SECOND AMENDMENT TO THE
                           THIRD RESTATED AND AMENDED
                      PUBLIC SERVICE COMPANY OF NEW MEXICO
                             PERFORMANCE STOCK PLAN


         THIS SECOND AMENDMENT TO THE PUBLIC SERVICE COMPANY OF NEW MEXICO THIRD
RESTATED AND AMENDED  PERFORMANCE  STOCK PLAN, (the "Plan" or "PSP") made by the
Public Service  Company of New Mexico,  a New Mexico  corporation  ("PNM" or the
"Company"), is effective December 7, 1998.

         WHEREAS,  the Company adopted the Performance Stock Plan effective July
1, 1993;

         WHEREAS,  the Company  adopted the First  Restated  and Amended  Public
Service Company of New Mexico Performance Stock Plan effective January 1, 1996;

         WHEREAS,  the Company adopted the First Amendment to the First Restated
and  Amended  Public  Service  Company  of New  Mexico  Performance  Stock  Plan
effective December 31, 1996;

         WHEREAS,  the Company  adopted the Second  Restated and Amended  Public
Service Company of New Mexico Performance Stock Plan effective March 10, 1998;

         WHEREAS,  the Company  adopted the Third  Restated  and Amended  Public
Service  Company of New Mexico  Performance  Stock Plan also effective March 10,
1998;

         WHEREAS,  the Company adopted the First Amendment to the Third Restated
and  Amended  Performance  Stock  Plan to  provide  greater  flexibility  to the
Compensation  and Human Resources  Committee  ("Committee")  of the PNM Board of
Directors  ("Board") to grant Awards to  Participants  throughout  the year,  to
continue  to include  transferred  employees  as  Participants  in the Plan with
respect to Awards  granted  prior to transfer so as not to adversely  affect the
existing Awards granted to the transferred  employees prior to transfer,  and to
conform the  definition  of  "Retirement"  in the Plan to the  definition in the
proposed  Manzano  Corporation  Omnibus  Performance  Equity  Plan to avoid  any
inequity between  Participants in the two plans,  with effective dates for these
various provisions as stated in the Amendment;

         WHEREAS,  the Company reserved the right to amend the Plan, pursuant to
Section  10.1,  and the Board on February 11, 1997 adopted the revised  Enabling
Resolution,  authorizing  the Committee to adopt and approve new benefit  plans,
and all amendments to current benefit plans, subject to stated exceptions;

         WHEREAS,  management  on December 7, 1998  presented to the Committee a
presentation and briefing  materials intended to address the Company's change in
control program  benefits,  as stated in various  current benefit plans,  and to
recommend  modifications to these plans in the event of a change in control,  as
well as to clarify when a change in control event could occur;

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         WHEREAS,  the  Committee  adopted and  approved  resolutions  effective
December 7, 1998 authorizing "necessary revisions,  modifications, or amendments
to certain  qualified and  nonqualified  benefit  plans and  agreements . . . to
fully  integrate"  the  approved  change in  control  principles  and  retention
benefits,  in the event of a change in control of the Company.  These principles
and  briefing  materials  included  revisions to the  definition  of a change in
control  event,  to include the clause "any  required  approvals,  including any
final nonappealable regulatory order, having been obtained."

         WHEREAS,  the Company has proceeded to modify the  pertinent  qualified
and  nonqualified  employee  benefits plans to address  reasonable and necessary
employee  benefits  in the  event of a change in  control,  and to  clarify  the
definition of a change in control; and

         WHEREAS,  the  Company  desires  to  amend  the  Plan to  clarify  what
constitutes  a final  change in  control  event and to  conform  the Plan to the
principles  and benefits  adopted and  approved by the  Committee on December 7,
1998.

         NOW THEREFORE, the Company hereby amends the Plan, as follows:

                  ITEM 1.  The  first  paragraph  of  Section  2.4,  "Change  in
         Control" shall be modified to read as follows:

                         2.4 "Change in Control,"  subject to the exceptions and
                  modifications  set forth at the end of this Section 2.4, shall
                  be deemed to have occurred (any required  approval,  including
                  any  final   nonappealable   regulatory  order,   having  been
                  obtained) if:

                  ITEM 2. Except as amended  herein,  the Company  readopts  and
         redeclares each and every other provision of the Plan.

         IN WITNESS  WHEREOF,  Public Service  Company of New Mexico caused this
Second Amendment to the Third Restated and Amended  Performance Stock Plan to be
executed by its  authorized  officers,  to be  effective as of the date and year
first above written.


                                        PUBLIC SERVICE COMPANY OF NEW MEXICO


                                        By   /s/ Jeffry E. Sterba
                                             -------------------------------
                                             JEFFRY E. STERBA
                                             President and Chief Executive
                                             Officer


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