligible to Retire.        Eligible  to  Retire,
means  an  Executive  who has either (i)  attained  age 55 and  completed 20
years of service with the Company and any successor  company or (ii) attained
age 60 with one year of service with the Company and any  successor  company,
upon the  occurrence  of a  Qualifying Termination.

                  1.6      Good  Reason.  Good Reason  means,  without  the
Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                  (a)      The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                  (b)      A  reduction  by the  Company of the  Executive's
base salary in effect at the Effective Time (or in the case of a reduction
after the date hereof,  but prior to the Effective Time, a reduction by the
Company of the Executive's base salary in effect on the date  hereof)  or as the
same shall be  increased  from time to time,  unless such reduction is less than
ten percent (10%) and it is either (i) replaced by an incentive  opportunity
equal in value; or is (ii) consistent and proportional  with  an  overall
reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                  (c)      The  relocation  of  the  Executive's  office  more
than  50  miles  from  the Executive's  office at the Effective Time (or in the
case of a relocation  after the  date  hereof,  but  prior  to  the  Effective
Time,  a  relocation  of the Executive's  office more than 50 miles from the
Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.



<PAGE>


                  1.7      Cause.  Cause shall mean the occurrence of any one or
more of the following:

                  (a)      The Executive is convicted of a felony involving
moral turpitude; or

                  (b)      The Executive  engages in conduct or activities that
constitutes  disloyalty to the Company and such conduct or activities are
materially  damaging to the property,  business or reputation of the Company; or

                  (c)      The  Executive  persistently  fails or  refuses  to
comply  with  any  written direction  of an  authorized  representative  of the
Company  other than a  directive  constituting  an  assignment described in
Section 1.6(a); or

                  (d)      The  Executive  embezzles  or  knowingly,  and  with
intent,   misappropriates property of the Company, or unlawfully appropriates
any corporate opportunity of the Company.

                  1.8      Annual Award Amount.  The average of the two highest
annual  incentive  awards under the Company's  Executive Incentive Plan (or the
annual cash incentive plan maintained by a successor  company) paid in the last
five years to the Executive prior to the occurrence of the Qualifying
Termination.

                  2.       Severance Benefits for an Executive  Ineligible to
Retire.  Upon the occurrence of a Qualifying Termination with respect to an
Executive who is Ineligible to Retire:

                  (a)      Severance Payment:  The Company shall pay to the
Executive an amount equal to two and one-fourth  times the Executive's  annual
base salary (as in effect on the date of the  Qualifying  Termination,  not
reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                  (b)      Severance Health Benefits. For the thirty-six month
period commencing on the occurrence of such Qualifying  Termination,  the
Company shall provide to the Executive and the Executive's  family medical and
dental benefits as provided to other executive officers who remain employed by
the Company.  The Executive  shall be  required  to make  payments  for such
coverage in


<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)      Split  Dollar.  The  Qualifying   Termination  shall
not constitute a termination of the Split Dollar  Agreement  between the Company
and the Executive (or the split dollar agreement between a successor company and
the Executive),  and the  Executive  shall  be  deemed  to have  retired  upon
such Qualifying Termination for purposes of such Split Dollar Agreement (or the
split dollar agreement between a successor company and the Executive).

                  3.       Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)      Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)      Supplemental   Retirement   Benefits.   For  purposes
of determining the Executive's supplemental retirement benefits which the
Executive is entitled to under the Company's  Executive Benefits Plan (or the
supplemental retirement  plan  maintained  by a  successor  company),  the
Early  Retirement Adjustment  Factor  (as such term is defined in the  Company's
Pension  Plan or within  the  meaning  of the  tax  qualified  retirement  plan
maintained  by a successor company) will be one (1).

                  (c)      Severance  Health  Benefits.  The Company shall
provide to the Executive and the Executive's family medical and dental benefits
on the same basis and on the same terms as any retiree who has attained age 65
and completed the greater of 20 years or actual years of service.

                  (d)      Retirement.  The  Executive  shall be  treated  as
having retired at the Company's  request for purposes of all of the  Company's
benefit plans (or the benefit plans maintained by a successor company).


<PAGE>


                  4.       Code Section 28OG.

                  4.1     Limitations.  Notwithstanding  Section 2 and 3, in the
event  that a change in ownership or control (within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code")) of the Company
occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)      the  Executive  would incur an excise tax under
Section 4999 of Code,  and the Company  would be denied a deduction  under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                  (b)      the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2      Executive's  Election.  If the  amounts to be paid to
the Executive are to be reduced under  paragraph 4.1 of this Section,  the
Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                  4.3      Later Adjustments.

                  (a)      If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of


<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                  (b)      In the event that it is  determined  for any reason
that the amount of "excess parachute  payments"  are less than  originally
calculated,  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
Section  without  any of such  payments constituting  an "excess  parachute
payment,"  together  with  interest on such amount at the  applicable  Federal
rate (as  defined in Section  1274(d) of the Code).

                  5.       Termination of Agreement.  This Agreement  shall
remain in effect from the date hereof until the last day of the  twenty-fourth
calendar  month  following  the Effective Time. Further,  upon the Effective
Time, this Agreement shall continue until the  Company  or its  successor  shall
have  fully  performed  all of its obligations thereunder with respect to the
Executive, with no future performance being possible. Notwithstanding the
foregoing, this Agreement shall terminate on the date the Company's Board of
Directors  decides by formal vote not to proceed with the Merger;  provided,
however, that in the event a Qualifying Termination occurs prior to such date,
this  Agreement  shall continue until the Company or its successor shall have
fully performed all of its obligations  thereunder with respect to the
Executive, with no further performance being possible.

                  6.       Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.  Notwithstanding the
foregoing, at and after the Effective Time, this Agreement may not be amended in
any respect  without the written  consent of the Executive.


<PAGE>


                  7.       Construction.  Wherever any words are used herein in
the masculine  gender they shall be construed  as though they were also used in
the feminine  gender in all cases where they would so apply,  and  wherever any
words are used herein in the singular  form,  they shall be  construed  as
though  they were also used in the plural form in all cases where they would so
apply.

                  8.       Governing Law.  This Agreement shall be governed by
the laws of Maryland.

                  9.       Successors and Assigns.  This  Agreement  shall be
binding upon the Company and any assignee or successor in interest to the
Company.

                  10.      Indemnification.  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.

                  11.      Notice. Any notices,  requests,  demands, or other
communications  provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has filed in writing with the Company, or in the case of the Company, to its
principal offices.

                                      BALTIMORE GAS AND ELECTRIC COMPANY



                                      By: /s/ Jon M. Files
                                          Jon M. Files
                                          Vice President Management Services



                                          /s/ Joseph A. Tiernan
                                          JOSEPH A. TIERNAN




<PAGE>

                               SEVERANCE AGREEMENT


                  This  Agreement is made the 6th day of December,  1995, by and
between  BALTIMORE GAS AND ELECTRIC  COMPANY (the "Company") and STEPHEN F. WOOD
(the  "Executive").  For purposes of Sections 1 through 11 of this Agreement the
term "Company" shall be deemed to include any successor company.

                  WHEREAS,  Potomac  Electric  Power  Company  ("PEPCO") and the
Company have entered into an Agreement  and Plan of Merger dated as of September
22, 1995 (the "Merger Agreement"), whereby PEPCO and the Company will merge into
RH Acquisition Corp. ("RH"), with RH as the surviving entity; and

                  WHEREAS,  the Company desires to establish a severance benefit
for the Executive covering the period from the date hereof through the Effective
Time (as hereinafter defined) and for the twenty-four month period following the
Effective Time in the event the Merger (as hereinafter defined) occurs, to avoid
the loss or the serious  distraction  of the  Executive to the  detriment of the
Company and its stockholders during such periods when the Executive's  undivided
attention  and  commitment  to the needs of the  Company  would be  particularly
important; and

                  WHEREAS,  the Executive  desires to devote his time and energy
for the  benefit of the Company and its  stockholders  and not to be  distracted
during the Merger.

                  NOW, THEREFORE, the parties agree as follows:

                  1.       Definitions.

                  1.1      Merger.  The term "Merger" shall have the meaning
ascribed to such term in the Merger Agreement.

                  1.2      Effective  Time.  The term  "Effective  Time"  shall
have the  meaning  ascribed to such term in the Merger Agreement.

                  1.3      Qualifying Termination.


<PAGE>

                  (a)      The  occurrence of any one or more of the following
events within  twenty-four calendar months after the Effective Time shall
constitute a "Qualifying Termination":

                  (i)      The Company's  termination of the Executive's
         employment without Cause (as defined in Section 1.7);

                  (ii)     The Executive's resignation for Good Reason (as
         defined in Section 1.6);

                  (iii)    Failure or refusal by a successor  company to assume
         the Company's  obligations under this Agreement in its entirety, as
         required by Section 9 herein; or

                  (iv)     Commission  by the  Company of a material  breach of
         any of the  provisions  of this Agreement.

                  (b)      A Qualifying  Termination  also shall include a
termination of the  Executive's employment, without Cause, from the date hereof,
but prior to the Effective Time.

                  (c)      A Qualifying  Termination  shall not include a
termination  of  employment  by reason of death, disability, the Executive's
voluntary termination of employment without Good Reason, or the Company's
termination of the Executive's  employment for Cause.

                  1.4      Ineligible  to Retire.  Ineligible  to Retire,  means
an Executive  who has not either (i)  attained  age 55 and  completed 20 years
of service with the Company and any  successor  company or (ii)  attained age 60
and  completed  one year of service with the Company and any  successor
company,  upon the  occurrence of a Qualifying Termination.

                  1.5      Eligible to Retire.        Eligible  to  Retire,
means  an  Executive  who has either (i)  attained  age 55 and  completed 20
years of service with the Company and any successor  company or (ii) attained
age 60 with one year of service with the Company and any  successor  company,
upon the  occurrence  of a  Qualifying Termination.

                  1.6      Good  Reason.  Good Reason  means,  without  the
Executive's  express  written consent,  the  occurrence  (i) after the


<PAGE>

Effective  Time, or (ii) after the date hereof, but prior to the Effective Time,
of any one or more of the following:

                  (a)      The  assignment to the  Executive of duties
materially  inconsistent  with the Executive's  authorities,  duties,
responsibilities,   and  status  (including offices,  title and reporting
relationships)  as an executive and/or officer of the Company,  or a material
reduction or  alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of  ninety  days  prior  to
the  Effective  Time  (or,  in the  case  of such an assignment,  reduction or
alteration  after the date  hereof,  but prior to the Effective  Time,  ninety
days  prior to the date  hereof),  unless  such act is remedied by the Company
within 10 business days after receipt of written notice thereof given by the
Executive;

                  (b)      A  reduction  by the  Company of the  Executive's
base salary in effect at the Effective Time (or in the case of a reduction
after the date hereof,  but prior to the Effective Time, a reduction by the
Company of the Executive's base salary in effect on the date  hereof)  or as the
same shall be  increased  from time to time,  unless such reduction is less than
ten percent (10%) and it is either (i) replaced by an incentive  opportunity
equal in value; or is (ii) consistent and proportional  with  an  overall
reduction  in  management  compensation  due to extraordinary  business
conditions,   including  but  not  limited  to  reduced profitability and other
financial stress (i.e., the base salary of the Executive will not be singled out
for reduction in a manner  inconsistent with a reduction imposed on other
executives of the Company);

                  (c)      The  relocation  of  the  Executive's  office  more
than  50  miles  from  the Executive's  office at the Effective Time (or in the
case of a relocation  after the  date  hereof,  but  prior  to  the  Effective
Time,  a  relocation  of the Executive's  office more than 50 miles from the
Executive's  office on the date hereof).

                           The Executive's  right to terminate  employment for
Good Reason shall not be affected by the Executive's  incapacity due to physical
or mental  illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.


<PAGE>


                  1.7      Cause.  Cause shall mean the occurrence of any one or
more of the following:

                  (a)      The Executive is convicted of a felony involving
moral turpitude; or

                  (b)      The Executive  engages in conduct or activities that
constitutes  disloyalty to the Company and such conduct or activities are
materially  damaging to the property,  business or reputation of the Company; or

                  (c)      The  Executive  persistently  fails or  refuses  to
comply  with  any  written direction  of an  authorized  representative  of the
Company  other than a  directive  constituting  an  assignment described in
Section 1.6(a); or

                  (d)      The  Executive  embezzles  or  knowingly,  and  with
intent,   misappropriates property of the Company, or unlawfully appropriates
any corporate opportunity of the Company.

                  1.8      Annual Award Amount.  The average of the two highest
annual  incentive  awards under the Company's  Executive Incentive Plan (or the
annual cash incentive plan maintained by a successor  company) paid in the last
five years to the Executive prior to the occurrence of the Qualifying
Termination.

                  2.       Severance Benefits for an Executive  Ineligible to
Retire.  Upon the occurrence of a Qualifying Termination with respect to an
Executive who is Ineligible to Retire:

                  (a)      Severance Payment:  The Company shall pay to the
Executive an amount equal to two and one-fourth  times the Executive's  annual
base salary (as in effect on the date of the  Qualifying  Termination,  not
reduced  by any reduction  described  in Section  1.6(b)  above) and Annual
Award  Amount.  The payment shall be made in twenty-four equal monthly
installments beginning on the first day of the month following the Qualifying
Termination.

                  (b)      Severance Health Benefits. For the thirty-six month
period commencing on the occurrence of such Qualifying  Termination,  the
Company shall provide to the Executive and the Executive's  family medical and
dental benefits as provided to other executive officers who remain employed by
the Company.  The Executive  shall be  required  to make  payments  for such
coverage in



<PAGE>

the same amount as is required of executive officers who remain employed by the
Company.

                  (c)      Split  Dollar.  The  Qualifying   Termination  shall
not constitute a termination of the Split Dollar  Agreement  between the Company
and the Executive (or the split dollar agreement between a successor company and
the Executive),  and the  Executive  shall  be  deemed  to have  retired  upon
such Qualifying Termination for purposes of such Split Dollar Agreement (or the
split dollar agreement between a successor company and the Executive).

                  3.       Severance  Benefits  for an  Executive  Eligible  to
Retire.  Upon the  occurrence  of a Qualifying Termination with respect to an
Executive who is Eligible to Retire:

                  (a)      Severance Payment:  The Company shall pay to the
Executive an amount equal to two times the Executive's annual base salary (as in
effect on the date of the Qualifying  Termination,  not reduced by any reduction
described in Section  1.6(b) above) and Annual Award Amount.  The payment shall
be made in twenty-four equal monthly  installments  beginning on the first day
of the month following the Qualifying Termination.

                  (b)      Supplemental   Retirement   Benefits.   For  purposes
of determining the Executive's supplemental retirement benefits which the
Executive is entitled to under the Company's  Executive Benefits Plan (or the
supplemental retirement  plan  maintained  by a  successor  company),  the Early
Retirement Adjustment  Factor  (as such term is defined in the  Company's
Pension  Plan or within  the  meaning  of the  tax  qualified  retirement  plan
maintained  by a successor company) will be one (1).

                  (c)      Severance  Health  Benefits.  The Company shall
provide to the Executive and the Executive's family medical and dental benefits
on the same basis and on the same terms as any retiree who has attained age 65
and completed the greater of 20 years or actual years of service.

                  (d)      Retirement.  The  Executive  shall be  treated  as
having retired at the Company's  request for purposes of all of the  Company's
benefit plans (or the benefit plans maintained by a successor company).


<PAGE>


                  4.       Code Section 28OG.

                  4.1      Limitations.  Notwithstanding  Section 2 and 3, in
the  event  that a change in ownership or control (within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code")) of the
Company occurs and the independent public  accountants  for the Company (the
"Accountants")  determine that if the benefits to be provided  under Section 2
and 3 (together with any other benefits payable to the Executive  under any
applicable  plan  maintained by the Company) were paid to the Executive:

                  (a)      the  Executive  would incur an excise tax under
Section 4999 of Code,  and the Company  would be denied a deduction  under
Section  280G of the Code of all or some of such amounts to be paid to the
Executive, and

                  (b)      the net after tax  benefits to the  Executive
attributable  to payments  under Sections 2 and 3 hereof would not be at least
$10,000 greater than the net after tax  benefits  which would accrue to the
Executive  if the amounts  which would otherwise cause the Executive to be
subject to this excise tax were not paid, the amounts payable to the Executive
pursuant to Section 2 and 3 (or pursuant to such other plans  maintained by the
Company) shall be reduced so that the amount payable to the Executive  hereunder
is the greatest amount (as determined by the Accountants)  that may be paid by
the Company to the Executive  without any such amount being subject to an excise
tax under Section 4999 or being  nondeductible for the Company pursuant to
Section 280G.

                  4.2      Executive's  Election.  If the  amounts to be paid to
the Executive are to be reduced under  paragraph 4.1 of this Section,  the
Executive shall be given the  opportunity to designate which benefits or
payments shall be reduced and in what order of priority.

                  4.3      Later Adjustments.

                  (a)      If  the  Executive  receives  reduced  payments  or
benefits  pursuant  to the preceding  paragraph,  or if it had been  determined
that no such reduction was required,  but it nonetheless is established pursuant
to the final determination of



<PAGE>

a court or an Internal Revenue Service proceeding that,  notwithstanding  the
good  faith of the  Executive  and the  Company  in  applying  the terms of this
Section,  the  aggregate  amount paid to the  Executive or for his benefit would
result in any amount being treated as an "excess parachute payment" for purposes
of Sections  28OG and 4999 of the Code,  then an amount equal to the amount that
would be an "excess  parachute  payment" shall be deemed for all purposes a loan
to the Executive  made on the date of the receipt of such excess  amount,  which
the  Executive  shall  have an  obligation  to repay 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
excess until the date of such repayment.

                  (b)      In the event that it is  determined  for any reason
that the amount of "excess parachute  payments"  are less than  originally
calculated,  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
Section  without  any of such  payments constituting  an "excess  parachute
payment,"  together  with  interest on such amount at the  applicable  Federal
rate (as  defined in Section  1274(d) of the Code).

                  5.       Termination of Agreement.  This Agreement  shall
remain in effect from the date hereof until the last day of the  twenty-fourth
calendar  month  following  the Effective Time. Further,  upon the Effective
Time, this Agreement shall continue until the  Company  or its  successor  shall
have  fully  performed  all of its obligations thereunder with respect to the
Executive, with no future performance being possible. Notwithstanding the
foregoing, this Agreement shall terminate on the date the Company's Board of
Directors  decides by formal vote not to proceed with the Merger;  provided,
however, that in the event a Qualifying Termination occurs prior to such date,
this  Agreement  shall continue until the Company or its successor shall have
fully performed all of its obligations  thereunder with respect to the
Executive, with no further performance being possible.

                  6.       Amendment  of  Agreement.   Subject  to  the
provisions  of  Section  5,  this Agreement  may not be  amended  in any manner
which has a  significant  adverse effect  on the  rights of the  Executive
without  the  written  consent  of the Executive.


<PAGE>

Notwithstanding the foregoing, at and after the Effective Time, this Agreement
may not be amended in any respect  without the written  consent of the
Executive.

                  7.       Construction.  Wherever any words are used herein in
the masculine  gender they shall be construed  as though they were also used in
the feminine  gender in all cases where they would so apply,  and  wherever any
words are used herein in the singular  form,  they shall be  construed  as
though  they were also used in the plural form in all cases where they would so
apply.

                  8.       Governing Law.  This Agreement shall be governed by
the laws of Maryland.

                  9.       Successors and Assigns.  This  Agreement  shall be
binding upon the Company and any assignee or successor in interest to the
Company.

                  10.      Indemnification.  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.

                  11.      Notice. Any notices,  requests,  demands, or other
communications  provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has filed in writing with the Company, or in the case of the Company, to its
principal offices.

                                         BALTIMORE GAS AND ELECTRIC COMPANY



                                         By:  /s/ Jon M. Files
                                              Jon M. Files
                                              Vice President Management Services

                                              /s/ Stephen F. Wood
                                              STEPHEN F. WOOD