This Agreement, made this 1st day of August, 1995 between Potomac Electric Power Company, hereinafter
referred to as the "Company" and H. Lowell Davis, hereinafter referred to as "Davis",
WHEREAS, Davis has served as Vice Chairman and Chief Financial Officer of the Company since September,
1983; and has served as Chief Executive Officer of the Company's subsidiary, Potomac Capital Investment
Corporation since its inception in 1983.
WHEREAS, the Company wishes to make provision for continuity and orderly transition through the continued
employment of Davis for the period specified herein; and
WHEREAS, Davis is willing to continue employment upon the terms and conditions hereinafter set forth;
NOW THEREFORE, the parties agree as follows:
1. For the period beginning on the date of execution of this Agreement and ending May 1, 1997 (or such
alternate date as may be mutually agreed to in writing between the Company and Davis) Davis will continue to
serve as Vice Chairman of the Company, unless his services are sooner terminated in accordance with the
provisions of clause number 3 hereafter. During the continuance of his employment, Davis will devote his full time,
energies and best efforts to the business of the Company through April 30, 1996. For the year commencing May
1, 1996 through April 30, 1997, Davis will remain available to perform requested services and will continue to
serve as a director of the Company. Unless otherwise mutually agreed to in writing between the Company and
Davis, Davis will retire on May 1, 1997.
2. Davis' salary as an officer of the Company during the period of this Agreement shall be payable monthly at an
annual rate to be established by the Company's Board of Directors from time to time, which rate shall be no less
than the base salary in effect at the date on which this Agreement is executed.
3. Davis' services may be terminated at a time prior to May 1, 1997 (or such alternate date as may be mutually
agreed to in writing between the Company an