EMPLOYMENT TERMINATION AND RELEASE AGREEMENT
                                       FOR
                               M. PHYLLIS BOURQUE


         THIS  EMPLOYMENT  TERMINATION  AND  RELEASE  AGREEMENT  FOR M.  PHYLLIS
BOURQUE  ("the  "Agreement")  by and between the Public  Service  Company of New
Mexico,  a New  Mexico  corporation,  (the  "Company")  and M.  PHYLLIS  BOURQUE
("Employee"),  is effective as of the date  Employee  signs the Agreement as set
forth below.

                                 R E C I T A L S

         WHEREAS,  Employee has been continuously  employed by the Company since
March 2, 1987.

         WHEREAS,  Employee is resigning from the Company effective December 24,
1996 and is also resigning from all other  positions she holds with Company,  or
its affiliates (including any affiliated entity over which the Company, directly
or indirectly, has a controlling interest (an "Affiliate"));

         WHEREAS,  the parties desire to compromise all claims and disputes that
may currently exist between them; and

         WHEREAS,  with  respect to the  foregoing,  the  Company  has agreed to
provide  Employee with severance  benefits,  pursuant to the following terms and
conditions.

         NOW, THEREFORE, in consideration of the promises and benefits set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby  acknowledged  by the  parties  hereto,  it is hereby  agreed as
follows:

         1. Employee's  Termination.  Employee is resigning from the Company and
hereby resigns from any and all other positions she currently holds with Company
and Affiliates thereof, including all officer, committee, and director positions
currently held with such  entities,  such  termination  and  resignations  to be
effective as of December 24, 1996 (the "Termination Date").

         2.  Severance  Benefits.   Company  agrees  to  provide  Employee  with
severance  benefits equal to Senior  Management  Plan severance  benefits as set
forth in the PNM Non-Union Severance Pay Plan (the "Severance Plan") as follows:

                  (a)  Severance Pay.  Severance Pay totaling $208,964.15.

                  (b)  Placement   Assistance.   Employee   shall  also  receive
placement  assistance  benefits by  reimbursement  of her  placement  assistance
expenses during the twelve (12) month period following the Termination Date. The
amount of such  reimbursement  shall not exceed five percent (5%) of  Employee's
base  salary,  for  a  total  reimbursement  not  to  exceed  $6,750.  Placement
assistance  shall include,  but shall not be limited to: (i) out-of-town  travel
(i.e., airfare,  mileage, rental cars, lodging and meals), (ii) services for out
placement,  (iii)  resume  preparation  and  mailing,  and (iv)  recruitment  or
employment agencies fees.

                                       1
<PAGE>

                  (c) Health Care  Coverage.  Employee shall receive Health Care
Benefits  for  the  next  twelve  (12)  calendar  months  immediately  following
Employee's  Termination  Date,  with the Company paying for all such Health Care
Benefits for Employee and her  enrolled  eligible  dependents  on such terms and
conditions as was provided by the Company  immediately  prior to the Termination
Date.  Employee  will not be allowed to change her level of benefits  (including
the elected family coverage)  during such twelve (12) month period.  If Employee
was receiving a monthly refund  immediately prior to her Termination Date due to
the elected  level of Health Care  Benefits,  she will  continue to receive such
refund  during such  twelve  (12) month  period.  If  Employee  was  required to
contribute  to the monthly cost of the Health Care  Benefits  (e.g.,  by payroll
withholding),  she will be required to continue  making any  applicable  monthly
premium  payments to retain the level of  coverage  being  provided  immediately
prior to such Termination Date. "Health Care Benefits" as used herein shall mean
the medical and dental benefits provided to Employee under the PNM Benefit Trust
and Master Plan, maintained by the Company or a health maintenance  organization
benefits sponsored by the Company,  although the Company reserves the right from
time to time, in its absolute and sole  discretion,  to amend such plans, in any
and all respects,  including the right to reduce or change the level of benefits
provided  thereunder,  or to provide  alternative forms of benefits.  The Health
Care Benefits provided hereunder for the first six (6) month period shall be tax
free,  whereas the second six (6) month period (i) shall be a taxable benefit to
Employee  and (ii) shall  reduce by six (6) months  the  available  Consolidated
Omnibus Budget Reconciliation Act ("COBRA") medical continuation coverage period
available to Employee.

         (d)  Insurance  Benefits.  Term life  insurance,  accidental  death and
dismemberment  coverage  in the amount of  $135,000  for a period of twelve (12)
calendar months immediately following the Termination Date.

         3. Payment of Benefits and Health Care and Life Insurance Coverage. The
payment for the benefits  described in  paragraphs 2 (a) and (b) above,  and the
health  care and life  insurance  coverage  shall be made to, or  arranged  for,
Employee at the end of the seven (7) day revocation  period for this  Agreement,
following  Employee's  timely  execution of this  Agreement and without the same
being revoked by Employee.

         4.  Release  Provisions.  Various  state and  federal  statutes  (laws)
prohibit  employment  discrimination  based on age, sex, race,  color,  national
origin, religion,  ancestry, physical or mental handicap and disability,  mental
condition or veteran status.  These statutes are enforced through state, federal
and local agencies,  including the EEOC and the New Mexico  Department of Labor,
Human Rights Division. Employee should carefully consider this Agreement and the
Release  provisions  of this  Section 4, and  thoroughly  understand  its effect
before  signing  it.  Employee is strongly  encouraged  to consult  with her own
attorney before signing this Agreement.  Employee  understands that the decision
to  consult  with an  attorney  is solely the  decision  of  Employee.  Employee
acknowledges  that she has been given a period of at least  twenty-one (21) days
(the "Review  Period") to review and consider this Agreement  before signing it.
Employee  understands  that  she may use as much of this  Review  Period  as she
wishes  prior to signing.  Employee may revoke this  Agreement  within seven (7)
days after signing it and this Agreement will become  effective and  enforceable
only  after  this  revocation  period has  expired.  Revocation  will be made by
returning a copy of this Agreement to JUDY ZANOTTI of the Company with a written
signature  in the space  provided at the end of the  Agreement  indicating  that
Employee  has  elected  to revoke  this  Agreement.  For this  revocation  to be
effective,  written  notice  must be  received  by the Company no later than the
close of business on the seventh (7th) day after Employee signs this  Agreement.
If  Employee  does not sign the  Agreement  during the  Review  Period or if she
revokes this Agreement during the seven (7) day revocation  period, it shall not
be effective nor enforceable and Employee will not receive the benefits provided
under this Agreement.

                                       2
<PAGE>

         (a) Release of the Company. By signing this Agreement,  Employee agrees
to release and discharge the Company and Affiliates, their directors,  officers,
agents,  supervisors,  employees,  subsidiaries  and successors from any and all
claims which  Employee  has or may have arising out of or related to  Employee's
relationship, in any capacity, with the Company or Affiliates or the termination
of  employment  with  the  Company  or  Affiliates  ("Claims").  This  Agreement
includes,  but is not limited to any Claims arising under Title VII of the Civil
Rights Act, as amended,  which prohibits  discrimination  based on race,  color,
national origin,  religion,  or sex; the Age  Discrimination  in Employment Act,
which prohibits  discrimination based on age; the Equal Pay Act, which prohibits
paying men and women unequal pay for equal work; the Rehabilitation Act of 1973,
which   prohibits   discrimination   based  on  handicap;   the  Americans  with
Disabilities  Act, which prohibits  discrimination  based upon  disability;  the
Vietnam Era Veterans  Readjustment Act of 1974,  which prohibits  discrimination
against  veterans;  the Family Medical Leave Act of 1993 which provides  certain
employee's  rights with respect to employee  absences;  the Employee  Retirement
Income Security Act of 1974 ("ERISA"),  which governs rights in employee benefit
plans; the New Mexico Human Rights Act, which prohibits  discrimination based on
race, color,  national origin,  religion,  ancestry,  sex, or mental or physical
handicap;  or any of these  statutes,  as amended,  as of the date of signing of
this Agreement,  or any other federal,  state, or local statute,  law, executive
order or regulation.  This Agreement also includes a release by Employee for any
Claims arising from state or federal common law or statute  including any claims
relating to the Company's  right to terminate its  employees,  including but not
limited to any claims for wrongful discharge,  retaliatory discharge,  breach of
covenant  of good  faith and fair  dealing  or breach  of  employment  contract.
Employee also releases the Company, by way of illustration,  but not limitation,
for any personal  injury or stress  damages in connection  with her treatment by
the Employer or arising out of her termination.  Employee agrees not to file any
lawsuit or assert any Claim, without limitation,  based upon the foregoing state
or federal common laws or statutes.

                                       3
<PAGE>

         This  Agreement  does not  extend to a release of the  Company  for any
benefits  payable  pursuant to the Agreement,  nor to any benefits that Employee
might otherwise be entitled  pursuant to any of the Company's  pension plans (as
that term is defined in Section 3(2)(A) of ERISA), benefits pursuant to the then
applicable PNM health insurance plans, any health maintenance  organization,  or
Benefits My Way.  Pursuant to 29 U.S.C.  ss. 626, this Agreement does not extend
to any claims or rights under the federal Age  Discrimination  in Employment Act
which may arise out of the actions of the Company or an Affiliate after the date
of this  Agreement.  Notwithstanding  anything  herein to the contrary,  nothing
herein  shall be  construed  as to  abrogate  or  supersede  any  obligation  or
agreement of the Company or Affiliates that may exist outside of this Agreement,
pursuant  to  applicable  bylaw  provisions  of the  Company or  Affiliates,  to
indemnify  Employee,  or to provide Employee with director and officer liability
insurance. This Agreement shall not increase or adversely impact any such rights
or obligations to which Employee may be entitled under such  indemnification  or
directors  and  officers  liability  insurance  referred  to in the  immediately
preceding sentence.

         (b) No Release of Employee.  The Company and  Affiliates do not release
Employee  from any  claim  which the  Company  or an  Affiliate  has or may have
against Employee arising out of or relating to Employee's  relationship,  in any
capacity,  with the Company or Affiliates.  This Agreement also does not release
Employee for expressly  contracted debts or loans due the Company or Affiliates,
evidenced  by  written  notes  or   agreements,   or  for  willful,   wanton  or
intentionally wrongful acts, nor does this Agreement extend to matters or events
occurring after the date of this Agreement.

         5.       Confidential Information.

         (a) Employee Acquired Confidential  Information.  Except as required by
law,  Employee agrees to keep  confidential all  "Confidential  Information" (as
defined in this  Agreement)  obtained  during the course of employment  with the
Company and the positions she has held with Affiliates. Employee agrees that she
will not reveal any Confidential Information to any other person, corporation or
entity,   without  the  prior  written   consent  from  an  authorized   Company
representative.  The term  "Confidential  Information" as used in this Agreement
means  information,  written or  otherwise,  which  Employee has received in the
course of her  relationship,  in any capacity with the Company or Affiliates and
includes,  without  limitation,  all  reports,  forecasts,  contracts,  customer
information,   confidential  commercial  information,  trade  secrets,  business
secrets,  personnel  information or any information that is not available to the
general public.  Any  information,  analysis or  interpretation  which is public
information as a result of (A) a public filing made by the Company or Affiliates
or (B)  information  supplied  by the Company or  Affiliates  pursuant to formal
discovery  procedures  (unless such  information,  analysis or interpretation is
public  as a result  of a breach  of this  Agreement)  shall  not be  considered
Confidential Information.

         (b) Confidential Employment Information. PNM and Affiliates agree that,
consistent with current policy,  they will only release  information  confirming
dates of employment and positions held by Employee.

         (c) This Agreement  Confidential.  The parties, and each of them, agree
that this Agreement has been entered into with the understanding that all of the
terms and  conditions  hereof  will remain  confidential  and that they or their
legal representatives will not, except as provided herein, disclose to any Third
Party the terms and conditions of this  Agreement  unless the other party hereto
consents in writing to such disclosure.  As used herein, "Third Party" means any
person, corporation,  partnership,  firm, consultant, or governmental entity, or
representatives  of any of the  foregoing,  other than  officers,  employees and
attorneys of the parties to this Agreement.

                                       4
<PAGE>

         (d)  Protective  Order.  In the event that  Employee  is  requested  or
required to disclose the Confidential  Information pursuant to Section 5(a), (b)
or (c) above,  it is agreed that Employee  shall provide the Company with prompt
written  notice of such  request(s)  at least ten (10) days  prior to making any
such  disclosure  and  advise  whether  or  not  Employee  intends  to  seek  an
appropriate  protective  order to preclude  disclosure of such  information.  If
Employee seeks a protective order, the Company or any Affiliate may join in such
action.  If Employee  does not seek a protective  order,  then the Company or an
Affiliate shall have such right to seek a protective  order.  The parties to the
Agreement  agree to cooperate in seeking a protective  order if any party hereto
so requests.

         If Employee  seeks such  protective  order,  without the Company or the
Affiliate joining such action, or if the Company and/or the Affiliate  commences
such action,  without Employee seeking or joining in such action, then the party
seeking  such  protective  order  shall  pay  the  attorney  fees  and  expenses
associated  therewith,  including the reasonable  attorney fees and costs of any
other party to this  Agreement who requires such legal counsel to protect her or
its  interest  pursuant to such  action.  If  Employee  or the  Company  (and/or
Affiliate)  both join in such action,  then each shall be responsible for her or
its respective attorney fees and costs. If, in the absence of a protective order
or the receipt of a waiver  hereunder,  a party is legally bound, in the written
opinion of its counsel, to disclose the Confidential Information, it may legally
do so without a breach of this  Agreement.  PNM and  Affiliates  shall  instruct
their  directors,  officers,  employees,  agents and  attorneys  to maintain the
confidentiality  provisions hereof.  Notwithstanding the foregoing,  all parties
hereby consent to the disclosure of information  contained in or related to this
Agreement to the extent  required,  in the opinion of counsel to a party hereto,
to  comply  with  applicable  securities  laws and  regulations  or the laws and
regulations administered by the NMPUC which bind such party.

         6. Agreement to Assist  Company.  Employee agrees to assist the Company
when requested from time to time in the future,  such as in providing  testimony
or providing information to the Company or its counsel.

         7.  Accord and  Satisfaction.  Employee  agrees that the  payments  and
benefits  provided for pursuant to this  Agreement and the  provisions  included
hereunder  constitute full settlement and satisfaction of all claims released by
Employee as described in Section  4(a),  and agrees that this  Agreement and the
benefits  provided  pursuant to this  Agreement  are not to be  construed  as an
admission of liability by the Company, Affiliates, or their directors, officers,
supervisors,  agents, employees or any other persons or entities being released.
Employee  further agrees that  acceptance of the payments and benefits  provided
under this  Agreement  constitute  a waiver of all rights  Employee  may have to
pursue any rights and  privileges  under any  internal  grievance  procedure  or
policy.

                                       5
<PAGE>

         8. Entire Agreement. The benefits provided hereunder are in lieu of any
other  benefits to which  Employee  may be eligible  under (i)  severance  plans
(including  employment  option programs) or agreements  maintained by Company or
Affiliates  thereof  (including  any  right  to  receive  a notice  of  position
impaction  under Company or Affiliates  severance  plans,  which right is hereby
specifically waived), (ii) executive or employee retention plans or similar type
change in control  plans or  agreements  maintained  by  Company  or  Affiliates
thereof,  or (iii) any other benefit plan of the Company or its  Affiliates  not
otherwise  mentioned in the following  sentence of this paragraph.  The benefits
provided hereunder are not, however, in lieu of nor is the Agreement intended to
increase  or decrease or in any way impact the  benefits  otherwise  provided to
Employee under plans that are specifically not released by Section 4(a).

         9. Payroll Taxes.  Any amounts due pursuant to this Agreement  shall be
reduced by applicable federal,  social security (FICA) (Employee's portion only)
and state payroll withholding taxes.

         10. Interpretation and Appeals. The interpretation,  administration and
appeals of any dispute  regarding  this  Agreement  shall be resolved  under the
interpretation,  administration  and appeal  provision  of the  Severance  Plan,
Articles VI and XI thereof, which are incorporated herein by reference.

         11.  Controlling  Laws. This Agreement  shall be interpreted  under the
laws of the State of New Mexico.

         12.  Headings.  The  headings and  subheadings  in this  Agreement  are
inserted for convenience and reference only and are not to be used in construing
this Agreement or any provision thereof.

         13.  Revocation  Contingency.  It is hereby  agreed  that the  benefits
provided  hereunder are  contingent  upon the Employee  properly  completing and
delivering  this Agreement  without  revoking the same as otherwise  provided in
Section 4 hereof.

         14.  Signature by Employee.  Employee has twenty-one (21) days from the
date this Agreement is delivered to her to sign and return it to the Company. If
she does not sign, as provided below,  and return the same within the twenty-one
(21) day  period,  this  Agreement  shall no longer  be of any force or  effect.
Following  the signing of the  Agreement by  Employee,  she shall have seven (7)
days to revoke the same by  returning  a revoked  copy of the  Agreement  to the
Company.  The date of the signature and delivery by Employee shall be determined
by the date set  forth  in the  notarial  acknowledgment  with  respect  to such
signature.

         EMPLOYEE HAS CAREFULLY READ AND FULLY UNDERSTANDS ALL OF THE PROVISIONS
OF THIS TERMINATION AND RELEASE  AGREEMENT WHICH SETS FORTH THE ENTIRE AGREEMENT
BETWEEN (I) THE COMPANY AND EMPLOYEE WITH REGARD TO EMPLOYEE'S  EMPLOYMENT  WITH
THE COMPANY, AND HER TERMINATION AND (II) AFFILIATES AND EMPLOYEE WITH REGARD TO
EMPLOYEE'S   EMPLOYMENT  WITH  AFFILIATES  AND   TERMINATION.   EMPLOYEE  HEREBY
ACKNOWLEDGES THAT EMPLOYEE HAS NOT RELIED UPON ANY REPRESENTATION OR STATEMENTS,
WRITTEN OR ORAL, NOT SET FORTH IN THIS DOCUMENT,  WITH RESPECT TO THIS AGREEMENT
OR (I) AND (II) ABOVE.

                                       6
<PAGE>

         IN WITNESS WHEREOF,  the parties hereto,  have signed this Agreement to
be effective as of the date signed and delivered by Employee.

                                       PUBLIC SERVICE COMPANY OF NEW
                                         MEXICO, INC.

                                       By
                                           -------------------------------
                                                BENJAMIN F. MONTOYA,
                                           President and Chief Executive Officer

                                       EMPLOYEE

                                       -----------------------------------
                                                M. PHYLLIS BOURQUE


STATE OF NEW MEXICO      )
                         ) ss:
COUNTY OF BERNALILLO     )

         The foregoing  instrument was  acknowledged  before me this ____ day of
_______________, 1996, by Benjamin F. Montoya, its President and Chief Executive
Officer, on behalf of Public Service Company of New Mexico.


                                         --------------------------------- 
                                         NOTARY PUBLIC


                                         My commission expires:


                                         --------------------------------- 



                                       7
<PAGE>


STATE OF NEW MEXICO                     )
                                        ) ss:
COUNTY OF BERNALILLO                    )

                  The foregoing  instrument was acknowledged before me this ____
day of _______________, 1996, by M. PHYLLIS BOURQUE.



                                         --------------------------------- 
                                         NOTARY PUBLIC


                                         My commission expires:


                                         --------------------------------- 





                                       8
<PAGE>

                                   REVOCATION

                  I,  M.  PHYLLIS   BOURQUE,   do  hereby  revoke  the  attached
Employment Termination and Release Agreement.



                                          --------------------------------
                                          M. PHYLLIS BOURQUE



STATE OF NEW MEXICO         )
                            ) ss:
COUNTY OF BERNALILLO        )

                  The foregoing  instrument was acknowledged before me this ____
day of ______________, 1996, by M. PHYLLIS BOURQUE.



                                         --------------------------------- 
                                         NOTARY PUBLIC


                                         My commission expires:


                                         --------------------------------- 








                                       9