Noncompetition, Nonsolicitation, and Confidentiality Agreement – Pepco Holdings

Page 1 of 7

NON-COMPETITION, NON -SOLICITATION, AND CONFIDENTIALITY
AGREEMENT

THIS NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY AGREEMENT (the
“Agreement“), is made on this 27^th day of March, 2006, by and
between Pepco Holdings, Inc., with its principal place of business at 701 Ninth
Street, N. W. Washington, D. C. 20068, including, unless the context clearly
otherwise requires, its subsidiaries and affiliates (together, “PHI”), and Eddie
R. Mayberry (the “Executive”).

WHEREAS, the Executive is employed by PHI as Senior Vice President, PHI and
President, Pepco Energy Services and in such capacity, had, has, and will
continue to have access to PHI’s employees, customers, vendors, trade secrets,
and proprietary information; and

WHEREAS, by virtue of the years of valuable service the Executive has
provided to PHI in a position in which the Executive has made significant policy
decisions and contributed to the establishment of the strategic direction and
compensation policies of PHI, the Executive possesses significant knowledge of
and experience in connection with the business of PHI, including specifics
regarding the compensation and benefits of its key executives that would place
him in a position to recruit such executives if he were to engage in a competing
or similar business; and

WHEREAS, PHI is prepared to make a substantial cash payment to the Executive
upon his retirement, as set forth in Section 2 below, provided that the
Executive makes certain assurances that he will not be in a position that is
potentially adverse to, or that otherwise would harm, the business interests of
PHI; and

WHEREAS, the Executive desires to enter into this Agreement in exchange for
such cash payment;

NOW THEREFORE, in consideration of these premises and intending to be legally
bound hereby, PHI and the Executive hereby agree as follows:

SECTION 1. Definitions. Capitalized terms used herein will have the
meanings set forth in the preamble of this Agreement, or as set forth below:

1.1. “Competing Business” means (a) any electric or gas energy
supplier or distributor located in or servicing the area east of the Mississippi
River within the United States of America and (b) any other corporation, or
unincorporated entity, in the area east of the Mississippi or any other place
where PHI has conducted business during the tenure of Executive’s employment
with PHI (except with respect to lines of business in which the Company no
longer engages).

1.2. “Proprietary Information” means confidential, proprietary,
business and technical information or trade secrets of PHI. Such Proprietary
Information shall include, but shall not be limited to, the following items and
information relating to the following items: (a) computer codes or instructions
(including source and object code listings, program logic algorithms,
subroutines, modules or other subparts of computer programs and related

documentation, including program notation), computer processing systems and
techniques, all computer inputs and outputs (regardless of the media on which
stored or located), hardware and software configurations, designs, architecture
and interfaces, (b) business research, studies, procedures and costs, (c)
financial data, (d) distribution methods, (e) marketing data, methods, plans and
efforts, (f) the identities of PHI’s relationship(s) with actual and prospective
customers, contractors and suppliers, (g) the terms of contracts and agreements
with customers, contractors and suppliers, (h) the needs and requirements of,
and course of dealing with, actual or prospective customers, contractors and
suppliers, (i) personnel information, including but not limited to benefit
programs, pay scales, and incentive programs, and (j) customer and vendor credit
information. Failure by PHI to mark any of the Proprietary Information as
confidential or proprietary shall not affect its status as Proprietary
Information under the terms of this Agreement.

1.3. “Restricted Period” means the entire period of the Executive’s
employment by PHI and the 12 calendar months following the termination of such
employment.

1.4. “Restrictive Covenants” means the provisions contained in
Section 3.1 of this Agreement.

SECTION 2. Transaction and Signing Bonus. Within 15 days following the
retirement of the Executive on April 1, 2006, PHI will make a single sum cash
payment to the Executive of one years’ salary in effect on his retirement date,
less any required tax withholding.

SECTION 3. Non-Compete; Confidentiality; Non-Solicitation. In
consideration of the payment described above in Section 2, the Executive
agrees to be bound by the Restrictive Covenants set forth in this Section
3.

3.1. Restrictive Covenants.

(a) During the Restricted Period, the Executive will not do any of the
following, directly or indirectly, in the area east of the Mississippi River or
any other place where PHI has conducted business during the tenure of
Executive’s employment with PHI (except with respect to lines of business in
which the Company no longer engages), without the prior written consent of PHI,
as applicable:

(i) Non-Competition. Engage or participate in any Competing Business;

(ii) Restrictions on Ownership. Become interested in (as owner,
stockholder, lender, partner, co-venturer, director, officer, employee, agent or
consultant) any person, firm, corporation, association or other entity engaged
in any Competing Business. Notwithstanding the foregoing, the Executive may hold
up to 2% of the outstanding securities of any class of any publicly-traded
securities of any company;

(iii) Non-Solicitation of Business. Solicit or call on, either
directly or indirectly, (A) for purposes of selling goods or products
competitive with goods or products sold by PHI , any customer with whom PHI
shall have dealt or any prospective customer that PHI shall have identified and
solicited at any time during the Executive’s employment, or

-2-

engagement as a consultant, by PHI ; or (B) for the purposes of purchasing
goods or products competitive with goods or products purchased by PHI for resale
by PHI , any supplier with whom PHI shall have dealt at any time during the
Executive’s employment, or engagement as a consultant, by PHI;

(iv) Non-Interference with Business. Influence or attempt to influence
any supplier, customer or potential customer of PHI to terminate or modify any
written or oral agreement or course of dealing with PHI; or

(v) Non-Solicitation of Employees. Influence or attempt to influence
any person to either (A) terminate or modify any employment, consulting, agency,
distributorship or other arrangement with PHI, or (B) employ or retain, or
arrange to have any other person or entity employ or retain, any person who has
been employed or retained by PHI as an employee, consultant, agent or
distributor of PHI at any time during the Restricted Period. It is understood
that this sub-paragraph (v) does not prevent the Executive from responding
truthfully to requests by prospective employers or recruiters for
recommendations or information concerning any such person’s performance as an
employee of PHI , provided that Executive did not initiate such request or refer
such person for the employment or retention that is the subject of the request,
and further provided that Executive shall not receive any compensation in any
form as a result of any hiring or retention of such person.

(b) Confidentiality. The Executive recognizes and acknowledges that
the Proprietary Information is a valuable, special and unique asset of the
business of PHI. As a result, both during the period of the Executive’s
employment with PHI and thereafter, the Executive shall not, without the prior
written consent of PHI , as applicable, for any reason either directly or
indirectly divulge to any third-party or use for his own benefit, or for any
purpose other than the exclusive benefit of PHI , any Proprietary Information
revealed, obtained or developed in the course of his employment, or engagement
as a consultant, by PHI ; provided, however, that nothing herein
contained shall restrict the Executive’s ability to make such disclosures during
the Executive’s period of employment or engagement with PHI as may be necessary
or appropriate to the effective and efficient discharge of his duties as an
employee or consultant or as such disclosures may be required by law. If the
Executive or any of his representatives becomes legally compelled to disclose
any of the Proprietary Information, the Executive will provide PHI with prompt
written notice so that the Company may seek a protective order or other
appropriate remedy.

(c) Property. All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of PHI. During
the period of employment, and engagement as a consultant, by PHI , the Executive
shall not remove from PHI ‘s offices or premises any documents, records,
notebooks, files, correspondence, reports, memoranda or similar materials of or
containing Proprietary Information, or other materials or property of any kind
belonging to PHI unless necessary or appropriate in accordance with the duties
and responsibilities required by or appropriate for his position and, in the
event that such materials or property are removed, all of the foregoing shall be
returned to their proper files or places of safekeeping as promptly as possible
after the removal shall serve its specific purpose. The Executive shall not
make, retain, remove and/or distribute any copies of any of the foregoing for
any reason whatsoever except as may be necessary in the discharge of his
assigned duties and

-3-

shall not divulge to any third person the nature of and/or contents of any of
the foregoing or of any other oral or written information to which he may have
access or with which for any reason he may become familiar, except as disclosure
shall be necessary in the performance of his duties; and upon the termination of
his employment with PHI , he shall leave with or return to PHI all originals and
copies of the foregoing then in his possession, whether prepared by the
Executive or by others.

(d) Duty to Keep Company Informed. In order to ensure that PHI and the
Company may retain the benefit of the Restrictive Covenants, the Executive
agrees to notify PHI of any employment or retention as consultant that he may
enter into which may be precluded by this Agreement, and to provide specific
information upon request regarding the Executive’s activities. In the event
Executive provides such notice and information at least 30 days prior to the
commencement of such employment or consultancy, PHI shall respond to such
Executive within 30 days (or if later, within 30 days after additional
information has been submitted by the Executive in response to a request for
such information) regarding the Company’s initial determination regarding
whether such employment or consultancy falls within the scope of the Restrictive
Covenants.

3.2. Acknowledgments. The Executive acknowledges that the Restrictive
Covenants are reasonable and necessary to protect the legitimate interests of
PHI and its affiliates and that, in the absence of such restrictions; PHI would
not enter into this Agreement. Therefore, the Executive acknowledges that the
Restrictive Covenants are entered into in order to induce PHI to make the
payment described in Section 2. The Executive further acknowledges that
the duration and geographic scope of Section 3.1(a) are reasonable given
the nature of PHI’s business and the position of authority and responsibility
that the Executive holds within PHI.

3.3. Rights and Remedies Upon Breach.

(a) Specific Enforcement. The Executive acknowledges that any breach
by him, willfully or otherwise, of the Restrictive Covenants will cause
continuing and irreparable injury to PHI for which monetary damages would not be
an adequate remedy. The Executive shall not, in any action or proceeding to
enforce any of the provisions of this Agreement, assert the claim or defense
that such an adequate remedy at law exists. In the event of any such breach by
the Executive, PHI shall have the right to enforce the Restrictive Covenants by
seeking injunctive or other relief in any court, without any requirement that a
bond or other security be posted, and this Agreement shall not in any way limit
remedies of law or in equity otherwise available to PHI . If an action at law or
in equity is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to recover, in addition to any other relief,
reasonable attorneys’ fees, costs and disbursements.

(b) Extension of Restrictive Period. If the Executive breaches any of
the Restrictive Covenants contained in Section 3.1(a), then the
Restricted Period shall be extended for a period of time equal to the period of
time that the Executive is in breach of such restriction.

(c) Return of Payment and Accounting. If the Executive engages in a
material breach of any of the Restrictive Covenants, the Executive will be
required to return the payment described in Section 2 above, plus
interest accruing from the date of payment to the

-4-

Executive to the date of such repayment at a rate of 2% above the prime rate,
as determined by PHI, to PHI, and PHI will have the right and remedy to require
the Executive to account for and pay over to PHI all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any action constituting a breach of the Restrictive
Covenants. These rights and remedies will be in addition to, and not in lieu of,
any other rights and remedies available to PHI under law or in equity.
Notwithstanding the foregoing, no return of payment will be required unless (i)
the damages caused by the breach are significant and proportionate to the
penalty hereunder, or (ii) the Executive fails to cease and remedy the breaching
activity within thirty (30) days after receiving notice from PHI indicating the
manner in which the breach has occurred and demanding such cessation and
remediation.

3.4. Judicial Modification. If any court determines that the
Restrictive Covenants or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, such court shall have the
power to modify such provision and, in its modified form, such provision shall
then be enforceable.

3.5. Disclosure of Restrictive Covenants. The Executive agrees to
disclose the existence and terms of the restrictive covenants set forth in this
Section 3 to any employer that the Executive may work for during the
Restricted Period which is in a Competing Business.

3.6. Enforceability. If any court holds the Restrictive Covenants
unenforceable by reason of their breadth or scope or otherwise, it is the
intention of the parties hereto that such determination not bar or in any way
affect the right of PHI to the relief provided above in the courts of any other
jurisdiction within the geographical scope of such Restrictive Covenants.

SECTION 4. Miscellaneous.

4.1. Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon PHI and the Executive and their respective successors,
executors, administrators, heirs and/or permitted assigns; provided,
however, that neither the Executive nor PHI may make any assignments of
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other party, except that, without such consent,
PHI may assign this Agreement to any successor to all or substantially all of
its assets and business by means of liquidation, dissolution, merger,
consolidation, transfer of assets, or otherwise.

4.2. Notice. Any notice or communication required or permitted under
this Agreement shall be made in writing and (a) sent by overnight courier, (b)
mailed by certified or registered mail, return receipt requested or (c) sent by
telecopier, addressed as follows:

If to the Executive:

Eddie R. Mayberry
115 N. Lee St.
# BH 401
Alexandria, VA 22314

-5-

If to PHI:

Pepco Holdings Inc.
General Counsel
701 Ninth St. N.W.
Washington, D.C. 20068

or to such other address as either party may from time to time duly specify
by notice given to the other party in the manner specified above.

4.3. Entire Agreement; Amendments. This Agreement contains the entire
agreement and understanding of the parties hereto relating to the subject matter
hereof, and merges and supersedes all prior and contemporaneous discussions,
agreements and understandings of every nature relating to the subject matter
hereof. This Agreement may not be changed or modified, except by an Agreement in
writing signed by each of the parties hereto.

4.4. Waiver. Any waiver by either party of any breach of any term or
condition in this Agreement shall not operate as a waiver of any other breach of
such term or condition or of any other term or condition, nor shall any failure
to enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof or constitute or be deemed a waiver or release of any
other rights, in law or in equity.

4.5. Governing Law. This Agreement shall be governed by, and enforced
in accordance with, the laws of the Delaware without regard to the application
of the principles of conflicts of laws.

4.6. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.

4.7. Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.

4.8. Consent to Arbitration; Fees.

(a) Except as otherwise provided in this Agreement, any controversy, claim,
or dispute between the parties related to or arising out of this Agreement shall
be finally settled by arbitration, conducted on a confidential basis, under the
U.S. Arbitration Act, if applicable, and the then current rules of the American
Arbitration Association (“Association”) strictly in accordance with the terms of
this Agreement and the laws of the State of Delaware, excluding its principles
of conflicts of laws.

(b) The Executive and PHI hereby consent to the personal and exclusive
jurisdiction of such arbitration and hereby waive any objection that the
Executive or PHI may

-6-

have to personal jurisdiction, the laying of venue of any such proceeding and
any claim or defense of inconvenient forum.

(c) Neither party shall be excluded from seeking provisional remedies in the
courts of any jurisdiction including but not limited to, temporary restraining
orders and preliminary injunctions, but such remedies shall not be sought as a
means to avoid or stay arbitration.

(d) In the event of any legal proceeding arising out of or relating to the
enforcement or interpretation of this Agreement, the party prevailing in such
proceeding shall be entitled to payment from the other party of all reasonable
attorneys’ fees, costs and disbursements incurred by the prevailing party in
connection with such proceeding.

4.9. Counterparts and Facsimiles. This Agreement may be executed,
including execution by facsimile signature, in one or more counterparts, each of
which shall be deemed an original, and all of which together shall be deemed to
be one and the same instrument.

IN WITNESS WHEREOF, PHI has caused this Agreement to be executed by its duly
authorized officers, and the Executive has executed this Agreement, in each case
as of the date first above written.

Pepco Holdings Inc.

By:

/s/ D. R. WRAASE

Title:

Chairman, President, and Chief Executive Officer

Eddie R. Mayberry

/s/ E. R. Mayberry

-7-