PEPCO HOLDINGS INC FILES (8-K) Disclosing Change in Directors or Principal Officers, Financial Statements and Exhibits

Item 5.02 Departure of Directors or Certain Officers; Election of

          Directors; Appointment of Certain Officers; Compensatory           Arrangements of Certain Officers.   

(e) OnDecember 20, 2011, Pepco Holdings, Inc. (the "Company") entered into an employment agreement (the "Agreement") with Joseph M. Rigby, the Company's Chairman, President and Chief Executive Officer. The Agreement, which is effective January 1, 2012 (the "Effective Date"), replaces the employment agreement entered into with Mr. Rigby in 2008 (the "Prior Agreement"). The Company's independent directors, based upon the recommendation of the Company's Compensation/Human Resources Committee (the "Committee") and advice from the Committee's independent compensation consultant, authorized the execution and delivery of the Agreement with Mr. Rigby. The Agreement includes provisions intended to further align Mr. Rigby's compensation with improvements in the Company's service reliability and customer satisfaction goals, as well as and initiatives related to succession planning and talent management as established by the Committee and to remove certain provisions identified as problematic pay practices. The following is a description of the material terms and conditions of the Agreement, which description is qualified by reference to a copy of the Agreement attached as Exhibit 10 to this Current Report on Form 8-K.

The Agreement has a term of three years and expires on December 31, 2014. The Prior Agreement provided for an initial three-year term with annual renewals thereafter unless either party elected to terminate the Prior Agreement. Pursuant to the terms of the Agreement, Mr. Rigby is required to devote his knowledge, skill and best efforts in the performance of his duties to the Company, other than civic and charitable commitments that do not conflict with the Company's business. To the extent Mr. Rigby elects to serve on the board of any public company, other than the board of directors of the Company (the "Board") or one of its subsidiaries, Mr. Rigby is required to obtain the prior consent of the Board.

For his full time service as President and Chief Executive Officer of the Company, Mr. Rigby will be entitled to an annual salary of $985,000 effective January 1, 2012. Mr. Rigby is entitled to receive under the Company's incentive compensation plans incentive awards if and to the extent that the Board determines in good faith that his performance merits payment of such awards, and to participate in a manner similar to other senior executives of the Company in its retirement plans, supplemental retirement benefit plans, savings plans, deferred compensation plans, health, welfare and insurance plans and other plans and programs provided by the Company from time to time for its senior executives. Mr. Rigby is also entitled to receive such perquisites and other personal benefits as are provided by the Company from time to time to its senior executives generally. The Company also agreed to pay on Mr. Rigby's behalf the costs of any supplemental life or disability insurance coverage generally offered by the Company from time to time to its senior executives.

The Agreement provides a supplement to Mr. Rigby's annual annuity benefit under the Company's Supplemental Retirement Plan (the "2011 SERP") equal to 1.65% of Mr. Rigby's 5-year average base pay and bonus multiplied by years of service as determined under the Company's defined benefit plans. For all other executives, the 2011 SERP provides for an annual benefit equal to 1.45% of the 5-year average base pay and bonus multiplied by years of service. The Agreement provides that the Board will conduct an annnual review of Mr. Rigby's total compensation, and may make such changes in such compensation as it deems appropriate in its sole discretion, provided that it may not decrease his salary over the term of the Agreement.

If at any time during the term of the Agreement the Company terminates Mr. Rigby's employment other than for cause ("cause" is defined as (i) intentional fraud or material misappropriation with respect to the business or assets of the Company, (ii) the persistent refusal or willful failure to perform substantially

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duties and responsibilities to the Company after notice of, and an opportunity to remedy, such failure have been given, or (iii) conduct that constitutes disloyalty to the Company or that materially damages the property, business or reputation of the Company), Mr. Rigby will be entitled to:

  (A)  Payment of unpaid salary and accrued vacation pay through the date of      termination, as well as any earned and unpaid bonus for the year prior to      the year in which the termination occurs; and    (B)  Subject to execution and delivery of an irrevocable release of claims:             ·   if the termination date is prior to the first              anniversary of the Effective Date, a lump sum              severance payment equal to three times the sum              of (i) his annual base salary in effect on the              date of the termination of employment and (ii)              the higher of (A) his target annual bonus under              the Company's Executive Incentive Compensation              Plan (the "EICP") for the year in which the              termination of employment occurs or (B) the              highest annual bonus received under the EICP              during the three calendar years preceding the              calendar year in which the termination of              employment occurs (the sum of (i) and (ii)              above is referred to as the "Calculation              Amount");           ·   if the termination date is on or after the              first anniversary of the Effective Date but on              or prior to December 31, 2014, a lump sum cash              payment equal to the product of (i) three times              Calculation Amount and (ii) a fraction (A) the              numerator of which is 730 minus the number of              days that have elapsed from and including              January 1, 2013, through the day immediately              prior the termination date and (B) the              denominator of which is 730; and           ·   a lump sum payment in cash equal to a pro-rated              portion of Mr. Rigby's target annual bonus              under the EICP for the year in which the              termination occurs;      (C) Any restricted shares or restricted stock units awarded under the Company's       Long-Term Incentive Plan (or any successor plan) (the "LTIP"), other than       the retention award provided for under the Agreement (as described below),       the vesting of which is contingent solely on Mr. Rigby's continued       employment and that would have become vested in full had he remained       employed for the remainder of the term of the Agreement will become vested       and non-forfeitable on the date his employment terminates, or if such award       would have vested in full after the last day of the term of the Agreement,       the vesting of the award shall be pro-rated based on service up to the date       of termination, except if such termination occurs within one year following       a change of control (as defined in the Agreement), the award will vest in       full.      (D) Any restricted shares or restricted stock units awarded under the LTIP,       other than the retention awards provided for under the Agreement (as       described below), the vesting of which is contingent on the achievement of       specified performance goals during a performance period that ends within the       term of the Agreement will become vested at the end of the performance       period if and to the extent the performance goals are achieved, or if the       performance period ends after the last day of the term of the Agreement, the       award (to the extent earned based on performance through the end of the       performance period) shall be pro-rated based on service up to the date of       termination; except that, if a termination occurs within one year following       a change of control, each outstanding performance award shall vest on the       date Mr. Rigby's employment terminates and the amount of the award shall be       determined on the assumptions that (i) Mr. Rigby had remained employed       through the end of the performance period and (ii) the target level of       performance had been achieved.                                            3

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If, at any time during the term of the Agreement, Mr. Rigby terminates his employment under any of the following circumstances ("Good Reason"), he will receive under his Agreement the same benefits that he would have received had the Company terminated his employment without cause as described above: (i) his base salary is reduced (other than a reduction consistent and proportional with the overall reduction, due to extraordinary business conditions, in the compensation of all other senior executives of the Company), (ii) he is not in good faith considered for incentive awards under the Company's plans in which senior executives are eligible to participate, (iii) the Company fails to provide him with retirement, fringe and supplemental benefits in a manner similar to other senior executives, (iv) the Company relocates Mr. Rigby's place of employment to a location further than 50 miles from Washington, D.C. (other than the Washington, D.C. or Wilmington, Delaware metropolitan areas), or (v) he is removed from the position of Chief Executive Officer (other than due to his disability).

Upon Mr. Rigby's resignation (other than for Good Reason) or upon his death or disability (which shall be deemed to have occurred if he becomes entitled to long-term disability benefits under the Company's disability plan or policy), or in the event of termination of his employment for cause prior to termination of the Agreement, Mr. Rigby will not be entitled to further compensation under the Agreement, except as provided in the Agreement with respect to salary, vacation pay and annual bonus earned but not paid prior to such termination or awards or benefits to which he may be entitled under the Company's benefit plans.

By entering into the Agreement, Mr. Rigby relinquished the right to receive under the Prior Agreement (i) a severance payment in an amount equal to three times his combined salary and bonus, that would have been payable regardless of when during the term of the Prior Agreement Mr. Rigby's employment had terminated, and (ii) a lump sum supplemental retirement benefit payable in cash equal to the present value of such benefit that would have been obtained by adding three additional years of age and three additional years of service, which would have been payable upon termination of Mr. Rigby's employment by the Company without cause or upon Mr. Rigby's resignation for good reason. In addition, Mr. Rigby relinquished the right to receive a gross-up payment for any excise tax payments he would have incurred had any payments made to him in connection with a termination of his employment been determined to be payments related to a change in control within the meaning of Section 280G of the Internal Revenue Code.

Unless prohibited by applicable law, for a period equal to the longer of one year following termination of employment and the remainder of the term of the Agreement, the Company has also agreed to reimburse Mr. Rigby for the cost of purchasing a health insurance policy comparable to the Company-sponsored healthcare plan in which Mr. Rigby was enrolled immediately prior to termination of employment to the extent the Company is not providing or paying for such coverage. Furthermore, if Mr. Rigby's employment is terminated without cause, or Mr. Rigby resigns for Good Reason, following a change of control, the Company shall, for a period of 24 months after such termination, unless prohibited by applicable law, either (i) provide him with healthcare, life insurance and disability benefits no less favorable than those benefits as in effect immediately prior to the termination or (ii) reimburse Mr. Rigby for the costs of obtaining such benefits.

The Agreement also contains confidentiality, non-compete and non-solicitation covenants, all of which contain terms that are customary in agreements of this type. Mr. Rigby has also agreed to be bound by and comply with, to the extent they may be applicable to him, any of the "clawback" provisions of (i) Section 304 of the Sarbanes-Oxley Act of 2002, or (ii) policies adopted by the Company in accordance with future rules of the Securities and Exchange Commission pursuant to Section 10D of the Securities Exchange Act of 1934, which was enacted as part of the Wall Street Reform and Consumer Protection Act.

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As an inducement for Mr. Rigby to enter into the Agreement and remain in his current position for an additional three-year period, the Agreement provides for contingent retention awards consisting of restricted stock units. Each restricted stock unit is a contractual right to receive at the time of settlement one share of the Company's common stock (the "Common Stock"). The contingent retention awards are comprised of service-based and performance-based awards, as described in greater detail below.

The portion of the total contingent retention awards under the Agreement that is subject to vesting based on continued service with the Company will be made on the Effective Date. The number of restricted stock units subject to such award will be determined by dividing $1.5 million by the closing price of a share of Common Stock on the last trading day prior to January 1, 2012. One-third of the restricted stock units will vest on January 1, 2013, and the remaining two-thirds of the restricted stock units will vest ratably, on a day-to-day basis, over the two-year period beginning on January 1, 2013, in each case so long as Mr. Rigby remains employed by the Company. Except as set forth below, to the extent Mr. Rigby's employment terminates prior to the end of the term of the Agreement, the unvested portion of this restricted stock award will be forfeited. The unvested portion of this award will be immediately vested in full in the event of the termination of Mr. Rigby's employment due to death or . . .

   Item 9.01           Financial Statements and Exhibits.           (d)  Exhibits           The following exhibits are is filed herewith:           Exhibit No.      Description of Exhibit                10          Employment Agreement of Joseph M. Rigby                           dated December 20, 2011 (including forms                           of Restricted Stock Unit Award                           Agreements contained therein)                                        * * * * * *                                           6

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