AGREEMENT AND GENERAL RELEASE OF CLAIMS

AGREEMENT AND GENERAL RELEASE OF CLAIMS

                        This Agreement and General Release of Claims (the "Agreement") is made this 27 ^th day of November, 2006 between Pepco Holdings Inc., including, unless the context clearly otherwise requires, its subsidiaries and affiliates (together, "PHI" or the "Company") and William J. Sim ("Mr. Sim").

                        WHEREAS, Mr. Sim entered into an Employment Agreement with the Company as of August 1, 2002 for a three year period, which Employment Agreement was automatically extended for an additional three year period (the "Employment Agreement");

                        WHEREAS, the parties have agreed that if Mr. Sim were to terminate his employment from the Company, such termination shall constitute a termination other than for Cause under the Employment Agreement;

                        NOW, THEREFORE, in consideration of the mutual promises set forth below, and intending to be legally bound, the parties hereto agree as follows:

             1.       Mr. Sim shall terminate his employment with the Company on December 31, 2006 and retire under the terms of the tax-qualified retirement plan generally applicable to Pepco heritage employees, effective January 1, 2007. It is understood that this is an amicable separation, and any oral or written communications made by Mr. Sim and PHI shall be consistent with an amicable separation. During the period between the date of this Agreement and the termination of Mr. Sim's employment, the Company shall continue to employ Mr. Sim under the following terms and conditions:

           a.        Mr. Sim shall remain an officer of Pepco Holdings, Inc.;

           b.        The Company shall not reduce Mr. Sim' annual salary, incentives, and benefits prior to his retirement;

           c.        For his part, Mr. Sim agrees to devote substantially all his time and attention to the matters for which he is suited by training and experience reasonably assigned to him by Thomas S. Shaw, PHI Executive Vice President or other such executive as designated by the PHI Chief Executive Officer; and

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