AGREEMENT AND PLAN
                               OF REORGANIZATION
                                  by and among
                      PUBLIC SERVICE COMPANY OF COLORADO,
                      SOUTHWESTERN PUBLIC SERVICE COMPANY
                                      and
                                  M-P NEW CO.
                          Dated as of August 22, 1995






                               TABLE OF CONTENTS

                                                                            Page



                                   ARTICLE I

                                  THE MERGERS

Section 1.1  Formation of Merger Subsidiaries ..............................   2
Section 1.2  Certain Other Actions .........................................   2
Section 1.3  The Mergers ...................................................   2
Section 1.4  Effective Time of the Mergers .................................   3

                                   ARTICLE II

                              TREATMENT OF SHARES

Section 2.1  Effect of Mergers on Capital Stock ............................   3
Section 2.2  Exchange of Common Stock Certificates .........................   4

                                  ARTICLE III

                                  THE CLOSING

Section 3.1  Closing .......................................................   7

                                   ARTICLE IV

                     REPRESENTATIONS AND WARRANTIES OF PSCo

Section 4.1  Organization and Qualification ................................   7
Section 4.2  Subsidiaries ..................................................   8
Section 4.3  Capitalization ................................................   8
Section 4.4  Authority; Non-Contravention; Statutory Approvals; Compliance     9
Section 4.5  Reports and Financial Statements .............................   10
Section 4.6  Absence of Certain Changes or Events .........................   11
Section 4.7  Litigation ...................................................   11
Section 4.8  Registration Statement and Proxy Statement ...................   11
Section 4.9  Tax Matters ..................................................   12
Section 4.10 Employee Matters; ERISA ......................................   15
Section 4.11 Environmental Protection .....................................   19
Section 4.12 Regulation as a Utility ......................................   21
Section 4.13 Vote Required ................................................   22
Section 4.14 Accounting Matters ...........................................   22

                                      -i-










Section 4.15 Opinion of Financial Advisor .................................   22
Section 4.16 Insurance ....................................................   22
Section 4.17 Ownership of SPS Common Stock ................................   22
Section 4.18 PSCo Rights Agreement ........................................   22

                                   ARTICLE V

                     REPRESENTATIONS AND WARRANTIES OF SPS

Section 5.1  Organization and Qualification ...............................   23
Section 5.2  Subsidiaries .................................................   23
Section 5.3  Capitalization ...............................................   24
Section 5.4  Authority; Non-Contravention; Statutory Approvals; Compliance    24
Section 5.5  Reports and Financial Statements .............................   25
Section 5.6  Absence of Certain Changes or Events .........................   26
Section 5.7  Litigation ...................................................   26
Section 5.8  Registration Statement and Proxy Statement ...................   26
Section 5.9  Tax Matters ..................................................   27
Section 5.10 Employee Matters; ERISA ......................................   30
Section 5.11 Environmental Protection .....................................   34
Section 5.12 Regulation as a Utility ......................................   35
Section 5.13 Vote Required ................................................   35
Section 5.14 Accounting Matters ...........................................   35
Section 5.15 Opinion of Financial Advisor .................................   35
Section 5.16 Insurance ....................................................   35
Section 5.17 Ownership of PSCo Common Stock ...............................   36
Section 5.18 SPS Rights Agreement .........................................   36

                                   ARTICLE VI

                    CONDUCT OF BUSINESS PENDING THE MERGERS

Section 6.1  Ordinary Course of Business ..................................   36
Section 6.2  Dividends ....................................................   37
Section 6.3  Issuance of Securities .......................................   37
Section 6.4  Charter Documents ............................................   37
Section 6.5  Acquisitions .................................................   38
Section 6.6  No Dispositions ..............................................   38
Section 6.7  Indebtedness .................................................   38
Section 6.8  Capital Expenditures .........................................   38
Section 6.9  Compensation, Benefits .......................................   39
Section 6.10 1935 Act .....................................................   39
Section 6.11 Accounting ...................................................   39
Section 6.12 Pooling ......................................................   39
Section 6.13 Tax-Free Status ..............................................   40
Section 6.14 Discharge of Liabilities .....................................   40

                                      -ii-










Section 6.15 Cooperation, Notification ....................................   40
Section 6.16 Rate Matters .................................................   40
Section 6.17 Third-Party Consents .........................................   40
Section 6.18 No Breach, Etc ...............................................   41
Section 6.19 Tax-Exempt Status ............................................   41
Section 6.20 Transition Management ........................................   41
Section 6.21 Insurance ....................................................   41
Section 6.22 Permits ......................................................   41

                                  ARTICLE VII

                             ADDITIONAL AGREEMENTS

Section 7.1  Access to Information ........................................   41
Section 7.2  Joint Proxy Statement and Registration Statement .............   42
Section 7.3  Regulatory Matters ...........................................   43
Section 7.4  Shareholder Approvals ........................................   44
Section 7.5  Directors' and Officers' Indemnification .....................   44
Section 7.6  Disclosure Schedules .........................................   46
Section 7.7  Public Announcements .........................................   46
Section 7.8  Rule 145 Affiliates ..........................................   46
Section 7.9  Employee Agreements and Workforce Matters ....................   47
Section 7.10 Employee Benefit Plans .......................................   47
Section 7.11 Incentive, Stock and Other Plans .............................   48
Section 7.12 No Solicitations .............................................   48
Section 7.13 Company Board of Directors ...................................   49
Section 7.14 Company Directors and Officers ...............................   50
Section 7.15 Employment Contracts .........................................   50
Section 7.16 Corporate Offices ............................................   50
Section 7.17 Expenses .....................................................   50
Section 7.18 Further Assurances ...........................................   50
Section 7.19 Registration Rights ..........................................   51
Section 7.20 Charter and By-Law Amendments ................................   52

                                  ARTICLE VIII

                                   CONDITIONS

Section 8.1  Conditions to Each Party's Obligation to Effect the Merger to
       Which it is Party ..................................................   52
Section 8.2  Conditions to Obligation of SPS to Effect the SPS Merger .....   53
Section 8.3  Conditions to Obligation of PSCo to Effect the PSCo Merger ...   54


                                     -iii-











                                   ARTICLE IX

                       TERMINATION, AMENDMENT AND WAIVER

Section 9.1  Termination ..................................................   55
Section 9.2  Effect of Termination ........................................   58
Section 9.3  Termination Fee; Expenses ....................................   58
Section 9.4  Amendment ....................................................   61
Section 9.5  Waiver .......................................................   61

                                   ARTICLE X

                               GENERAL PROVISIONS

SectionNon-Survival of Representations, Warranties, Covenants and
         Agreements .......................................................   61
Section 10.2  Brokers .....................................................   61
Section 10.3  Notices .....................................................   62
Section 10.4  Miscellaneous ...............................................   62
Section 10.5  Interpretation ..............................................   63
Section 10.6  Counterparts; Effect ........................................   63
Section 10.7  Parties in Interest .........................................   63
Section 10.8  Specific Performance ........................................   64


                                      -iv-










                      AGREEMENT AND PLAN OF REORGANIZATION



                  AGREEMENT AND PLAN OF  REORGANIZATION,  dated as of August 22,
1995 (this  "Agreement"),  by and among Public  Service  Company of Colorado,  a
corporation   formed  under  the  laws  of  the  State  of  Colorado   ("PSCo"),
Southwestern  Public Service Company, a corporation formed under the laws of the
State of New Mexico  ("SPS"),  and M-P New Co., a  corporation  formed under the
laws of the State of Delaware,  50% of whose outstanding  capital stock is owned
by PSCo and 50% of whose capital stock is owned by SPS (the "Company").

                  WHEREAS,  PSCo and SPS have determined to engage in a business
combination as peer firms in a merger of equals;

                  WHEREAS,  in furtherance  thereof,  the  respective  Boards of
Directors of PSCo,  SPS and the Company  have  approved  the  consummation  of a
reorganization  provided  for in this  Agreement,  pursuant  to which two wholly
owned,  newly formed  subsidiaries  of the Company will merge with and into PSCo
and  SPS on  the  terms  and  conditions  set  forth  in  this  Agreement  (such
transactions are referred to herein  individually as the PSCo Merger and the SPS
Merger (as defined in Section ) and collectively as the "Mergers"),  as a result
of which the common  shareholders  of PSCo and SPS will  together own all of the
outstanding  shares of common  stock of the Company and each share of each other
class  of  capital  stock  of PSCo  and  SPS  shall  be  unaffected  and  remain
outstanding;

                  WHEREAS, for federal income tax purposes,  it is intended that
the Mergers shall collectively qualify as a transaction described in Section 351
of the Internal  Revenue Code of 1986,  as amended  (the  "Code"),  and that the
shareholders  of PSCo and SPS will  not  recognize  any gain or loss as a result
thereof, except with respect to any cash received; and

                  WHEREAS,  the parties hereto intend to cause the  organization
of a service  company  subsidiary of the Company and a subsidiary of the Company
which will hold the shares of existing non-utility subsidiaries of PSCo and SPS.

                  NOW  THEREFORE,  in  consideration  of the  premises  and  the
representations,  warranties,  covenants and agreements  contained  herein,  the
parties hereto, intending to be legally bound, hereby agree as follows:



                                      -1-










                                   ARTICLE I

                                  THE MERGERS

                  Section 1.1  Formation of Merger  Subsidiaries.  To effectuate
the transactions  contemplated  herein,  upon receipt of any required approvals,
PSCo and SPS respectively, shall cause the following corporations (together, the
"Merger Subsidiaries") to be organized:

                  (a) PSCO Merger Corp., a corporation  organized under the laws
of the State of Colorado  ("Merger Sub A"), the  articles of  incorporation  and
bylaws of which shall be in such forms as shall be  determined  by PSCo with the
consent  of SPS,  which  consent  shall not be  unreasonably  withheld,  and the
authorized  capital  stock of which  shall  initially  consist  of 100 shares of
common stock, without par value, which shall be issued to the Company at a price
of $1.00 per share.

                  (b) SPS Merger Corp., a corporation  organized  under the laws
of the State of New Mexico ("Merger Sub B"), the articles of  incorporation  and
bylaws of which  shall be in such forms as shall be  determined  by SPS with the
consent of PSCo,  which  consent  shall not be  unreasonably  withheld,  and the
authorized  capital  stock of which  shall  initially  consist  of 100 shares of
common stock, without par value, which shall be issued to the Company at a price
of $1.00 per share.

                  Section 1.2 Certain  Other  Actions.  In  connection  with the
organization of the Merger  Subsidiaries,  as soon as practicable  following the
creation  of the Merger  Subsidiaries,  the Company  shall:  (a)  designate  the
respective  directors  and  officers of the Merger  Subsidiaries;  (b) cause the
directors and officers of the Merger  Subsidiaries  to take such steps as may be
necessary  or   appropriate   to  complete  the   organization   of  the  Merger
Subsidiaries; (c) adopt (as sole shareholder of each of the Merger Subsidiaries)
each of the Merger Agreements (as defined in Section 1.3); (d) cause each Merger
Agreement to be approved by the Merger  Subsidiary party thereto;  and (e) cause
each Merger  Subsidiary to perform its obligations under the Merger Agreement to
which it is a party.

                  Section 1.3 The Mergers.  Pursuant to agreements  and plans of
merger,  forms  of  which  are  attached  hereto  as  Exhibit  A and  Exhibit  B
(respectively,  the "PSCo Merger  Agreement" and the "SPS Merger Agreement" and,
together,  the  "Merger  Agreements"),  and upon the  terms and  subject  to the
conditions of this Agreement, at the Effective Time (as defined in Section 1.4):

                  (a) Merger Sub A shall be merged with and into PSCo (the "PSCo
Merger") in accordance  with the applicable  provisions of the laws of the State
of  Colorado.  PSCo shall be the  surviving  corporation  in the PSCo Merger and
shall continue its corporate  existence under the laws of the State of Colorado.
As a result of the PSCo Merger,  PSCo shall become a subsidiary  of the Company.
The effects  and  consequences  of the PSCo Merger  shall be as set forth in the
PSCo  Merger  Agreement  and  in  Section  7-111-106  of the  Colorado  Business
Corporation Act (the "CBCA").

                                      -2-











                  (b) Merger  Sub B shall be merged  with and into SPS (the "SPS
Merger") in  accordance  with the laws of the State of New Mexico.  SPS shall be
the  surviving  corporation  in the SPS Merger and shall  continue its existence
under the laws of the State of New Mexico.  As a result of the SPS  Merger,  SPS
shall become a subsidiary of the Company.  The effects and  consequences  of the
SPS  Merger  shall be as set forth in the SPS  Merger  Agreement  and in Section
53-14-6 of the New Mexico Business Corporation Act (the "NMBCA").

                  Section 1.4 Effective Time of the Mergers. On the Closing Date
(as defined in Section 3.1),  articles of merger with respect to the PSCo Merger
shall be executed and filed by the parties  hereto with the  Department of State
of the State of Colorado  pursuant to Section 7-111-105 of the CBCA and articles
of merger  with  respect to the SPS Merger  shall be  executed  and filed by the
parties hereto with the Department of State of the State of New Mexico  pursuant
to Section  53-14-4 of the  NMBCA.  The  Mergers  shall  both  become  effective
simultaneously and at the time that PSCo and SPS shall agree as specified in the
articles of merger for the Mergers (the time the Mergers become  effective being
hereinafter called the "Effective Time").


                                   ARTICLE II

                              TREATMENT OF SHARES

                  Section  2.1  Effect  of  Mergers  on  Capital  Stock.  At the
Effective  Time,  by virtue of the Mergers and without any action on the part of
any holder of any capital stock of PSCo,  SPS, Merger Sub A, Merger Sub B or the
Company:

                  (a)  Cancellation of Certain Common Stock.  Each share of PSCo
common stock, par value $5.00 per share ("PSCo Common Stock"), and each share of
SPS common stock, par value $1.00 per share ("SPS Common Stock"),  together with
any PSCo  Rights  (as  defined in  Section  4.18) or SPS  Rights (as  defined in
Section 5.18),  that are owned by PSCo or any of its subsidiaries (as defined in
Section 4.1) or by SPS or any of its subsidiaries,  as the case may be, shall be
cancelled and shall cease to exist, and no  consideration  shall be delivered in
exchange therefor.

                  (b)  Conversion of Certain  Common  Stock.  Each share of PSCo
Common Stock issued and  outstanding  immediately  prior to the  Effective  Time
(other than shares cancelled  pursuant to Section 2.1(a) and shares with respect
to which the holder thereof duly exercises the right to dissent under applicable
law) shall be converted  into the right to receive one share  ("PSCo  Conversion
Ratio") of Company  common  stock,  par value $1.00 per share  ("Company  Common
Stock"),  and each share of SPS Common Stock issued and outstanding  immediately
prior to the  Effective  Time (other than shares  cancelled  pursuant to Section
2.1(a) and shares with respect to which the holder  thereof duly  exercises  the
right to dissent  under  applicable  law) shall be  converted  into the right to
receive 0.95 shares ("SPS Conversion  Ratio") of Company Common Stock. Upon such
conversions as provided for

                                      -3-











herein and in the  respective  Merger  Agreements,  each holder of a certificate
formerly  representing  any such shares of PSCo Common Stock or SPS Common Stock
shall cease to have any rights with respect thereto, except the right to receive
the shares of Company Common Stock to be issued in  consideration  therefor (and
cash in lieu of  fractional  shares) upon the surrender of such  certificate  in
accordance with Section 2.2.

                  (c)  Cancellation  of  Company  Common  Stock.  Each  share of
Company Common Stock issued and outstanding  immediately  prior to the Effective
Time shall be  cancelled,  and no  consideration  shall be delivered in exchange
therefor.

                  (d)  Preferred  Stock  Unchanged.  Each of the PSCo  Preferred
Shares,  par value $100.00 per share and each share of PSCo Preferred Stock, par
value $25.00 per share (collectively, "PSCo Preferred Stock"), and each share of
SPS Preferred Stock, par value $100.00 per share and each share of SPS Preferred
Stock, par value $25.00 per share (collectively, "SPS Preferred Stock") shall be
unchanged in and shall remain outstanding after the Mergers.

                  (e) Shares of Dissenting  Holders.  Any issued and outstanding
shares of SPS Common  Stock,  PSCo Common  Stock,  SPS  Preferred  Stock or PSCo
Preferred Stock held by a person who objects to the Merger and complies with all
applicable  provisions of the CBCA or the NMBCA,  as applicable,  concerning the
right of such person to dissent  from the Mergers and demand  appraisal  of such
shares  ("Dissenting  Holder") shall from and after the Effective Time represent
only the right to receive such  consideration  as may be determined to be due to
such  Dissenting  Holder with respect to such shares pursuant to the CBCA or the
NMBCA,  as  applicable,  and, in the case of shares of SPS Common Stock and PSCo
Common Stock,  shall not be converted as described in Section 2.1(b);  provided,
however,  that shares  outstanding  immediately  prior to the Effective Time and
held by a Dissenting Holder who shall withdraw the demand for appraisal, or lose
the right of  appraisal of such  shares,  pursuant to the CBCA or the NMBCA,  as
applicable,  shall (i) in the case of shares of SPS Common  Stock or PSCo Common
Stock,  be deemed to be converted,  as of the Effective  Time, into the right to
receive the Company Common Stock specified in Section 2.1(b) and cash in lieu of
fractional shares in accordance with Section 2.2, without interest,  and (ii) in
the case of shares of SPS Preferred Stock or PSCo Preferred  Stock, be unchanged
in and remain outstanding after the Mergers, without interest.

                  Section 2.2  Exchange of Common Stock Certificates.

                  (a) Deposit with Exchange Agent. As soon as practicable  after
the Effective  Time,  the Company  shall  deposit with a bank,  trust company or
other  agent   selected  by  PSCo  and  SPS  ("Exchange   Agent")   certificates
representing shares of Company Common Stock required to effect the conversion of
PSCo or SPS, as the case may be, Common Stock into Company Common Stock referred
to in Section 2.1(b).

                  (b)  Exchange  Procedures.  As soon as  practicable  after the
Effective  Time,  the  Exchange  Agent  shall mail to each holder of record of a
certificate or certificates which

                                      -4-











immediately  prior to the  Effective  Time  represented  issued and  outstanding
shares of PSCo or SPS, as the case may be,  Common Stock  ("Certificates")  that
were converted  ("Converted Shares") into the right to receive shares of Company
Common Stock  ("Company  Shares")  pursuant to Section  2.1(b),  (i) a letter of
transmittal  (which shall specify that delivery  shall be effected,  and risk of
loss and title to the Certificates  shall pass, only upon actual delivery of the
Certificates to the Exchange Agent) and (ii)  instructions  for use in effecting
the exchange of Certificates for certificates  representing Company Shares. Upon
delivery of a Certificate  to the Exchange  Agent for exchange,  together with a
duly executed  letter of  transmittal  and such other  documents as the Exchange
Agent shall require, the holder of such Certificate shall be entitled to receive
in exchange  therefor a  certificate  representing  that number of whole Company
Shares and the amount of cash in lieu of fractional  share  interests which such
holder has the right to receive  pursuant to the  provisions of this Article II.
In the  event of a  transfer  of  ownership  of  Converted  Shares  which is not
registered  in the  transfer  records  of PSCo or SPS,  as the  case  may be,  a
certificate  representing the proper number of Company Shares may be issued to a
transferee if the Certificate representing such Converted Shares is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such  transfer  and by  evidence  satisfactory  to the  Exchange  Agent that any
applicable  stock transfer taxes have been paid. Until delivered as contemplated
by this  Section  2.2,  each  Certificate  shall be deemed at any time after the
Effective  Time to represent  only the right to receive  upon such  delivery the
certificate  representing  Company  Shares  and  cash in lieu of any  fractional
shares of Company Common Stock as contemplated by this Section 2.2.

                  (c)  Distributions  with  Respect to  Unexchanged  Shares.  No
dividends or other distributions  declared or made after the Effective Time with
respect to Company  Shares with a record date after the Effective  Time shall be
paid to the holder of any  undelivered  Certificate  with respect to the Company
Shares  represented  thereby,  and no cash payment in lieu of fractional  shares
shall be paid to any such holder pursuant to Section 2.2(d), until the holder of
record of such  Certificate  (or a transferee  as  described in Section  2.2(b))
shall have delivered such Certificate as contemplated in Section 2.2(b). Subject
to the  effect  of  unclaimed  property,  escheat  and  other  applicable  laws,
following  delivery of any such  Certificate,  there shall be paid to the record
holder (or  transferee) of the  certificates  representing  whole Company Shares
issued in exchange therefor, without interest, (i) at the time of such delivery,
the amount of any cash payable in lieu of a fractional  share of Company  Common
Stock to which such  holder (or  transferee)  is  entitled  pursuant  to Section
2.2(d) and the amount of  dividends  or other  distributions  with a record date
after the  Effective  Time  theretofore  paid with respect to such whole Company
Shares and (ii) at the  appropriate  payment  date,  the amount of  dividends or
other  distributions  with a record date after the  Effective  Time but prior to
delivery and a payment date subsequent to delivery  payable with respect to such
whole Company Shares, as the case may be.

                  (d)  No  Fractional  Shares.  (i)  No  certificates  or  scrip
representing  fractional shares of Company Common Stock shall be issued upon the
delivery for exchange of Certificates,  and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a  shareholder  of the
Company.

                                      -5-












                       (ii) As promptly as  practicable  following the Effective
Time,  the Exchange  Agent shall  determine the excess of (x) the number of full
shares of Company  Common Stock  delivered to the Exchange  Agent by the Company
pursuant  to Section  2.2(a)  over (y) the  aggregate  number of full  shares of
Company  Common Stock to be  distributed  to holders of PSCo or SPS, as the case
may be, Common Stock pursuant to Section 2.2(b) (such excess being herein called
the "Excess  Shares").  As soon after the  Effective  Time as  practicable,  the
Exchange  Agent,  as agent for the  holders of PSCo or SPS,  as the case may be,
Common Stock,  shall sell the Excess Shares at then prevailing prices on the New
York Stock Exchange ("NYSE"), all in the manner provided in Section 2.2(d)(iii).

                       (iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE  through one or more member  firms of the NYSE and
shall be executed in round lots to the extent practicable. Until the proceeds of
such sale or sales have been  distributed  to the holders of PSCo or SPS, as the
case may be, Common Stock, the Exchange Agent shall,  until remitted pursuant to
Section  2.2(f),  hold such proceeds in trust for the holders of PSCo or SPS, as
the case may be, Common Stock ("Common Shares Trust"). The Company shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation, of the Exchange Agent incurred in connection with
such sale of the Excess Shares.  The Exchange Agent shall  determine the portion
of the proceeds  comprising the Common Shares Trust to which each holder of PSCo
or SPS,  as the  case  may be,  Common  Stock  shall  be  entitled,  if any,  by
multiplying  the amount of the aggregate  proceeds  comprising the Common Shares
Trust by a fraction the numerator of which is the amount of the fractional share
interest to which such holder of PSCo or SPS, as the case may be,  Common  Stock
is entitled and the  denominator of which is the aggregate  amount of fractional
share  interests to which all holders of PSCo or SPS, as the case may be, Common
Stock are entitled.

                       (iv) As soon as  practicable  after  the  sale of  Excess
Shares  pursuant to clause  (iii) above and the  determination  of the amount of
cash,  if any, to be paid to holders of PSCo or SPS, as the case may be,  Common
Stock in lieu of any  fractional  share  interests,  the  Exchange  Agent  shall
distribute  such  amounts to holders of PSCo or SPS, as the case may be,  Common
Stock who have theretofore  delivered  Certificates for PSCo or SPS, as the case
may be, Common Stock for exchange pursuant to this Article II.

                  (e) Closing of Transfer  Books.  From and after the  Effective
Time,  the stock  transfer  books of PSCo with  respect to shares of PSCo Common
Stock,  and of SPS with  respect  to  shares of SPS  Common  Stock,  issued  and
outstanding  prior to the Effective  Time shall be closed and no transfer of any
such shares shall thereafter be made. If, after the Effective Time, Certificates
are  presented  to the  Company,  they  shall be  cancelled  and  exchanged  for
certificates  representing  the  appropriate  number of whole Company Shares and
cash in lieu of  fractional  shares of Company  Common Stock as provided in this
Section 2.2.

                       (f)  Termination  of  Exchange  Agent.  Any  certificates
representing  Company  Shares  deposited  with the  Exchange  Agent  pursuant to
Section  2.2(a)  and not  exchanged  within one year  after the  Effective  Time
pursuant to this Section 2.2 shall be

                                      -6-











returned by the Exchange  Agent to the Company,  which shall  thereafter  act as
Exchange Agent.  All funds held by the Exchange Agent for payment to the holders
of  undelivered  Certificates  and  unclaimed  at the end of one  year  from the
Effective Time shall be remitted to the Company,  after which time any holder of
undelivered  Certificates  shall look as a general  creditor only to the Company
for payment of such funds to which such holder may be due, subject to applicable
law.  The  Company  shall not be liable to any person  for such  shares or funds
delivered to a public official  pursuant to any applicable  abandoned  property,
escheat or similar law.


                                  ARTICLE III

                                  THE CLOSING

                  Section  3.1  Closing.  The  closing  (the  "Closing")  of the
Mergers  shall take place at a place to be  mutually  agreed upon by the parties
hereto at 10:00  A.M.,  local  time,  on the  second  business  day  immediately
following the date on which the last of the conditions set forth in Article VIII
is  fulfilled  or  waived,  or at such other time and date as SPS and PSCo shall
mutually agree (the "Closing Date").


                                   ARTICLE IV

                     REPRESENTATIONS AND WARRANTIES OF PSCo

                  PSCo represents and warrants to SPS as follows:

                  Section  4.1   Organization  and   Qualification.   Except  as
disclosed in Section 4.1 of the PSCo Disclosure  Schedule (as defined in Section
7.6(ii)),  each of PSCo  and  each of its  subsidiaries  is a  corporation  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of its
jurisdiction of incorporation,  has all requisite corporate power and authority,
and has been duly authorized by all necessary  regulatory  approvals and orders,
to own, lease and operate its assets and properties and to carry on its business
as it is now being  conducted,  and is duly qualified and in good standing to do
business  in each  jurisdiction  in which  the  nature  of its  business  or the
ownership  or  leasing of its assets  and  properties  makes such  qualification
necessary other than in such jurisdictions  where the failure to be so qualified
and in good standing will not, when taken together with all other such failures,
have a material adverse effect on the business, operations,  properties, assets,
condition  (financial or otherwise),  prospects or results of operations of PSCo
and its  subsidiaries  taken as a whole or on the consummation of this Agreement
or the PSCo Merger Agreement (any such material adverse effect being hereinafter
referred to as a "PSCo Material Adverse Effect").  As used in this Agreement the
term "subsidiary" with respect to any person shall mean any corporation or other
entity  (including  partnerships and other business  associations) in which such
person  directly or indirectly  owns  outstanding  capital stock or other voting
securities having the power, under ordinary circumstances, to elect a

                                      -7-











majority  of the  directors  or similar  members of the  governing  body of such
corporation or other entity,  or otherwise to direct the management and policies
of such corporation or other entity.

                  Section 4.2  Subsidiaries.  Section 4.2 of the PSCo Disclosure
Schedule  contains a description as of the date hereof of all  subsidiaries  and
joint  ventures of PSCo,  including  the name of each such entity,  the state or
jurisdiction of its incorporation,  a brief description of the principal line or
lines of business  conducted  by each such entity and PSCo's  interest  therein.
Except as disclosed in Section 4.2 of the PSCo Disclosure Schedule, none of such
entities is a "public  utility  company",  a "holding  company",  a  "subsidiary
company" or an "affiliate"  of any public utility  company within the meaning of
Section  2(a)(5),  2(a)(7),  2(a)(8) or 2(a)(11) of the Public  Utility  Holding
Company  Act of 1935,  as amended  (the  "1935  Act"),  respectively.  Except as
disclosed in Section 4.2 of the PSCo Disclosure Schedule,  all of the issued and
outstanding  shares of  capital  stock of each  subsidiary  of PSCo are  validly
issued,  fully paid,  nonassessable  and free of preemptive rights and are owned
directly  or  indirectly   by  PSCo  free  and  clear  of  any  liens,   claims,
encumbrances,  security interests,  equities,  charges and options of any nature
whatsoever,  and  there  are  no  outstanding  subscriptions,   options,  calls,
contracts,   voting  trusts,  proxies  or  other  commitments,   understandings,
restrictions,   arrangements,   rights  or  warrants,  including  any  right  of
conversion  or exchange  under any  outstanding  security,  instrument  or other
agreement, obligating any such subsidiary to issue, deliver or sell, or cause to
be  issued,  delivered  or  sold,  additional  shares  of its  capital  stock or
obligating it to grant,  extend or enter into any such  agreement or commitment.
As used in this  Agreement,  the term "joint venture" with respect to any person
shall mean any  corporation or other entity  (including  partnerships  and other
business associations and joint ventures) in which such person or one or more of
its  subsidiaries  owns an equity  interest  that is less than a majority of any
class  of the  outstanding  voting  securities  or  equity,  other  than  equity
interests  held for  passive  investment  purposes  that are less than 5% of any
class of the outstanding voting securities or equity.

                  Section 4.3  Capitalization.  The authorized  capital stock of
PSCo consists of 140,000,000 shares of PSCo Common Stock and 7,000,000 shares of
PSCo Preferred  Stock. As of the close of business on July 31, 1995,  62,931,908
shares of PSCo Common Stock and 2,902,412  shares of PSCo  Preferred  Stock were
issued and outstanding.  All of the issued and outstanding shares of the capital
stock  of PSCo  are  validly  issued,  fully  paid,  nonassessable  and  free of
preemptive  rights.  Except as disclosed  in Section 4.3 of the PSCo  Disclosure
Schedule and except for the PSCo Rights (as defined in Section 4.18),  as of the
date hereof, there are no outstanding subscriptions,  options, calls, contracts,
voting  trusts,  proxies  or other  commitments,  understandings,  restrictions,
arrangements,  rights or warrants, including any right of conversion or exchange
under any outstanding security,  instrument or other agreement,  obligating PSCo
or any of its  subsidiaries  to issue,  deliver or sell,  or cause to be issued,
delivered  or sold,  additional  shares  of the  capital  stock or other  voting
securities  of PSCo or  obligating  PSCo or any of its  subsidiaries  to  grant,
extend or enter into any such agreement or commitment.


                                      -8-











                   Section  4.4  Authority;   Non-Contravention;   Statutory
Approvals; Compliance.

                  (a) Authority.  PSCo has all requisite  power and authority to
enter into this Agreement and the PSCo Merger Agreement and, subject to the PSCo
Shareholders'  Approvals  (as  defined  in Section  4.13) and the PSCo  Required
Statutory   Approvals  (as  defined  in  Section  4.4(c)),   to  consummate  the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement  and the PSCo Merger  Agreement  and the  consummation  by PSCo of the
transactions  contemplated  hereby and thereby have been duly  authorized by all
necessary  corporate  action on the part of PSCo,  subject to obtaining the PSCo
Shareholders' Approvals.  This Agreement has been, and the PSCo Merger Agreement
will be, duly and validly  executed and delivered by PSCo and,  assuming the due
authorization,  execution and delivery of this  Agreement by SPS and the Company
and  of the  PSCo  Merger  Agreement  by  Merger  Sub A,  constitutes,  or  will
constitute,  the legal, valid and binding obligation of PSCo enforceable against
PSCo in accordance with its terms.

                  (b)  Non-Contravention.  Except as disclosed in Section 4.4(b)
of the PSCo Disclosure Schedule, the execution and delivery of this Agreement by
PSCo do not, and the execution and delivery by PSCo of the PSCo Merger Agreement
and the  consummation of the transactions  contemplated  hereby and thereby will
not,  violate,  conflict  with or  result in a breach  of any  provision  of, or
constitute a default (with or without notice or lapse of time or both) under, or
result in the  termination  of, or accelerate  the  performance  required by, or
result in a right of termination, cancellation or acceleration of any obligation
under or the loss of a material  benefit under, or result in the creation of any
lien,  security  interest,  charge or encumbrance  upon any of the properties or
assets (any such violation,  conflict,  breach,  default,  right of termination,
cancellation or acceleration, loss or creation, a "Violation") of PSCo or any of
its  subsidiaries  or, to the best knowledge of PSCo, any of its joint ventures,
under any  provisions  of (i) the articles of  incorporation,  bylaws or similar
governing  documents of PSCo or any of its subsidiaries or joint ventures,  (ii)
subject to obtaining  the PSCo Required  Statutory  Approvals and the receipt of
the PSCo Shareholders' Approvals, any statute, law, ordinance, rule, regulation,
judgment,  decree,  order,  injunction,  writ,  permit or  license of any court,
governmental   or  regulatory   body   (including  a  stock  exchange  or  other
self-regulatory  body) or authority,  domestic or foreign (each, a "Governmental
Authority"),  applicable to PSCo or any of its subsidiaries or joint ventures or
any of their  respective  properties or assets or (iii) subject to obtaining the
third-party  consents or other approvals set forth in Section 4.4(b) of the PSCo
Disclosure Schedule (the "PSCo Required  Consents"),  any note, bond,  mortgage,
indenture,  deed of trust, license,  franchise,  permit,  concession,  contract,
lease or other instrument,  obligation or agreement of any kind to which PSCo or
any of its subsidiaries or joint ventures is now a party or by which any of them
or any of their  respective  properties  or  assets  may be  bound or  affected,
excluding from the foregoing clauses (ii) and (iii) such Violations as would not
have, in the aggregate, a PSCo Material Adverse Effect.

                       (c) Statutory  Approvals.  Except as disclosed in Section
4.4(c) of the PSCo Disclosure Schedule,  no declaration,  filing or registration
with,  or notice to or  authorization,  consent,  finding by or approval of, any
Governmental Authority is necessary for the

                                      -9-











execution and delivery of this Agreement or the PSCo Merger Agreement by PSCo or
the consummation by PSCo of the transactions contemplated hereby or thereby, the
failure to obtain,  make or give which  would  have,  in the  aggregate,  a PSCo
Material  Adverse Effect (the "PSCo  Required  Statutory  Approvals"),  it being
understood that  references in this Agreement to "obtaining"  such PSCo Required
Statutory   Approvals   shall  mean   making  such   declarations,   filings  or
registrations;  giving such notice;  obtaining  such consents or approvals;  and
having such waiting periods expire as are necessary to avoid a violation of law.

                  (d) Compliance.  Except as disclosed in Section 4.4(d) or 4.11
of the PSCo  Disclosure  Schedule  or as  disclosed  in the PSCo SEC Reports (as
defined in Section 4.5),  neither PSCo nor any of its  subsidiaries  nor, to the
best  knowledge of PSCo,  any of its joint  ventures is in violation of or under
investigation with respect to, or has been given notice or been charged with any
violation of, any law, statute,  order, rule, regulation,  ordinance or judgment
(including, without limitation, any applicable Environmental Laws (as defined in
Section 4.11(g)) of any Governmental  Authority,  except for violations that, in
the  aggregate,  do not  have,  and,  to the best  knowledge  of  PSCo,  are not
reasonably  likely to have, a PSCo Material Adverse Effect.  Except as disclosed
in  Section  4.4(d)  or  4.11  of  the  PSCo  Disclosure  Schedule,   PSCo,  its
subsidiaries  and, to the best  knowledge of PSCo,  its joint  ventures have all
permits, licenses,  franchises and other governmental  authorizations,  consents
and  approvals  necessary to conduct  their  respective  businesses as currently
conducted (collectively,  "Permits"),  except those the failure to obtain which,
in the aggregate, would not have a PSCo Material Adverse Effect.

                  Section  4.5  Reports and  Financial  Statements.  The filings
required to be made by PSCo and its subsidiaries since January 1, 1990 under the
Securities  Act of 1933,  as amended  (the  "Securities  Act"),  the  Securities
Exchange Act of 1934, as amended (the "Exchange Act"),  applicable  Colorado and
Wyoming  laws and  regulations,  the Federal  Power Act (the "Power  Act"),  the
Natural Gas Act, the 1935 Act or the Atomic  Energy Act of 1954, as amended (the
"Atomic Energy Act") have been filed with the Securities and Exchange Commission
(the "SEC"), the Colorado Public Utility Commission (the "Colorado Commission"),
the Wyoming Public Service  Commission (the "Wyoming  Commission"),  the Federal
Energy Regulatory  Commission (the "FERC") or the Nuclear Regulatory  Commission
(the  "NRC"),  as the case may be,  including  all forms,  statements,  reports,
agreements  (oral  or  written)  and all  documents,  exhibits,  amendments  and
supplements appertaining thereto, and complied in all material respects with all
applicable  requirements  of the  appropriate  act and the rules and regulations
thereunder.  PSCo has made  available  to SPS a true and  complete  copy of each
report, schedule, registration statement and definitive proxy statement filed by
PSCo with the SEC since  January 1, 1990 and  through  the date  hereof (as such
documents  have  since  the time of their  filing  been  amended,  the "PSCo SEC
Reports").  The PSCo SEC Reports,  including  without  limitation  any financial
statements  or schedules  included  therein,  at the time filed,  and any forms,
reports or other documents filed by PSCo with the SEC after the date hereof, did
not and will not  contain  any untrue  statement  of a material  fact or omit to
state a material  fact  required to be stated  therein or  necessary to make the
statements therein, in light of the circumstances under which they

                                      -10-











were made, not misleading.  The audited  consolidated  financial  statements and
unaudited interim financial  statements of PSCo included in the PSCo SEC Reports
(collectively,  the "PSCo Financial Statements") have been prepared, and will be
prepared, in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP") (except as may be indicated  therein or in the notes
thereto and except with  respect to  unaudited  statements  as permitted by Form
10-Q) and fairly present the consolidated  financial  position of PSCo as of the
respective  dates thereof or the  consolidated  results of  operations  and cash
flows for the respective periods then ended, as the case may be, subject, in the
case of the unaudited interim financial statements,  to normal,  recurring audit
adjustments. True, accurate and complete copies of the articles of incorporation
and bylaws of PSCo, as in effect on the date hereof, have been delivered to SPS.

                  Section  4.6 Absence of Certain  Changes or Events.  Except as
disclosed in the PSCo SEC Reports filed prior to the date hereof or as disclosed
in Section 4.6 of the PSCo Disclosure  Schedule,  from December 31, 1994 through
the date  hereof each of PSCo and each of its  subsidiaries  has  conducted  its
business only in the ordinary  course of business  consistent with past practice
and no event has occurred  which has had,  and no fact or condition  exists that
would have or, to the best  knowledge of PSCo, is  reasonably  likely to have, a
PSCo Material  Adverse  Effect.  For purposes of this Section 4.6, the amount of
any fine or penalty  imposed  or  assessed  against  PSCo after the date of this
Agreement  may be taken into  account  in  determining  whether a PSCo  Material
Adverse  Effect has  occurred  regardless  of whether or not the event,  fact or
condition  which lead to the imposition or assessment of the fine or penalty has
been disclosed in the PSCo SEC Reports or the PSCo Disclosure Schedule.

                  Section 4.7  Litigation.  Except as  disclosed in the PSCo SEC
Reports  filed prior to the date hereof or as  disclosed  in Section 4.7, 4.9 or
4.11 of the PSCo Disclosure Schedule, (i) there are no claims, suits, actions or
proceedings pending or, to the best knowledge of PSCo, threatened, nor are there
any  investigations  or  reviews  pending  or,  to the best  knowledge  of PSCo,
threatened  against,  relating to or affecting PSCo or any of its  subsidiaries,
(ii) there have not been any  developments  since December 31, 1994 with respect
to any such disclosed claims,  suits,  actions,  proceedings,  investigations or
reviews and (iii) there are no judgments, decrees, injunctions,  rules or orders
of any court, governmental department,  commission,  agency,  instrumentality or
authority or any arbitrator  applicable to PSCo or any of its subsidiaries  that
in the  aggregate  would have, or to the best  knowledge of PSCo are  reasonably
likely to have, a PSCo Material Adverse Effect.

                  Section 4.8 Registration  Statement and Proxy Statement.  None
of the  information  supplied  or to be  supplied  by or on  behalf  of PSCo for
inclusion or  incorporation  by reference in (i) the  registration  statement on
Form S-4 to be filed with the SEC by the Company in connection with the issuance
of shares of Company Common Stock in the Merger (the  "Registration  Statement")
will,  at the  time the  Registration  Statement  becomes  effective  under  the
Securities Act, contain any untrue statement of a material fact or omit to state
any  material  fact  required  to be stated  therein  or  necessary  to make the
statements  therein not misleading and (ii) the joint proxy in definitive  form,
relating to the meetings of

                                      -11-











the  shareholders  of SPS and PSCo to be held in connection with the Mergers and
the prospectus  relating to the Company Common Stock to be issued in the Mergers
(the "Joint Proxy Statement") will, at the date mailed to such shareholders and,
as the same may be  amended  or  supplemented,  at the  times of such  meetings,
contain any untrue  statement  of a material  fact or omit to state any material
fact  necessary  in  order  to make  the  statements  therein,  in  light of the
circumstances  under  which  they are made,  not  misleading.  The  Registration
Statement and the Joint Proxy  Statement  will comply as to form in all material
respects with the  provisions of the Securities Act and the Exchange Act and the
rules and regulations thereunder.

                  Section 4.9 Tax Matters.  "Taxes",  as used in this Agreement,
means any federal, state, county, local or foreign taxes, charges, fees, levies,
or other assessments,  including all net income, gross income, sales and use, ad
valorem,   transfer,  gains,  profits,  excise,  franchise,  real  and  personal
property, gross receipts,  capital stock,  production,  business and occupation,
disability,  employment,  payroll,  license,  estimated,  stamp,  custom duties,
severance or withholding  taxes or charges imposed by any  governmental  entity,
and includes any interest and  penalties  (civil or criminal) on or additions to
any such taxes and any expenses  incurred in connection with the  determination,
settlement  or litigation of any tax  liability.  "Tax Return",  as used in this
Agreement,  means a report,  return or other information required to be supplied
to a governmental  entity with respect to Taxes  including,  where  permitted or
required,  combined  or  consolidated  returns  for any group of  entities  that
includes PSCo or any of its  subsidiaries  on the one hand, or SPS or any of its
subsidiaries on the other hand.

                  (a)  Filing of Timely  Tax  Returns.  Except as  disclosed  in
Section  4.9(a)  of  the  PSCo  Disclosure  Schedule,   PSCo  and  each  of  its
subsidiaries  have filed all Tax  Returns  required  to be filed by each of them
under applicable law. All Tax Returns were in all material  respects (and, as to
Tax Returns not filed as of the date hereof, will be) true, complete and correct
and filed on a timely basis.

                  (b) Payment of Taxes. PSCo and each of its subsidiaries  have,
within the time and in the manner prescribed by law, paid (and until the Closing
Date will pay  within the time and in the  manner  prescribed  by law) all Taxes
that are currently due and payable except for those  contested in good faith and
for which adequate reserves have been taken.

                       (c)  Tax  Reserves.   PSCo  and  its  subsidiaries   have
established  (and  until the  Closing  Date will  maintain)  on their  books and
records  reserves  adequate to pay all Taxes and reserves  for  deferred  income
taxes in accordance with GAAP.

                       (d) Tax Liens.  There are no Tax liens upon the assets of
PSCo or any of its subsidiaries except liens for Taxes not yet due.

                       (e) Withholding  Taxes. PSCo and each of its subsidiaries
have complied (and until the Closing Date will comply) in all material  respects
with the  provisions  of the Code  relating to the payment  and  withholding  of
Taxes, including, without limitation, the

                                      -12-











withholding and reporting  requirements  under Code  sections1441  through 1464,
3401 through 3606,  and 6041 and 6049, as well as similar  provisions  under any
other  laws,  and have,  within  the time and in the manner  prescribed  by law,
withheld  from  employee  wages  and  paid  over  to  the  proper   governmental
authorities all amounts required.

                  (f)  Extensions  of Time for  Filing  Tax  Returns.  Except as
disclosed in Section 4.9(f) of the PSCo  Disclosure  Schedule,  neither PSCo nor
any of its subsidiaries has requested any extension of time within which to file
any Tax Return, which Tax Return has not since been filed.

                  (g) Waivers of Statute of Limitations.  Except as disclosed in
Section  4.9(g) of the PSCo  Disclosure  Schedule,  neither  PSCo nor any of its
subsidiaries  has  executed  any  outstanding  waivers  or  comparable  consents
regarding  the  application  of the statute of  limitations  with respect to any
Taxes or Tax Returns.

                  (h) Expiration of Statute of Limitations.  Except as disclosed
in Section 4.9(h) of the PSCo  Disclosure  Schedule,  the statute of limitations
for the  assessment of all Taxes has expired for all  applicable  Tax Returns of
PSCo and each of its subsidiaries or those Tax Returns have been examined by the
appropriate  taxing  authorities for all periods through the date hereof, and no
deficiency for any Taxes has been proposed, asserted or assessed against PSCo or
any of its subsidiaries that has not been resolved and paid in full.

                  (i) Audit,  Administrative  and Court  Proceedings.  Except as
disclosed in Section 4.9(i) of the PSCo Disclosure Schedule,  no audits or other
administrative  proceedings  or court  proceedings  are  presently  pending with
regard to any Taxes or Tax Returns of PSCo or any of its subsidiaries.

                  (j) Powers of Attorney.  Except as disclosed in Section 4.9(j)
of the PSCo  Disclosure  Schedule,  no power of attorney  currently in force has
been granted by PSCo or any of its subsidiaries concerning any Tax matter.

                  (k) Tax Rulings.  Except as disclosed in Section 4.9(k) of the
PSCo Disclosure Schedule,  neither PSCo nor any of its subsidiaries has received
a Tax Ruling (as defined below) or entered into a Closing  Agreement (as defined
below) with any taxing  authority  that would have a continuing  adverse  effect
after the Closing Date. "Tax Ruling",  as used in this  Agreement,  shall mean a
written ruling of a taxing authority relating to Taxes. "Closing Agreement",  as
used in this Agreement,  shall mean a written and legally binding agreement with
a taxing authority relating to Taxes.

                  (l)  Availability  of Tax Returns.  PSCo and its  subsidiaries
have made  available to SPS complete  and  accurate  copies,  covering all years
ending on or after December 31, 1990, of (i) all Tax Returns, and any amendments
thereto,  filed  by PSCo or any of its  subsidiaries,  (ii)  all  audit  reports
received from any taxing  authority  relating to any Tax Return filed by PSCo or
any of its subsidiaries and (iii) any Closing Agreements entered into by PSCo or
any of its subsidiaries with any taxing authority.

                                      -13-












                  (m) Tax Sharing  Agreements.  Except as  disclosed  in Section
4.9(m) of the PSCo Disclosure Schedule, no agreements relating to the allocation
or sharing of Taxes exist between or among PSCo and any of its subsidiaries.

                  (n)  Code  section  341(f).   Neither  PSCo  nor  any  of  its
subsidiaries has filed (or will file prior to the Closing) a consent pursuant to
Code section  341(f) or has agreed to have Code section  341(f)(2)  apply to any
disposition  of a subsection  (f) asset (as such term is defined in Code section
341(f)(4)) owned by PSCo or any of its subsidiaries.

                  (o) Code section 168. Except as disclosed in Section 4.9(o) of
the PSCo Disclosure Schedule,  no property of PSCo or any of its subsidiaries is
property that PSCo or any such subsidiary or any party to this transaction is or
will be  required  to treat as being  owned by another  person  pursuant  to the
provisions of Code section 168(f)(8) (as in effect prior to its amendment by the
Tax Reform Act of 1986) or is tax-exempt use property within the meaning of Code
section 168.

                  (p) Code  section  481  Adjustments.  Except as  disclosed  in
Section  4.9(p) of the PSCo  Disclosure  Schedule,  neither  PSCo nor any of its
subsidiaries  is required to include in income any  adjustment  pursuant to Code
section 481(a) by reason of a voluntary change in accounting method initiated by
PSCo or any of its subsidiaries,  and, to the best of the knowledge of PSCo, the
Internal  Revenue  Service (the "IRS") has not proposed any such  adjustment  or
change in accounting method.

                  (q) Code  sections  6661 and  6662.  Except  as  disclosed  in
Section 4.9(q) of the PSCo Disclosure Schedule, all transactions that could give
rise to an  understatement  of federal  income tax  (within  the meaning of Code
section 6661 for Tax Returns  filed on or before  December 31, 1989,  and within
the meaning of Code section 6662 for tax returns filed after  December 31, 1989)
that could  reasonably be expected to result in a PSCo Material  Adverse  Effect
have been adequately  disclosed (or, with respect to Tax Returns filed following
the Closing,  will be  adequately  disclosed) on the Tax Returns of PSCo and its
subsidiaries in accordance with Code section 6661(b)(2)(B) for Tax Returns filed
on or  prior  to  December  31,  1989,  and  in  accordance  with  Code  section
6662(d)(2)(B) for Tax Returns filed after December 31, 1989.

                  (r) Code section 280G.  Except as disclosed in Section  4.9(r)
of the PSCo Disclosure  Schedule,  neither PSCo nor any of its subsidiaries is a
party to any  agreement,  contract,  or  arrangement  that could  reasonably  be
expected  to  result,  on account of the  transactions  contemplated  hereunder,
separately or in the aggregate, in the payment of any "excess parachute payment"
within the meaning of Code section 280G.

                  (s) NOLS. As of December 31, 1993,  PSCo and its  subsidiaries
had net operating loss carryovers available to offset future income as disclosed
in Section 4.9(s) of the PSCo  Disclosure  Schedule.  Section 4.9(s) of the PSCo
Disclosure  Schedule  discloses  the  amount of and year of  expiration  of each
company's net operating loss carryovers.


                                      -14-











                  (t) Credit  Carryover.  As of December 31, 1993,  PSCo and its
subsidiaries had tax credit carryovers  available to offset future tax liability
as disclosed in Section 4.9(t) of the PSCo Disclosure  Schedule.  Section 4.9(t)
of the PSCo Disclosure  Schedule  discloses the amount and year of expiration of
each company's tax credit carryovers.

                  (u) Code section 338 Elections. Except as disclosed in Section
4.9(u) of the PSCo Disclosure  Schedule,  no election under Code section 338 (or
any  predecessor  provision)  has been made by or with respect to PSCo or any of
its subsidiaries or any of their respective assets or properties.

                  (v) Acquisition  Indebtedness.  Except as disclosed in Section
4.9(v) of the PSCo  Disclosure  Schedule,  no indebtedness of PSCo or any of its
subsidiaries is "corporate acquisition  indebtedness" within the meaning of Code
section 279(b).

                  (w) Intercompany Transactions.  Except as disclosed in Section
4.9(w) of the PSCo Disclosure Schedule, neither PSCo nor any of its subsidiaries
have  engaged in any  intercompany  transactions  within the meaning of Treasury
Regulations  section  1.1502-13  for  which  any  income  or  gain  will  remain
unrecognized as of the close of the last taxable year prior to the Closing Date.

                  Section 4.10 Employee Matters; ERISA.

                  (a)  Benefit  Plans.  Section  4.10(a) of the PSCo  Disclosure
Schedule  contains a true and complete list of: (i) each employee  benefit plan,
program or arrangement covering employees, former employees or directors of PSCo
(or any of its  subsidiaries)  or any of their dependents or  beneficiaries,  or
providing  benefits to such persons in respect of services  provided to any such
entity,  including,  but not limited to, any "employee  benefit plan" within the
meaning of Section 3(3) of the Employee  Retirement Income Security Act of 1974,
as  amended  ("ERISA")  (whether  or  not  terminated,  if  PSCo  or  any of its
subsidiaries could have statutory or contractual  liability with respect thereto
on or  after  the date  hereof);  (ii)  each  management,  employment,  deferred
compensation,  severance (including any payment, right or benefit resulting from
a change in control),  bonus or other  contract for  personal  services  with or
covering  any current  officer,  key  employee  or  director  or any  consulting
contract with any person who prior to entering into such contract was a director
or officer of PSCo or any of its  subsidiaries  (whether or not  terminated,  if
PSCo or any of its  subsidiaries  could have statutory or contractual  liability
with respect thereto on or after the date hereof);  (iii) each "employee pension
benefit  plan" (within the meaning of ERISA section 3(2)) subject to Title IV of
ERISA or the minimum  funding  requirements  of Code section 412  maintained  or
contributed  to by  PSCo  or any  entity  required  to be  aggregated  therewith
pursuant to Code section  414(b) or (c) (a "PSCo ERISA  Affiliate")  at any time
during  the   seven-year   period   immediately   preceding   the  date   hereof
(collectively,  the "PSCo  Benefit  Plans")  and (iv) with  respect to each PSCo
Benefit  Plan,  the  source  or  sources  of  benefit  payments  under  the plan
(including,  where  applicable,  the  identity  of any trust  (whether  or not a
grantor trust),  insurance  contract,  custodial account,  agency agreement,  or
other arrangement

                                      -15-











that holds the assets of, or serves as a funding  vehicle or source of  benefits
for, such PSCo Benefit Plan).

                  (b)  Contributions.  Except as disclosed in Section 4.10(b) of
the PSCo  Disclosure  Schedule,  all material  contributions  and other payments
required  to have been made by PSCo or any of its  subsidiaries  pursuant to any
PSCo Benefit  Plan (or to any person  pursuant to the terms  thereof)  have been
timely made or the amount of such payment or  contribution  obligation  has been
reflected in the PSCo Financial Statements.

                  (c) Qualification;  Compliance. Except as disclosed in Section
4.10(c) of the PSCo Disclosure Schedule, each PSCo Benefit Plan that is intended
to be "qualified"  within the meaning of Code section 401(a) has been determined
by the IRS to be so qualified,  and, to the best  knowledge of PSCo, no event or
condition  exists or has occurred that could reasonably be expected to result in
the revocation of any such determination.  PSCo and each of its subsidiaries are
in  compliance  with,  and each PSCo  Benefit  Plan is and has been  operated in
compliance with, all applicable laws, rules and regulations governing such plan,
including,  without  limitation,  ERISA and the Code, except for violations that
could not reasonably be expected to have a PSCo Material Adverse Effect.  To the
best  knowledge of PSCo, no individual or entity has engaged in any  transaction
with  respect to any PSCo  Benefit  Plan as a result of which PSCo or any of its
subsidiaries  could  reasonably  expect to be subject to  liability  pursuant to
ERISA  section 409 or section  502, or subject to an excise tax pursuant to Code
section 4975. To the best knowledge of PSCo, (i) no PSCo Benefit Plan is subject
to any ongoing audit,  investigation,  or other administrative proceeding of the
Internal Revenue Service, the Department of Labor, or any other federal,  state,
or local  governmental  entity,  and (ii) no PSCo Benefit Plan is the subject of
any pending application for administrative relief under any voluntary compliance
program of any governmental  entity (including,  without  limitation,  the IRS's
Voluntary Compliance Resolution Program or Walk-in Closing Agreement Program, or
the Department of Labor's Delinquent Filer Voluntary Compliance Program).

                  (d)  Liabilities.  With  respect  to the PSCo  Benefit  Plans,
individually and in the aggregate,  no termination or partial termination of any
PSCo Benefit  Plan or other event has  occurred,  and, to the best  knowledge of
PSCo, there exists no condition or set of circumstances, that could subject PSCo
or any of its subsidiaries to any liability arising under the Code, ERISA or any
other applicable law (including,  without limitation,  any liability to or under
any such plan or to the Pension Benefit Guaranty  Corporation  (the "PBGC"),  or
under any indemnity agreement to which PSCo, any of its subsidiaries or any PSCo
ERISA Affiliate is a party,  which  liability,  excluding  liability for benefit
claims and funding  obligations payable in the ordinary course and liability for
PBGC insurance  premiums  payable in the ordinary  course,  could  reasonably be
expected to have a PSCo Material Adverse Effect.

                  (e) Welfare Plans.  Except as disclosed in Section  4.10(e) of
the PSCo  Disclosure  Schedule,  no PSCo Benefit  Plan that is a "welfare  plan"
(within the meaning of

                                      -16-











ERISA section 3(1)) provides benefits for any retired or former employees (other
than as required pursuant to ERISA section 601).

                  (f) Documents Made Available. PSCo has made available to SPS a
true and correct copy of each collective bargaining agreement to which PSCo is a
party or under which PSCo has obligations and, with respect to each PSCo Benefit
Plan, as  applicable  (i) the current plan document  (including  all  amendments
adopted  since  the most  recent  restatement)  and its most  recently  prepared
summary plan  description and all summaries of material  modifications  prepared
since the most recent summary plan description,  (ii) the most recently prepared
annual report (IRS Form 5500 Series) including financial statements,  (iii) each
related trust  agreement,  insurance  contract,  service  provider or investment
management agreement (including all amendments to each such document),  (iv) the
most recent IRS determination  letter with respect to the qualified status under
Code  section  401(a)  of such  plan  and a copy of any  application  for an IRS
determination  letter filed since the most recent IRS  determination  letter was
issued, and (v) the most recent actuarial report or valuation.

                  (g) Payments  Resulting from Mergers.  Other than as set forth
in Section 7.11 or disclosed in Section 4.10(g) of the PSCo Disclosure Schedule,
the  consummation  or  announcement  of any  transaction  contemplated  by  this
Agreement  will not (either alone or upon the  occurrence  of any  additional or
further acts or events)  result in any (i) payment  (whether of severance pay or
otherwise)  becoming  due from the  Company  or PSCo or any of its  subsidiaries
under  any  applicable  PSCo  Benefit  Plans to any  officer,  employee,  former
employee  or  director  thereof or to the  trustee  under any  "rabbi  trust" or
similar  arrangement,  or  (ii)  benefit  under  any  PSCo  Benefit  Plan  being
established or becoming accelerated,  vested or payable, except for a payment or
benefit that would have been payable under the same terms and conditions without
regard to the transactions contemplated by this Agreement.

                  (h) Funded  Status of Plans.  Except as  disclosed  in Section
4.10(h) of the PSCo Disclosure Schedule,  each PSCo Benefit Plan that is subject
to either or both of the minimum funding requirements of ERISA section 302 or to
Title IV of ERISA has assets  that,  as of the date  hereof,  have a fair market
value equal to or exceeding the present value of the accrued benefit obligations
thereunder on a termination  basis, as of the date hereof based on the actuarial
methods,  tables and assumptions  theretofore utilized by such plan's actuary in
preparing such plan's most recently prepared actuarial valuation report,  except
to the extent that  applicable law would require the use of different  actuarial
assumptions  if such plan was to be  terminated  as of the date hereof.  No PSCo
Benefit Plan subject to the minimum  funding  requirements  of ERISA section 302
has incurred any "accumulated  funding  deficiency" (within the meaning of ERISA
section 302).

                  (i)  Multiemployer  Plans.  Except  as  disclosed  in  Section
4.10(i)  of the  PSCo  Disclosure  Schedule,  no PSCo  Benefit  Plan is or was a
"multiemployer  plan"  (within  the  meaning  of ERISA  section  4001(a)(3)),  a
multiple employer plan described in Code section 413(c), or a "multiple employer
welfare  arrangement"  (within the meaning of ERISA section 3(40));  and none of
PSCo, any subsidiary thereof or any PSCo ERISA Affiliate has been obligated to

                                      -17-











contribute  to, or otherwise has or has had any  liability  with respect to, any
multiemployer  plan,  multiple  employer  plan,  or  multiple  employer  welfare
arrangement.  With  respect to any PSCo  Benefit  Plan that is listed in Section
4.10(i) of the PSCo Disclosure  Schedule as a  multiemployer  plan, PSCo and its
subsidiaries  have not made or  incurred a "complete  withdrawal"  or a "partial
withdrawal," as such terms are defined in ERISA sections4203 and 4205, therefrom
at any time during the five calendar year period immediately  preceding the date
of this Agreement and the  transactions  contemplated by the Agreement will not,
in and of  themselves,  give rise to such a  "complete  withdrawal"  or "partial
withdrawal."

                  (j) Modification or Termination of Plans.  Except as disclosed
in Section  4.10(j) of the PSCo  Disclosure  Schedule:  (i) neither PSCo nor any
subsidiary  of PSCo is  subject to any legal,  contractual,  equitable  or other
obligation to establish as of any date any employee  benefit plan of any nature,
including   (without   limitation)  any  pension,   profit   sharing,   welfare,
post-retirement  welfare,  stock  option,  stock  or cash  award,  non-qualified
deferred  compensation or executive  compensation plan, policy or practice;  and
(ii) to the best  knowledge  of PSCo,  after  review  of all PSCo  Benefit  Plan
documents,  the  Company,  PSCo or one or more of its  subsidiaries  may, in any
manner,  and without  the consent of any  employee,  beneficiary  or  dependent,
employees'  organization  or other person,  terminate,  modify or amend any PSCo
Benefit Plan or any other employee benefit plan, policy, program or practice (or
its  participation in any such PSCo Benefit Plan or other employee benefit plan,
policy, program or practice) at any time sponsored, maintained or contributed to
by PSCo or any of its subsidiaries, effective as of any date before, on or after
the Effective Time except to the extent that any retroactive  amendment would be
prohibited by ERISA section 204(g).

                  (k) Reportable Events;  Claims. Except as disclosed in Section
4.10(k) of the PSCo Disclosure Schedule, (i) no event constituting a "reportable
event" (within the meaning of ERISA section 4043(b)) for which the 30-day notice
requirement  has not been waived by the PBGC has  occurred  with  respect to any
PSCo Benefit Plan and (ii) no liability,  claim,  action or litigation  has been
made,  commenced or, to the best  knowledge of PSCo,  threatened,  by or against
PSCo or any of its  subsidiaries  with  respect to any PSCo  Benefit Plan (other
than for benefits or PBGC  premiums  payable in the ordinary  course) that could
reasonably be expected to have to a PSCo Material Adverse Effect.

                  (l) Labor Agreements. To the best knowledge of PSCo, as of the
date hereof, there is no current labor union  representation  question involving
employees  of  PSCo  or any of its  subsidiaries,  nor  does  PSCo or any of its
subsidiaries  know of any activity or proceeding of any labor  organization  (or
representative  thereof)  or  employee  group  (or  representative  thereof)  to
organize any such  employees.  Except as disclosed in the PSCo SEC Reports or as
disclosed in Section 4.10(l) of the PSCo Disclosure  Schedule:  (i) neither PSCo
nor any of its subsidiaries is a party to any collective bargaining agreement or
other labor  agreement  with any union or labor  organization;  (ii) there is no
unfair labor practice charge or grievance arising out of a collective bargaining
agreement or other grievance  procedure  against PSCo or any of its subsidiaries
pending, or to the best knowledge of PSCo,  threatened,  that has, or reasonably
may be expected by PSCo to have, a PSCo

                                      -18-











Material Adverse Effect;  (iii) there is no complaint,  lawsuit or proceeding in
any forum by or on behalf of any present or former  employee,  any applicant for
employment or classes of the foregoing alleging breach of any express or implied
contract  of  employment,  any law or  regulation  governing  employment  or the
termination  thereof or other  discriminatory,  wrongful or tortious  conduct in
connection  with  the  employment  relationship  against  PSCo  or  any  of  its
subsidiaries pending, or to the best knowledge of PSCo, threatened, that has, or
reasonably may be expected by PSCo to have, a PSCo Material Adverse Effect; (iv)
there is no strike,  dispute,  slowdown, work stoppage or lockout pending, or to
the best knowledge of PSCo, threatened,  against or involving PSCo or any of its
subsidiaries  that has or, insofar as reasonably can be foreseen,  could have, a
PSCo  Material  Adverse  Effect;  (v) PSCo and each of its  subsidiaries  are in
compliance  with  all  applicable  laws  respecting  employment  and  employment
practices,  terms  and  conditions  of  employment,  wages,  hours  of work  and
occupational  safety  and  health,   except  for  non-compliance  that,  in  the
aggregate, does not, and insofar as reasonably can be foreseen, will not, have a
PSCo Material  Adverse  Effect;  and (vi) there is no proceeding,  claim,  suit,
action or governmental  investigation pending or, to the best knowledge of PSCo,
threatened in respect to which any director,  officer, employee or agent of PSCo
or any of its subsidiaries is or may be entitled to claim  indemnification  from
PSCo  or any of its  subsidiaries  pursuant  to  their  respective  articles  of
incorporation or bylaws or as provided in the indemnification  agreements listed
on Section 4.10(l) of the PSCo Disclosure Schedule.

                  Section 4.11 Environmental Protection.

                  (a) Compliance.  Except as disclosed in Section 4.11(a) of the
PSCo Disclosure Schedule,  or as disclosed in the PSCo SEC Reports, each of PSCo
and each of its  subsidiaries  is in  material  compliance  with all  applicable
Environmental Laws (as hereinafter defined in Section 4.11(g)), except where the
failure to be so in material  compliance  would not in the aggregate have a PSCo
Material  Adverse  Effect.  Except as disclosed  in Section  4.11(a) of the PSCo
Disclosure  Schedule,  neither PSCo nor any of its subsidiaries has received any
written notice from any person or Governmental  Authority that alleges that PSCo
or any of  its  subsidiaries  is not  in  material  compliance  with  applicable
Environmental  Laws,  except  where the failure to be so in material  compliance
would not in the aggregate have a PSCo Material Adverse Effect.

                  (b)  Environmental  Permits.  Except as  disclosed  in Section
4.11(b)  of the  PSCo  Disclosure  Schedule,  or as  disclosed  in the  PSCo SEC
Reports,  PSCo and each of its  subsidiaries has obtained or has applied for all
material   environmental,   health  and  safety   permits   and   authorizations
(collectively,  "Environmental Permits") necessary for the construction of their
facilities  and the  conduct  of their  operations,  and all such  Environmental
Permits are in good standing or, where  applicable,  a renewal  application  has
been timely filed and is pending agency approval,  and PSCo and its subsidiaries
are  in  material   compliance  with  all  terms  and  conditions  of  all  such
Environmental  Permits and are not required to make any material expenditures in
connection with any renewal  application  pending agency approval,  except where
the failure to obtain or be in such compliance and the

                                      -19-











requirement  to make such  expenditures  would not have in the  aggregate a PSCo
Material Adverse Effect.

                  (c)  Environmental  Claims.  Except as  disclosed  in  Section
4.11(c)  of the  PSCo  Disclosure  Schedule,  or as  disclosed  in the  PSCo SEC
Reports,  to the best  knowledge of PSCo,  there is no  Environmental  Claim (as
hereinafter  defined in Section  4.11(g))  pending,  or to the best knowledge of
PSCo,  threatened (i) against PSCo or any of its subsidiaries or joint ventures,
(ii) against any person or entity whose  liability for any  Environmental  Claim
PSCo or any of its  subsidiaries  or joint  ventures has or may have retained or
assumed either contractually or by operation of law or (iii) against any real or
personal  property or operations  that PSCo or any of its  subsidiaries or joint
ventures  owns,  leases or  manages,  in whole or in part,  that,  if  adversely
determined, would have in the aggregate a PSCo Material Adverse Effect.

                  (d)  Releases.  Except as  disclosed  in  Section  4.11(c)  or
4.11(d)  of the  PSCo  Disclosure  Schedule,  or as  disclosed  in the  PSCo SEC
Reports,  to the  best  knowledge  of  PSCo,  there  has  been  no  Release  (as
hereinafter   defined  in  Section  4.11(g))  of  any  Hazardous   Material  (as
hereinafter  defined in Section 4.11(g)) that would be reasonably likely to form
the basis of any  Environmental  Claim  against PSCo or any  subsidiary or joint
venture  of PSCo,  or  against  any  person or entity  whose  liability  for any
Environmental  Claim PSCo or any  subsidiary or joint venture of PSCo has or may
have retained or assumed either contractually or by operation of law, except for
Releases of Hazardous  Materials  the  liability for which would not have in the
aggregate a PSCo Material Adverse Effect.

                  (e)  Predecessors.  Except as disclosed in Section  4.11(e) of
the PSCo Disclosure  Schedule,  or as disclosed in the PSCo SEC Reports,  to the
best  knowledge  of  PSCo,  with  respect  to any  predecessor  of  PSCo  or any
subsidiary or joint venture of PSCo, there are no  Environmental  Claims pending
or threatened,  or any Releases of Hazardous  Materials that would be reasonably
likely to form the basis of any  Environmental  Claims that would have,  or that
PSCo  reasonably  believes would have, in the aggregate a PSCo Material  Adverse
Effect.

                  (f)  Disclosure.  To the  best  knowledge  of  PSCo,  PSCo has
disclosed to SPS all material facts that PSCo reasonably believes form the basis
of a PSCo Material Adverse Effect arising from (i) the cost of pollution control
equipment currently required or known to be required in the future, (ii) current
investigatory, removal, remediation or response costs or investigatory, removal,
remediation or response costs known to be required in the future,  in each case,
both  on-site and off-site and (iii) any other  environmental  matter  affecting
PSCo or its subsidiaries that would have, or that PSCo reasonably believes would
have, in the aggregate a PSCo Material Adverse Effect.

                  (g)      As used in this Agreement:

                  (i)  "Environmental  Claim" means any and all  administrative,
          regulatory  or  judicial  actions,  suits,  demands,  demand  letters,
          directives, claims, liens,

                                      -20-











         investigations, proceedings or notices of noncompliance or violation by
         any person or entity (including,  without limitation,  any Governmental
         Authority) alleging potential liability (including, without limitation,
         potential liability for enforcement costs, investigatory costs, cleanup
         costs, response costs, removal costs, remedial costs, natural resources
         damages,  property  damages,  personal  injuries,  fines or  penalties)
         arising out of, based on or resulting from (A) the presence, or Release
         or  threatened  Release of any  Hazardous  Materials  at any  location,
         whether or not owned, operated, leased or managed by PSCo or any of its
         subsidiaries  or joint  ventures  (for  purposes of this  Section  4.11
         only),  or by SPS or any of its  subsidiaries  or joint  ventures  (for
         purposes of Section 5.11 only), (B) circumstances  forming the basis of
         any violation,  or alleged  violation,  of any Environmental Law or (C)
         any and all claims by any third party  seeking  damages,  contribution,
         indemnification,  cost  recovery,  compensation  or  injunctive  relief
         resulting from the presence or Release of any Hazardous Materials.

                 (ii)  "Environmental  Laws" means all federal,  state and local
         laws,  rules and  regulations  relating to pollution or  protection  of
         human health or the environment (including, without limitation, ambient
         air, surface water,  groundwater,  land surface or subsurface  strata),
         including,   without  limitation,  laws  and  regulations  relating  to
         Releases or  threatened  Releases of  Hazardous  Materials or otherwise
         relating to the manufacture,  processing, distribution, use, treatment,
         storage, disposal, transport or handling of Hazardous Materials.

                (iii) "Hazardous Materials" means (A) any petroleum or petroleum
         products  or  petroleum  wastes  (including  crude oil or any  fraction
         thereof),   radioactive   materials,   friable   asbestos   or  friable
         asbestos-containing  material,  urea formaldehyde foam insulation,  and
         transformers   or  other  equipment  that  contain   dielectric   fluid
         containing polychlorinated  biphenyls, (B) any chemicals,  materials or
         substances  which are now defined as or included in the  definition  of
         "hazardous  substances",  "hazardous  wastes",  "hazardous  materials",
         "extremely  hazardous wastes",  "restricted  hazardous wastes",  "toxic
         substances",  "toxic pollutants", or words of similar import, under any
         Environmental  Law and (C) any other chemical,  material,  substance or
         waste, exposure to which is now prohibited,  limited or regulated under
         any  Environmental  Law in a  jurisdiction  in which PSCo or any of its
         subsidiaries  or joint ventures  operates (for purposes of this Section
         4.11 only) or in which SPS or any of its subsidiaries or joint ventures
         operates (for purposes of Section 5.11 only).

                 (iv) "Release"  means any release,  spill,  emission,  leaking,
         injection,  deposit,  disposal,   discharge,   dispersal,  leaching  or
         migration into the  atmosphere,  soil,  surface  water,  groundwater or
         property (indoors or outdoors).

                  Section 4.12  Regulation as a Utility.  PSCo is regulated as a
public utility in the State of Colorado and one of its wholly owned subsidiaries
is regulated as a public utility in the State of Wyoming. Except as disclosed in
Section 4.12 of the PSCo  Disclosure  Schedule,  neither PSCo nor any subsidiary
company or affiliate  of PSCo is subject to  regulation  as a public  utility or
public service company (or similar designation) by any other

                                      -21-











state  in  the  United   States,   by  the  United   States  or  any  agency  or
instrumentality of the United States or by any foreign country.  As used in this
Section 4.12 and in Section 5.12, the terms "subsidiary company" and "affiliate"
shall have the respective  meanings  ascribed to them in the 1935 Act. PSCo is a
holding  company  exempt  from all  provisions  of the 1935 Act  except  Section
9(a)(2) pursuant to Section 3(a)(2) of the 1935 Act.

                  Section 4.13 Vote Required. The approval of the PSCo Merger by
two-thirds of all votes  entitled to be cast by all holders of PSCo Common Stock
and  PSCo  Preferred  Stock  voting  together  as  a  single  class  (the  "PSCo
Shareholders'  Approvals")  are the only  votes of the  holders  of any class or
series of the capital  stock of PSCo  required to approve  this  Agreement,  the
Merger Agreements, the Mergers and the other transactions contemplated hereby.

                  Section 4.14  Accounting  Matters.  PSCo has not,  through the
date hereof,  taken or agreed to take any action that would  prevent the Company
from accounting for the business  combination to be effected by the Mergers as a
pooling-of-interests in accordance with GAAP and applicable SEC regulations.

                  Section 4.15 Opinion of Financial  Advisor.  PSCo has received
the opinion of Barr Devlin & Co.  Incorporated,  dated the date  hereof,  to the
effect that,  as of the date hereof,  the PSCo  Conversion  Ratio is fair from a
financial point of view to the holders of PSCo Common Stock.

                  Section 4.16 Insurance. Except as disclosed in Section 4.16 of
the PSCo Disclosure Schedule,  each of PSCo and each of its subsidiaries is, and
has been continuously since January 1, 1990, insured in such amounts and against
such risks and losses as are customary for companies  conducting  the respective
businesses  conducted  by PSCo and its  subsidiaries  during  such time  period.
Except as  disclosed in Section 4.16 of the PSCo  Disclosure  Schedule,  neither
PSCo nor any of its  subsidiaries  has  received any notice of  cancellation  or
termination with respect to any material insurance policy thereof.  All material
insurance  policies  of PSCo and its  subsidiaries  are  valid  and  enforceable
policies.

                  Section  4.17  Ownership  of SPS Common  Stock.  PSCo does not
"beneficially  own" (as such term is defined in Rule  13d-3  under the  Exchange
Act) any shares of SPS Common Stock.

                  Section  4.18  PSCo  Rights  Agreement.  PSCo  shall  take all
necessary  action  with  respect to all of the  outstanding  rights to  purchase
common  stock  of  PSCo  (the  "PSCo  Rights")  issued  pursuant  to the  Rights
Agreement, dated as of February 26, 1991 (the "PSCo Rights Agreement"),  between
PSCo and Mellon  Bank,  N.A.,  as Rights  Agent,  so that  PSCo,  as of the time
immediately prior to the Effective Time, will have no obligations under the PSCo
Rights or the PSCo Rights  Agreement,  except for the payment of any  redemption
price,  if  required,  and so that the  holders of the PSCo  Rights will have no
rights under the PSCo Rights or the PSCo Rights Agreement except for the payment
of  any   redemption   price,   if  required.   Assuming  the  accuracy  of  the
representation contained in Section 5.17, the

                                      -22-











execution,  delivery  and  performance  of this  Agreement  will not result in a
distribution  of, or otherwise,  trigger,  the PSCo Rights under the PSCo Rights
Agreement.
                                   ARTICLE V

                     REPRESENTATIONS AND WARRANTIES OF SPS

                  SPS represents and warrants to PSCo as follows:

                  Section  5.1   Organization  and   Qualification.   Except  as
disclosed in Section 5.1 of the SPS  Disclosure  Schedule (as defined in Section
7.6(i)),  each  of SPS  and  each  of its  subsidiaries  is a  corporation  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of its
jurisdiction of incorporation,  has all requisite corporate power and authority,
and has been duly authorized by all necessary  regulatory  approvals and orders,
to own, lease and operate its assets and properties and to carry on its business
as it is now being  conducted,  and is duly qualified and in good standing to do
business  in each  jurisdiction  in which  the  nature  of its  business  or the
ownership  or  leasing of its assets  and  properties  makes such  qualification
necessary other than in such jurisdictions  where the failure to be so qualified
and in good standing will not, when taken together with all other such failures,
have a material adverse effect on the business, operations,  properties, assets,
condition  (financial or  otherwise),  prospects or results of operations of SPS
and its  subsidiaries  taken as a whole or on the consummation of this Agreement
or the SPS Merger Agreement (any such material adverse effect being  hereinafter
referred to as a "SPS Material Adverse Effect").

                  Section 5.2  Subsidiaries.  Section 5.2 of the SPS  Disclosure
Schedule  contains a description as of the date hereof of all  subsidiaries  and
joint  ventures of SPS,  including  the name of each such  entity,  the state or
jurisdiction of its incorporation,  a brief description of the principal line or
lines of  business  conducted  by each such entity and SPS's  interest  therein.
Except as disclosed in Section 5.2 of the SPS Disclosure Schedule,  none of such
entities is a "public  utility  company",  a "holding  company",  a  "subsidiary
company" or an "affiliate"  of any public utility  company within the meaning of
Section  2(a)(5),  2(a)(7),  2(a)(8) or 2(a)(11) of the 1935 Act,  respectively.
Except as disclosed in Section 5.2 of the SPS  Disclosure  Schedule,  all of the
issued and  outstanding  shares of capital  stock of each  subsidiary of SPS are
validly issued, fully paid,  nonassessable and free of preemptive rights and are
owned  directly  or  indirectly  by SPS free and  clear  of any  liens,  claims,
encumbrances,  security interests,  equities,  charges and options of any nature
whatsoever,  and  there  are  no  outstanding  subscriptions,   options,  calls,
contracts,   voting  trusts,  proxies  or  other  commitments,   understandings,
restrictions,   arrangements,   rights  or  warrants,  including  any  right  of
conversion  or exchange  under any  outstanding  security,  instrument  or other
agreement, obligating any such subsidiary to issue, deliver or sell, or cause to
be  issued,  delivered  or  sold,  additional  shares  of its  capital  stock or
obligating it to grant, extend or enter into any such agreement or commitment.


                                      -23-











                  Section 5.3  Capitalization.  The authorized  capital stock of
SPS consists of 100,000,000  shares of SPS Common Stock and 5,000,000  shares of
SPS  Preferred  Stock.  As of the  close  of  business  on July  31,  1995,  (i)
40,917,908  shares of SPS Common  Stock and  1,416,800  shares of SPS  Preferred
Stock were issued and outstanding.  All of the issued and outstanding  shares of
the capital stock of SPS are validly issued, fully paid,  nonassessable and free
of preemptive  rights.  Except as disclosed in Section 5.3 of the SPS Disclosure
Schedule and except for the SPS Rights (as defined in Section  5.18),  as of the
date hereof, there are no outstanding subscriptions,  options, calls, contracts,
voting  trusts,  proxies  or other  commitments,  understandings,  restrictions,
arrangements,  rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating SPS or
any of its  subsidiaries  to  issue,  deliver  or sell,  or cause to be  issued,
delivered  or sold,  additional  shares  of the  capital  stock or other  voting
securities of SPS or obligating SPS or any of its subsidiaries to grant,  extend
or enter into any such agreement or commitment.

                  Section 5.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.

                  (a)  Authority.  SPS has all requisite  power and authority to
enter into this Agreement and the SPS Merger  Agreement and,  subject to the SPS
Shareholders'  Approvals  (as  defined  in  Section  5.13) and the SPS  Required
Statutory   Approvals  (as  defined  in  Section   5.4(c),   to  consummate  the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement  and the SPS  Merger  Agreement  and  the  consummation  by SPS of the
transactions  contemplated  hereby and thereby have been duly  authorized by all
necessary  corporate  action on the part of SPS,  subject to  obtaining  the SPS
Shareholders'  Approvals.  This Agreement has been, and the SPS Merger Agreement
will be, duly and validly  executed and  delivered by SPS and,  assuming the due
authorization,  execution and delivery hereof by PSCo and the Company and of the
SPS Merger  Agreement  by Merger Sub B,  constitutes,  or will  constitute,  the
legal, valid and binding obligation of SPS enforceable against SPS in accordance
with its terms.

                  (b)  Non-Contravention.  Except as disclosed in Section 5.4(b)
of the SPS  Disclosure  Schedule the execution and delivery of this Agreement by
SPS do not, and the execution  and delivery of the SPS Merger  Agreement and the
consummation of the transactions contemplated hereby and thereby will not result
in any Violation by SPS or any of its  subsidiaries or, to the best knowledge of
SPS,  any of its joint  ventures  under any  provisions  of (i) the  articles of
incorporation,  bylaws  or  similar  governing  documents  of  SPS or any of its
subsidiaries  or joint  ventures,  (ii)  subject to  obtaining  the SPS Required
Statutory  Approvals  and the receipt of the SPS  Shareholders'  Approvals,  any
statute, law, ordinance, rule, regulation,  judgment, decree, order, injunction,
writ, permit or license of any Governmental  Authority  applicable to SPS or any
of its subsidiaries or joint ventures or any of their  respective  properties or
assets,  or  (iii)  subject  to  obtaining  the  third-party  consents  or other
approvals  disclosed in Section 5.4(b) of the SPS Disclosure  Schedule (the "SPS
Required  Consents"),  any  note,  bond,  mortgage,  indenture,  deed of  trust,
license,  franchise,  permit,  concession,  contract, lease or other instrument,
obligation or agreement of any kind to which SPS or any of its  subsidiaries  or
joint ventures is now a party or by which

                                      -24-











any of them or any of their  respective  properties  or  assets  may be bound or
affected, excluding from the foregoing clauses (ii) and (iii) such Violations as
would not have, in the aggregate, a SPS Material Adverse Effect.

                  (c) Statutory Approvals. Except as disclosed in Section 5.4(c)
of the SPS Disclosure Schedule, no declaration,  filing or registration with, or
notice to or authorization, consent, finding by or approval of, any Governmental
Authority,  is necessary for the execution and delivery of this Agreement or the
SPS  Merger  Agreement  by SPS or the  consummation  by SPS of the  transactions
contemplated hereby or thereby,  the failure to obtain, make or give which would
have,  in the  aggregate,  a SPS  Material  Adverse  Effect  (the "SPS  Required
Statutory Approvals"),  it being understood that references in this Agreement to
"obtaining"  such SPS  Required  Statutory  Approvals  shall  mean  making  such
declarations,  filings or  registrations;  giving such  notice;  obtaining  such
consents or approvals;  and having such waiting  periods expire as are necessary
to avoid a violation of law.

                  (d) Compliance.  Except as disclosed in Section 5.4(d) or 5.11
of the SPS  Disclosure  Schedule  or as  disclosed  in the SPS SEC  Reports  (as
defined in Section  5.5),  neither SPS nor any of its  subsidiaries  nor, to the
best  knowledge of SPS, any of its joint  ventures,  is in violation of or under
investigation with respect to, or has been given notice or been charged with any
violation of, any law, statute,  order, rule, regulation,  ordinance or judgment
(including,  without  limitation,  any applicable  Environmental  Laws),  of any
Governmental  Authority,  except for violations  that, in the aggregate,  do not
have,  and, to the best knowledge of SPS, are not  reasonably  likely to have, a
SPS Material  Adverse  Effect.  Except as disclosed in Section 5.4(d) or 5.11 of
the SPS Disclosure Schedule, SPS, its subsidiaries and, to the best knowledge of
SPS, its joint  ventures  have all  Permits,  except those the failure to obtain
which would not, in the aggregate, have a SPS Material Adverse Effect.

                  Section  5.5  Reports and  Financial  Statements.  The filings
required to be made by SPS and its subsidiaries  since January 1, 1990 under the
Securities  Act, the Exchange Act,  applicable New Mexico,  Texas,  Oklahoma and
Kansas laws and  regulations  or the Power Act have been filed with the SEC, the
New Mexico Public Utility Commission (the "New Mexico  Commission"),  the Public
Utility Commission of Texas (the "Texas Commission"), the Corporation Commission
of Oklahoma (the "Oklahoma Commission"),  the Kansas Corporation Commission (the
"Kansas  Commission"),  or the FERC,  as the case may be,  including  all forms,
statements,  reports, agreements (oral or written) and all documents,  exhibits,
amendments and supplements  appertaining  thereto,  and complied in all material
respects with all applicable  requirements  of the appropriate act and the rules
and  regulations  thereunder.  No filings by SPS or its  subsidiaries  have been
required  under the 1935 Act, the Natural Gas Act or the Atomic  Energy Act. SPS
has made  available to PSCo a true and complete  copy of each report,  schedule,
registration  statement and definitive proxy statement filed by SPS with the SEC
since January 1, 1990 and through the date hereof (as such  documents have since
the time of their  filing  been  amended,  the "SPS SEC  Reports").  The SPS SEC
Reports, including without limitation any financial statements or schedules

                                      -25-











included therein,  at the time filed, and any forms,  reports or other documents
filed by SPS with the SEC after the date  hereof,  did not and will not  contain
any  untrue  statement  of a  material  fact or omit to  state a  material  fact
required to be stated  therein or necessary to make the statements  therein,  in
light of the  circumstances  under  which they were made,  not  misleading.  The
audited  consolidated  financial  statements  and  unaudited  interim  financial
statements  of SPS  included  in the SPS SEC  Reports  (collectively,  the  "SPS
Financial  Statements")  have been prepared,  and will be prepared in accordance
with GAAP (except as may be indicated therein or in the notes thereto and except
with  respect to  unaudited  statements  as  permitted  by Form 10-Q) and fairly
present the  consolidated  financial  position of SPS as of the respective dates
thereof  or the  consolidated  results  of  operations  and cash  flows  for the
respective  periods then ended, as the case may be, subject,  in the case of the
unaudited interim financial statements,  to normal, recurring audit adjustments.
True,  accurate and complete copies of the articles of incorporation  and bylaws
of SPS, as in effect on the date hereof, have been delivered to PSCo.

                  Section  5.6 Absence of Certain  Changes or Events.  Except as
disclosed in the SPS SEC Reports  filed prior to the date hereof or as disclosed
in Section 5.6 of the SPS  Disclosure  Schedule,  from December 31, 1994 through
the date  hereof  each of SPS and each of its  subsidiaries  has  conducted  its
business only in the ordinary  course of business  consistent with past practice
and no event has occurred  which has had,  and no fact or condition  exists that
would have or, to the best knowledge of SPS, is reasonably likely to have, a SPS
Material Adverse Effect. For purposes of the Section 5.6, the amount of any fine
or penalty imposed or assessed  against SPS after the date of this Agreement may
be taken into account in determining  whether a SPS Material  Adverse Effect has
occurred regardless of whether or not the event, fact or condition which lead to
the  imposition or  assessment of the fine or penalty has been  disclosed in the
SPS SEC Reports or the SPS Disclosure Schedule.

                  Section 5.7  Litigation.  Except as  disclosed  in the SPS SEC
Reports  filed prior to the date hereof or as  disclosed  in Section 5.7, 5.9 or
5.11 of the SPS Disclosure Schedule,  (i) there are no claims, suits, actions or
proceedings pending or, to the best knowledge of SPS, threatened,  nor are there
any  investigations  or  reviews  pending  or,  to the  best  knowledge  of SPS,
threatened  against,  relating to or affecting  SPS or any of its  subsidiaries,
(ii) there have not been any  developments  since December 31, 1994 with respect
to any such disclosed claims,  suits,  actions,  proceedings,  investigations or
reviews, and (iii) there are no judgments, decrees, injunctions, rules or orders
of any court, governmental department,  commission,  agency,  instrumentality or
authority or any arbitrator applicable to SPS or any of its subsidiaries that in
the aggregate would have, or to the best knowledge of SPS are reasonably  likely
to have, a SPS Material Adverse Effect.

                  Section 5.8 Registration  Statement and Proxy Statement.  None
of the  information  supplied  or to be  supplied  by or on  behalf  of SPS  for
inclusion or incorporation by reference in (i) the Registration  Statement will,
at the time the Registration  Statement  becomes  effective under the Securities
Act,  contain  any  untrue  statement  of a  material  fact or omit to state any
material fact required to be stated therein or necessary to make the

                                      -26-











statements  therein not misleading and (ii) the Joint Proxy  Statement  will, at
the date  mailed to the  shareholders  of SPS and PSCo  and,  as the same may be
amended or supplemented, at the times of the meetings of such shareholders to be
held in connection with the Mergers,  contain any untrue statement of a material
fact  or omit to  state  any  material  fact  necessary  in  order  to make  the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement and the Joint Proxy Statement will comply
as to form in all material  respects with the  provisions of the  Securities Act
and the Exchange Act and the rules and regulations thereunder.

                  Section 5.9  Tax Matters.

                  (a)  Filing of Timely  Tax  Returns.  Except as  disclosed  in
Section 5.9(a) of the SPS Disclosure Schedule,  SPS and each of its subsidiaries
have filed all Tax Returns required to be filed by each of them under applicable
law. All Tax Returns were in all material  respects  (and, as to Tax Returns not
filed as of the date hereof,  will be) true, complete and correct and filed on a
timely basis.

                  (b) Payment of Taxes. SPS and each of its  subsidiaries  have,
within the time and in the manner prescribed by law, paid (and until the Closing
Date will pay  within the time and in the  manner  prescribed  by law) all Taxes
that are currently due and payable except for those  contested in good faith and
for which adequate reserves have been taken.

                  (c) Tax Reserves.  SPS and its  subsidiaries  have established
(and until the Closing Date will  maintain) on their books and records  reserves
adequate to pay all Taxes and reserves for deferred  income taxes in  accordance
with GAAP.

                  (d) Tax  Liens.  There are no Tax liens upon the assets of SPS
or any of its subsidiaries except liens for Taxes not yet due.

                  (e) Withholding  Taxes. SPS and each of its subsidiaries  have
complied (and until the Closing Date will comply) in all material  respects with
the  provisions  of the Code relating to the payment and  withholding  of Taxes,
including,  without limitation, the withholding and reporting requirements under
Code sections 1441 through 1464,  3401 through 3606,  and 6041 and 6049, as well
as similar provisions under any other laws, and have, within the time and in the
manner  prescribed by law,  withheld  from  employee  wages and paid over to the
proper governmental authorities all amounts required.

                  (f)  Extensions  of Time for  Filing  Tax  Returns.  Except as
disclosed in Section 5.9(f) of the SPS Disclosure Schedule,  neither SPS nor any
of its subsidiaries has requested any extension of time within which to file any
Tax Return, which Tax Return has not since been filed.

                  (g) Waivers of Statute of Limitations.  Except as disclosed in
Section  5.9(g)  of the  SPS  Disclosure  Schedule,  neither  SPS nor any of its
subsidiaries has executed

                                      -27-











any outstanding  waivers or comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Tax Returns.

                  (h) Expiration of Statute of Limitations.  Except as disclosed
in Section 5.9(h) of the SPS Disclosure Schedule, the statute of limitations for
the  assessment of all Taxes has expired for all  applicable  Tax Returns of SPS
and each of its  subsidiaries  or those Tax  Returns  have been  examined by the
appropriate  taxing  authorities for all periods through the date hereof, and no
deficiency for any Taxes has been proposed,  asserted or assessed against SPS or
any of its subsidiaries that has not been resolved and paid in full.

                  (i) Audit,  Administrative  and Court  Proceedings.  Except as
disclosed in Section 5.9(i) of the SPS Disclosure  Schedule,  no audits or other
administrative  proceedings  or court  proceedings  are  presently  pending with
regard to any Taxes or Tax Returns of SPS or any of its subsidiaries.

                  (j) Powers of Attorney.  Except as disclosed in Section 5.9(j)
of the SPS Disclosure Schedule, no power of attorney currently in force has been
granted by SPS or any of its subsidiaries concerning any Tax matter.

                  (k) Tax Rulings.  Except as disclosed in Section 5.9(k) of the
SPS Disclosure Schedule,  neither SPS nor any of its subsidiaries has received a
Tax Ruling or entered into a Closing  Agreement  with any taxing  authority that
would have a continuing adverse effect after the Closing Date.

                  (l) Availability of Tax Returns. SPS and its subsidiaries have
made available to PSCo complete and accurate copies covering all years ending on
or after December 31, 1990, of (i) all Tax Returns,  and any amendments thereto,
filed by SPS or any of its  subsidiaries,  (ii) all audit reports  received from
any  taxing  authority  relating  to any Tax  Return  filed by SPS or any of its
subsidiaries and (iii) any Closing  Agreements entered into by SPS or any of its
subsidiaries with any taxing authority.

                  (m) Tax Sharing  Agreements.  Except as  disclosed  in Section
5.9(m) of the SPS Disclosure Schedule,  no agreements relating to the allocation
or sharing of Taxes exist between or among SPS and any of its subsidiaries.

                  (n)  Code  section   341(f).   Neither  SPS  nor  any  of  its
subsidiaries has filed (or will file prior to the Closing) a consent pursuant to
Code section  341(f) or has agreed to have Code section  341(f)(2)  apply to any
disposition  of a subsection  (f) asset (as such term is defined in Code section
341(f)(4)) owned by SPS or any of its subsidiaries.

                  (o) Code section 168. Except as disclosed in Section 5.9(o) of
the SPS Disclosure  Schedule,  no property of SPS or any of its  subsidiaries is
property that SPS or any such subsidiary or any party to this  transaction is or
will be  required  to treat as being  owned by another  person  pursuant  to the
provisions of Code section 168(f)(8) (as in effect prior to

                                      -28-











its  amendment  by the Tax Reform  Act of 1986) or is  tax-exempt  use  property
within the meaning of Code section 168.

                  (p) Code  section  481  Adjustments.  Except as  disclosed  in
Section  5.9(p)  of the  SPS  Disclosure  Schedule,  neither  SPS nor any of its
subsidiaries  is required to include in income any  adjustment  pursuant to Code
section 481(a) by reason of a voluntary change in accounting method initiated by
SPS or any of its subsidiaries, and to the best of the knowledge of SPS, the IRS
has not proposed any such adjustment or change in accounting method.

                  (q) Code  sections  6661 and  6662.  Except  as  disclosed  in
Section 5.9(q) of the SPS Disclosure Schedule,  all transactions that could give
rise to an  understatement  of federal  income tax  (within  the meaning of Code
section 6661 for Tax Returns  filed on or before  December 31, 1989,  and within
the meaning of Code section 6662 for tax returns filed after  December 31, 1989)
that could  reasonably  be expected to result in a SPS Material  Adverse  Effect
have been adequately  disclosed (or, with respect to Tax Returns filed following
the  Closing  will be  adequately  disclosed)  on the Tax Returns of SPS and its
subsidiaries in accordance with Code section 6661(b)(2)(B) for Tax Returns filed
on or  prior  to  December  31,  1989,  and  in  accordance  with  Code  section
6662(d)(2)(B) for Tax Returns filed after December 31, 1989.

                  (r) Code section 280G.  Except as disclosed in Section  5.9(r)
of the SPS Disclosure  Schedule,  neither SPS nor any of its  subsidiaries  is a
party to any  agreement,  contract,  or  arrangement  that could  reasonably  be
expected  to  result,  on account of the  transactions  contemplated  hereunder,
separately or in the aggregate, in the payment of any "excess parachute payment"
within the meaning of Code section 280G.

                  (s) NOLS.  As of December 31, 1993,  SPS and its  subsidiaries
had net operating loss carryovers available to offset future income as disclosed
in Section  5.9(s) of the SPS  Disclosure  Schedule.  Section  5.9(s) of the SPS
Disclosure  Schedule  discloses  the  amount of and year of  expiration  of each
company's net operating loss carryovers.

                  (t) Credit  Carryover.  As of December 31,  1993,  SPS and its
subsidiaries had tax credit carryovers  available to offset future tax liability
as disclosed in Section 5.9(t) of the SPS Disclosure Schedule. Section 5.9(t) of
the SPS Disclosure  Schedule discloses the amount and year of expiration of each
company's tax credit carryovers.

                  (u) Code section 338 Elections. Except as disclosed in Section
5.9(u) of the SPS  Disclosure  Schedule,  no election under Code section 338 (or
any predecessor provision) has been made by or with respect to SPS or any of its
subsidiaries or any of their respective assets or properties.

                  (v) Acquisition  Indebtedness.  Except as disclosed in Section
5.9(v) of the SPS  Disclosure  Schedule,  no  indebtedness  of SPS or any of its
subsidiaries is "corporate acquisition  indebtedness" within the meaning of Code
section 279(b).


                                      -29-











                  (w) Intercompany Transactions.  Except as disclosed in Section
5.9(w) of the SPS Disclosure  Schedule,  neither SPS nor any of its subsidiaries
have  engaged in any  intercompany  transactions  within the meaning of Treasury
Regulations  section  1.1502-13  for  which  any  income  or  gain  will  remain
unrecognized as of the close of the last taxable year prior to the Closing Date.

                  Section 5.10 Employee Matters; ERISA.

                  (a)  Benefit  Plans.  Section  5.10(a)  of the SPS  Disclosure
Schedule  contains a true and complete list of: (i) each employee  benefit plan,
program or arrangement covering employees,  former employees or directors of SPS
(or any of its  subsidiaries)  or any of their dependents or  beneficiaries,  or
providing  benefits to such persons in respect of services  provided to any such
entity,  including,  but not limited to, any "employee  benefit plan" within the
meaning of ERISA section 3(3) (whether or not  terminated,  if SPS or any of its
subsidiaries could have statutory or contractual  liability with respect thereto
on or  after  the date  hereof);  (ii)  each  management,  employment,  deferred
compensation,  severance (including any payment, right or benefit resulting from
a change in control),  bonus or other  contract for  personal  services  with or
covering  any current  officer,  key  employee  or  director  or any  consulting
contract with any person who prior to entering into such contract was a director
or officer of SPS or any of its subsidiaries (whether or not terminated,  if SPS
or any of its  subsidiaries  could have statutory or contractual  liability with
respect  thereto  on or after the date  hereof);  (iii) each  "employee  pension
benefit  plan" (within the meaning of ERISA section 3(2)) subject to Title IV of
ERISA or the minimum  funding  requirements  of Code section 412  maintained  or
contributed to by SPS or any entity required to be aggregated therewith pursuant
to Code section  414(b) or (c) (a "SPS ERISA  Affiliate") at any time during the
seven-year period immediately preceding the date hereof (collectively,  the "SPS
Benefit  Plans") and (iv) with respect to each SPS Benefit  Plan,  the source or
sources of benefit payments under the plan  (including,  where  applicable,  the
identity of any trust  (whether  or not a grantor  trust),  insurance  contract,
custodial account,  agency agreement, or other arrangement that holds the assets
of, or serves as a funding  vehicle or source of benefits  for, such SPS Benefit
Plan).

                  (b)  Contributions.  Except as disclosed in Section 5.10(b) of
the SPS  Disclosure  Schedule,  all material  contributions  and other  payments
required to have been made by SPS or any of its subsidiaries pursuant to any SPS
Benefit Plan (or to any person  pursuant to the terms  thereof) have been timely
made or the amount of such payment or contribution obligation has been reflected
in the SPS Financial Statements.

                  (c) Qualification;  Compliance. Except as disclosed in Section
5.10(c) of the SPS Disclosure  Schedule,  each SPS Benefit Plan that is intended
to be "qualified"  within the meaning of Code section 401(a) has been determined
by the IRS to be so  qualified,  and, to the best  knowledge of SPS, no event or
condition  exists or has occurred that could reasonably be expected to result in
the revocation of any such  determination.  SPS and each of its subsidiaries are
in  compliance  with,  and each SPS  Benefit  Plan is and has been  operated  in
compliance with, all applicable laws, rules and regulations governing such plan,
including,

                                      -30-











without  limitation,  ERISA and the Code,  except for violations  that could not
reasonably  be  expected  to have a SPS  Material  Adverse  Effect.  To the best
knowledge of SPS, no  individual or entity has engaged in any  transaction  with
respect  to  any  SPS  Benefit  Plan  as a  result  of  which  SPS or any of its
subsidiaries  could  reasonably  expect to be subject to  liability  pursuant to
ERISA  section 409 or section  502, or subject to an excise tax pursuant to Code
section 4975.  To the best  knowledge of SPS, (i) no SPS Benefit Plan is subject
to any ongoing audit,  investigation,  or other administrative proceeding of the
Internal Revenue Service, the Department of Labor, or any other federal,  state,
or local governmental entity, and (ii) no SPS Benefit Plan is the subject of any
pending  application for  administrative  relief under any voluntary  compliance
program of any governmental  entity (including,  without  limitation,  the IRS's
Voluntary Compliance Resolution Program or Walk-in Closing Agreement Program, or
the Department of Labor's Delinquent Filer Voluntary Compliance Program).

                  (d)  Liabilities.  With  respect  to the  SPS  Benefit  Plans,
individually and in the aggregate,  no termination or partial termination of any
SPS Benefit Plan or other event has occurred, and, to the best knowledge of SPS,
there exists no condition or set of circumstances, that could subject SPS or any
of its subsidiaries to any liability  arising under the Code, ERISA or any other
applicable law  (including,  without  limitation,  any liability to or under any
such plan or to the PBGC), or under any indemnity agreement to which SPS, any of
its  subsidiaries  or any SPS  ERISA  Affiliate  is a  party,  which  liability,
excluding  liability for benefit claims and funding  obligations  payable in the
ordinary  course  and  liability  for PBGC  insurance  premiums  payable  in the
ordinary  course,  could  reasonably be expected to have a SPS Material  Adverse
Effect.

                  (e) Welfare Plans.  Except as disclosed in Section  5.10(e) of
the SPS  Disclosure  Schedule,  no SPS  Benefit  Plan that is a  "welfare  plan"
(within the meaning of ERISA section 3(1)) provides  benefits for any retired or
former employees (other than as required pursuant to ERISA section 601).

                  (f) Documents Made Available. SPS has made available to PSCo a
true and correct copy of each collective  bargaining agreement to which SPS is a
party or under which SPS has  obligations  and, with respect to each SPS Benefit
Plan, as  applicable  (i) the current plan document  (including  all  amendments
adopted  since  the most  recent  restatement)  and its most  recently  prepared
summary plan  description and all summaries of material  modifications  prepared
since the most recent summary plan description,  (ii) the most recently prepared
annual report (IRS Form 5500 Series) including financial statements,  (iii) each
related trust  agreement,  insurance  contract,  service  provider or investment
management agreement (including all amendments to each such document),  (iv) the
most recent IRS determination  letter with respect to the qualified status under
Code  section  401(a)  of  such  plan  and a copy of any  application  of an IRS
determination  letter filed since the most recent IRS  determination  letter was
issued, and (v) the most recent actuarial report or valuation.

                  (g) Payments  Resulting from Mergers.  Other than as set forth
in Section 7.11 or disclosed in Section 5.10(g) of the SPS Disclosure  Schedule,
the  consummation  or  announcement  of any  transaction  contemplated  by  this
Agreement will not

                                      -31-











(either  alone or upon the  occurrence  of any  additional  or  further  acts or
events)  result in any (i)  payment  (whether  of  severance  pay or  otherwise)
becoming  due from  the  Company  or SPS or any of its  subsidiaries  under  any
applicable  SPS  Benefit  Plans to any  officer,  employee,  former  employee or
director  thereof  or  to  the  trustee  under  any  "rabbi  trust"  or  similar
arrangement,  or (ii) benefit  under any SPS Benefit Plan being  established  or
becoming  accelerated,  vested or payable,  except for a payment or benefit that
would have been payable under the same terms and  conditions  without  regard to
the transactions contemplated by this Agreement.

                  (h) Funded  Status of Plans.  Except as  disclosed  in Section
5.10(h) of the SPS Disclosure Schedule, each SPS Benefit Plan that is subject to
either or both of the minimum  funding  requirements  of ERISA section 302 or to
Title IV of ERISA has assets  that,  as of the date  hereof,  have a fair market
value equal to or exceeding the present value of the accrued benefit obligations
thereunder on a termination  basis, as of the date hereof based on the actuarial
methods,  tables and assumptions  theretofore utilized by such plan's actuary in
preparing such plan's most recently prepared actuarial valuation report,  except
to the extent that  applicable law would require the use of different  actuarial
assumptions  if such plan was to be  terminated  as of the date  hereof.  No SPS
Benefit Plan subject to the minimum  funding  requirements  of ERISA section 302
has incurred any "accumulated  funding  deficiency" (within the meaning of ERISA
section 302).

                  (i)  Multiemployer  Plans.  Except  as  disclosed  in  Section
5.10(i)  of the  SPS  Disclosure  Schedule,  no  SPS  Benefit  Plan  is or was a
"multiemployer  plan"  (within  the  meaning  of ERISA  section  4001(a)(3)),  a
multiple employer plan described in Code section 413(c), or a "multiple employer
welfare  arrangement"  (within the meaning of ERISA section 3(40));  and none of
SPS, any  subsidiary  thereof or any SPS ERISA  Affiliate has been  obligated to
contribute  to, or otherwise has or has had any  liability  with respect to, any
multiemployer  plan,  multiple  employer  plan,  or  multiple  employer  welfare
arrangement.  With  respect  to any SPS  Benefit  Plan that is listed in Section
5.10(i) of the SPS  Disclosure  Schedule as a  multiemployer  plan,  SPS and its
subsidiaries  have not made or  incurred a "complete  withdrawal"  or a "partial
withdrawal,"  as such  terms  are  defined  in ERISA  sections  4203  and  4205,
therefrom at any time during the five calendar year period immediately preceding
the date of this Agreement and the  transactions  contemplated  by the Agreement
will not, in and of  themselves,  give rise to such a "complete  withdrawal"  or
"partial withdrawal."

                  (j) Modification or Termination of Plans.  Except as disclosed
in Section  5.10(j) of the SPS  Disclosure  Schedule:  (i)  neither  SPS nor any
subsidiary  of SPS is  subject  to any legal,  contractual,  equitable  or other
obligation to establish as of any date any employee  benefit plan of any nature,
including   (without   limitation)  any  pension,   profit   sharing,   welfare,
post-retirement  welfare,  stock  option,  stock  or cash  award,  non-qualified
deferred  compensation or executive  compensation plan, policy or practice;  and
(ii)  to the  best  knowledge  of SPS  after  review  of all  SPS  Benefit  Plan
documents,  the  Company,  SPS or one or more of its  subsidiaries  may,  in any
manner,  and without  the consent of any  employee,  beneficiary  or  dependent,
employees'  organization  or other  person,  terminate,  modify or amend any SPS
Benefit Plan or any other employee benefit plan, policy, program or practice

                                      -32-











(or its  participation  in any such SPS Benefit Plan or other  employee  benefit
plan,  policy,  program  or  practice)  at any  time  sponsored,  maintained  or
contributed  to by SPS or any of  its  subsidiaries,  effective  as of any  date
before, on or after the Effective Time except to the extent that any retroactive
amendment would be prohibited by ERISA section 204(g).

                  (k) Reportable Events;  Claims. Except as disclosed in Section
5.10(k) of the SPS Disclosure Schedule,  (i) no event constituting a "reportable
event" (within the meaning of ERISA section 4043(b)) for which the 30-day notice
requirement has not been waived by the PBGC has occurred with respect to any SPS
Benefit Plan and (ii) no liability,  claim,  action or litigation has been made,
commenced or, to the best knowledge of SPS, threatened, by or against SPS or any
of its  subsidiaries  with  respect  to any SPS  Benefit  Plan  (other  than for
benefits or PBGC premiums  payable in the ordinary course) that could reasonably
be expected to have a SPS Material Adverse Effect.

                  (l) Labor Agreements.  To the best knowledge of SPS, as of the
date hereof, there is no current labor union  representation  question involving
employees  of  SPS  or  any of  its  subsidiaries,  nor  does  SPS or any of its
subsidiaries  know of any activity or proceeding of any labor  organization  (or
representative  thereof)  or  employee  group  (or  representative  thereof)  to
organize  any such  employees.  Except as disclosed in the SPS SEC Reports or as
disclosed in Section 5.10(l) of the SPS Disclosure Schedule: (i) neither SPS nor
any of its  subsidiaries  is a party to any collective  bargaining  agreement or
other labor  agreement  with any union or labor  organization;  (ii) there is no
unfair labor practice charge or grievance arising out of a collective bargaining
agreement or other grievance  procedure  against SPS or any of its  subsidiaries
pending,  or to the best knowledge of SPS,  threatened,  that has, or reasonably
may be expected by SPS to have, a SPS Material Adverse Effect; (iii) there is no
complaint,  lawsuit or proceeding in any forum by or on behalf of any present or
former  employee,  any  applicant  for  employment  or classes of the  foregoing
alleging  breach of any express or implied  contract of  employment,  any law or
regulation   governing   employment   or  the   termination   thereof  or  other
discriminatory,  wrongful or tortious  conduct in connection with the employment
relationship  against  SPS or any of its  subsidiaries  pending,  or to the best
knowledge of SPS, threatened,  that has, or reasonably may be expected by SPS to
have, a SPS Material Adverse Effect; (iv) there is no strike, dispute, slowdown,
work stoppage or lockout pending,  or to the best knowledge of SPS,  threatened,
against or  involving  SPS or any of its  subsidiaries  that has or,  insofar as
reasonably can be foreseen,  could have, a SPS Material Adverse Effect;  (v) SPS
and  each  of its  subsidiaries  are in  compliance  with  all  applicable  laws
respecting  employment  and  employment  practices,   terms  and  conditions  of
employment,  wages, hours of work and occupational safety and health, except for
non-compliance  that, in the aggregate,  does not, and insofar as reasonably can
be foreseen,  will not, have a SPS Material Adverse Effect; and (vi) there is no
proceeding, claim, suit, action or governmental investigation pending or, to the
best  knowledge of SPS,  threatened in respect to which any  director,  officer,
employee  or agent of SPS or any of its  subsidiaries  is or may be  entitled to
claim  indemnification  from SPS or any of its  subsidiaries  pursuant  to their
respective   articles  of   incorporation  or  bylaws  or  as  provided  in  the
indemnification  agreements  listed on  Section  5.10(l)  of the SPS  Disclosure
Schedule.

                                      -33-












                  Section 5.11 Environmental Protection.

                  (a) Compliance.  Except as disclosed in Section 5.11(a) of the
SPS Disclosure Schedule or as disclosed in the SPS SEC Reports,  each of SPS and
each  of  its  subsidiaries  is  in  material  compliance  with  all  applicable
Environmental  Laws,  except  where the failure to be so in material  compliance
would  not in the  aggregate  have a SPS  Material  Adverse  Effect.  Except  as
disclosed in Section 5.11(a) of the SPS Disclosure Schedule, neither SPS nor any
of its  subsidiaries  has  received  any  written  notice  from  any  person  or
Governmental  Authority that alleges that SPS or any of its  subsidiaries is not
in material  compliance with  applicable  Environmental  Laws,  except where the
failure to be so in material  compliance  would not in the aggregate  have a SPS
Material Adverse Effect.

                  (b)  Environmental  Permits.  Except as  disclosed  in Section
5.11(b) of the SPS  Disclosure  Schedule or as disclosed in the SPS SEC Reports,
each of SPS and each of its  subsidiaries  has  obtained  or has applied for all
material   Environmental   Permits  necessary  for  the  construction  of  their
facilities  and the  conduct  of their  operations,  and all such  Environmental
Permits are in good standing or, where  applicable,  a renewal  application  has
been timely filed and is pending agency  approval,  and SPS and its subsidiaries
are in  compliance  with all  terms  and  conditions  of all such  Environmental
Permits and are not required to make any  material  expenditures  in  connection
with any renewal application  pending agency approval,  except where the failure
to obtain or be in such compliance and the requirement to make such expenditures
would not have in the aggregate a SPS Material Adverse Effect.

                  (c)  Environmental  Claims.  Except as  disclosed  in  Section
5.11(c) of the SPS  Disclosure  Schedule or as disclosed in the SPS SEC Reports,
to the best  knowledge of SPS,  there is no  Environmental  Claim (as defined in
Section  4.11(g))  pending,  or to the best  knowledge  of SPS,  threatened  (i)
against  SPS or any of its  subsidiaries  or joint  ventures,  (ii)  against any
person or entity whose liability for any  Environmental  Claim SPS or any of its
subsidiaries  or joint  ventures  has or may have  retained  or  assumed  either
contractually  or by  operation  of law or (iii)  against  any real or  personal
property or operations  that SPS or any of its  subsidiaries  or joint  ventures
owns,  leases or manages,  in whole or in part,  that, if adversely  determined,
would have in the aggregate a SPS Material Adverse Effect.

                  (d)  Releases.  Except as  disclosed  in  Section  5.11(c)  or
5.11(d) of the SPS  Disclosure  Schedule or as disclosed in the SPS SEC Reports,
to the best  knowledge  of SPS,  there  has  been no  Release  of any  Hazardous
Material that would be reasonably  likely to form the basis of any Environmental
Claim  against  SPS or any  subsidiary  or joint  venture of SPS, or against any
person  or  entity  whose  liability  for  any  Environmental  Claim  SPS or any
subsidiary or joint  venture of SPS has or may have  retained or assumed  either
contractually or by operation of law, except for Releases of Hazardous Materials
the liability  for which would not have in the aggregate a SPS Material  Adverse
Effect.

                  (e)  Predecessors.  Except as disclosed in Section  5.11(e) of
the SPS Disclosure  Schedule or as disclosed in the SPS SEC Reports, to the best
knowledge of SPS

                                      -34-











with respect to any  predecessor  of SPS or any  subsidiary  or joint venture of
SPS, there are no Environmental Claims pending or threatened, or any Releases of
Hazardous  Materials  that would be  reasonably  likely to form the basis of any
Environmental  Claims that would have,  or that SPS  reasonably  believes  would
have, in the aggregate, a SPS Material Adverse Effect.

                  (f)  Disclosure.  To  the  best  knowledge  of  SPS,  SPS  has
disclosed to PSCo all material facts that SPS reasonably believes form the basis
of a SPS Material Adverse Effect arising from (i) the cost of pollution  control
equipment currently required or known to be required in the future, (ii) current
investigatory, removal, remediation or response costs or investigatory, removal,
remediation or response costs known to be required in the future,  in each case,
both on-site and offsite and (iii) any other environmental  matter affecting SPS
or its subsidiaries that would have, or that SPS reasonably believes would have,
in the aggregate a SPS Material Adverse Effect.

                  Section 5.12  Regulation  as a Utility.  SPS is regulated as a
public utility in the States of Texas, New Mexico, Oklahoma and Kansas and in no
other state. Except as disclosed in Section 5.12 of the SPS Disclosure Schedule,
neither  SPS nor any  subsidiary  company  or  affiliate  of SPS is  subject  to
regulation  as  a  public  utility  or  public   service   company  (or  similar
designation)  by any other state in the United  States,  by the United States or
any agency or instrumentality of the United States or by any foreign country.
SPS is not a holding company under the 1935 Act.

                  Section 5.13 Vote Required.  The approval of the SPS Merger by
two-thirds  of all votes  entitled to be cast by all holders of SPS Common Stock
and  two-thirds of all votes entitled to be cast by all holders of SPS Preferred
Stock, each voting as a separate class (the "SPS Shareholders'  Approval"),  are
the only votes of the holders of any class or series of the capital stock of SPS
required to approve this Agreement,  the Merger  Agreement,  the Mergers and the
other transactions contemplated hereby.

                  Section 5.14 Accounting Matters. SPS has not, through the date
hereof,  taken or agreed to take any action that would  prevent the Company from
accounting  for the  business  combination  to be  effected  by the Mergers as a
pooling-of-interests in accordance with GAAP and applicable SEC regulations.

                  Section 5.15 Opinion of  Financial  Advisor.  SPS has received
the opinion of Dillon,  Read & Co.  Inc.  dated the date  hereof,  to the effect
that, as of the date hereof,  the SPS Conversion  Ratio and  consideration to be
received by the holders of SPS Common  Stock are fair from a financial  point of
view to the holders of SPS Common Stock.

                  Section 5.16 Insurance. Except as disclosed in Section 5.16 of
the SPS Disclosure  Schedule,  each of SPS and each of its  subsidiaries is, and
has been continuously since January 1, 1990, insured in such amounts and against
such risks and losses as are customary for companies  conducting  the respective
businesses conducted by SPS and its subsidiaries during such time period. Except
as disclosed in Section 5.16 of the SPS

                                      -35-











Disclosure  Schedule,  neither SPS nor any of its  subsidiaries has received any
notice of  cancellation  or termination  with respect to any material  insurance
policy thereof.  All material insurance policies of SPS and its subsidiaries are
valid and enforceable policies.

                  Section  5.17  Ownership  of PSCo Common  Stock.  SPS does not
"beneficially  own" (as such term is defined in Rule  13d-3  under the  Exchange
Act) any shares of PSCo Common Stock.

                  Section  5.18  SPS  Rights  Agreement.   SPS  shall  take  all
necessary  action  with  respect to all of the  outstanding  rights to  purchase
common stock of SPS (the "SPS Rights") issued  pursuant to the Rights  Agreement
dated  as  of  July  23,  1991  between  SPS  and  Ameritrust  Company  National
Association,  as Rights Agent (the "SPS Rights  Agreement"),  so that SPS, as of
the time immediately prior to the Effective Time, will have no obligations under
the SPS  Rights or the SPS  Rights  Agreement,  except  for the  payment  of any
redemption  price,  if required,  and so that the holders of the SPS Rights will
have no rights under the SPS Rights or the SPS Rights  Agreement  except for the
payment of any  redemption  price,  if  required.  Assuming  the accuracy of the
representation   contained  in  Section  4.17,  the   execution,   delivery  and
performance  of  this  Agreement  will  not  result  in a  distribution  of,  or
otherwise, trigger, the SPS Rights under the SPS Rights Agreement.


                                   ARTICLE VI

                    CONDUCT OF BUSINESS PENDING THE MERGERS

                  PSCo and SPS have each delivered to the other a budget for the
years 1995 through 1999 (respectively,  the "PSCo Budget" and the "SPS Budget"),
which PSCo or SPS, as the case may be, may update or otherwise modify in writing
for purposes of this Article VI only with the consent in writing of SPS or PSCo,
as the case may be.  After the date  hereof and prior to the  Effective  Time or
earlier termination of this Agreement,  each of PSCo and SPS agrees as to itself
and its  subsidiaries,  except as  expressly  contemplated  or permitted in this
Agreement,  or to the extent the other party shall otherwise consent in writing,
as follows:

                  Section 6.1 Ordinary Course of Business.  Each of PSCo and SPS
shall,  and each shall  cause its  respective  subsidiaries  to,  carry on their
respective  businesses in the usual, regular and ordinary course consistent with
past practice and use all  commercially  reasonable  efforts to preserve  intact
their present  business  organizations  and goodwill,  preserve the goodwill and
relationships with customers, suppliers and others having business dealings with
them and,  subject to  prudent  management  of  workforce  needs and  ongoing or
planned  programs  relating to downsizing,  re-engineering  and similar matters,
keep available the services of their present officers and employees,  to the end
that their goodwill and ongoing businesses shall not be impaired in any material
respect at the Effective Time.


                                      -36-











                  Section 6.2 Dividends.  Neither PSCo nor SPS shall,  nor shall
either permit any of its subsidiaries to: (a) declare or pay any dividends on or
make other distributions in respect of any of their capital stock other than (i)
to such party or its  wholly-owned  subsidiaries,  (ii) stated dividends on PSCo
Preferred Stock or SPS Preferred Stock,  (iii) regular  dividends on PSCo Common
Stock with usual  record and  payment  dates not in excess of an annual  rate of
$2.04,  provided  that such annual rate may be increased by up to $0.16 and (iv)
regular dividends on SPS Common Stock with usual record and payment dates not in
excess of an annual rate of $2.20 per share;  (b) split,  combine or  reclassify
any of their  capital stock or issue or authorize or propose the issuance of any
other  securities in respect of, in lieu of, or in  substitution  for, shares of
its capital stock; or (c) redeem,  repurchase or otherwise acquire any shares of
their  capital  stock  other  than  (i)   redemptions,   repurchases  and  other
acquisitions  of shares of  capital  stock in the  ordinary  course of  business
consistent with past practice including,  without  limitation,  (A) repurchases,
redemptions  and other  acquisitions in connection  with the  administration  of
employee benefit and dividend reinvestment plans as in effect on the date hereof
in the  ordinary  course of the  operation  of such  plans and (B)  redemptions,
purchases or acquisitions required by the respective terms of any series of PSCo
Preferred  Stock or SPS Preferred  Stock and (C) in connection with refunding of
PSCo  Preferred  Stock  or SPS  Preferred  Stock  at a lower  cost of  funds  as
permitted  pursuant to Section 6.7, (ii)  intercompany  acquisitions  of capital
stock and (iii) the  redemption,  if  required,  of the PSCo  Rights and the SPS
Rights  pursuant  to the PSCo  Rights  Agreement  and the SPS Rights  Agreement,
respectively.

                  Section 6.3 Issuance of Securities.  Except as provided in the
PSCo Budget or the SPS Budget,  as the case may be,  neither PSCo nor SPS shall,
nor shall either permit any of its subsidiaries  to, issue,  deliver or sell, or
authorize  or propose  the  issuance,  delivery  or sale of, any shares of their
capital stock of any class or any securities  convertible  into or  exchangeable
for,  or any  rights,  warrants  or  options  to  acquire,  any such  shares  or
convertible or  exchangeable  securities,  other than (a) the issuance of common
stock or stock  appreciation or similar rights,  as the case may be, pursuant to
(i) the PSCo Dividend Reinvestment and Share Purchase Plan, Employee Savings and
Stock Ownership Plan,  Omnibus  Incentive Plan,  Annual  Incentive Plan and Long
Term Incentive Plan or (ii) the Dividend  Reinvestment and Cash Payment Plan for
Shareholders  of SPS,  the  Dividend  Reinvestment  and  Cash  Payment  Plan for
Employees of SPS, the SPS 1989 Stock Incentive Plan, the SPS Employee Investment
Plan, the SPS Non-Qualified Salary Deferral Plan and the SPS Directors' Deferred
Compensation Plan, in each case consistent in kind and amount with past practice
and in the  ordinary  course of  business  under  such  plans  substantially  in
accordance  with  their  present  terms,  (b)  the  issuance  by a  wholly-owned
subsidiary of shares of its capital stock to its parent and (c) preferred  stock
to the extent  disclosed in Section 6.7 of the PSCo  Disclosure  Schedule or the
SPS  Disclosure  Schedule,  provided  that  subject to Section 6.9, the type and
amount of annual  awards under the SPS 1989 Stock  Incentive  Plan may vary from
year to year in accordance with the terms of such plan.

                  Section 6.4 Charter Documents.  Except as disclosed in Section
6.4 of the PSCo Disclosure Schedule or the SPS Disclosure Schedule, neither PSCo
nor SPS shall

                                      -37-











amend or propose to amend its articles of  incorporation  or by-laws,  except as
contemplated herein, in any way adverse to the other party.

                  Section 6.5  Acquisitions.  Except as disclosed in Section 6.5
of the PSCo Disclosure Schedule or the SPS Disclosure  Schedule,  and except for
acquisitions  not exceeding  $50,000,000 in the aggregate in the case of, on the
one  hand,  PSCo  and its  subsidiaries  and,  on the  other  hand,  SPS and its
subsidiaries,  neither PSCo nor SPS shall,  nor shall  either  permit any of its
subsidiaries to, acquire or agree to acquire,  by merging or consolidating with,
or by purchasing a substantial  equity  interest in or a substantial  portion of
the  assets  of,  or by any  other  manner,  any  business  or any  corporation,
partnership,  association or other business organization or division thereof, or
otherwise  acquire  or  agree  to  acquire  any  assets;   provided  that  Quixx
Corporation, a subsidiary of SPS, shall be permitted to carry on its business of
making investments in and developing  cogeneration and  energy-related  projects
within  the  limitations  of funding  Quixx  Corporation  by SPS  imposed by the
applicable  regulatory  authorities or as approved by the Boards of Directors of
Quixx Corporation and SPS.

                  Section 6.6 No  Dispositions.  Except as  disclosed in Section
6.6 of the PSCo Disclosure  Schedule or the SPS Disclosure  Schedule,  and other
than (a) dispositions not exceeding $5 million in the aggregate, in the case of,
on the one hand, PSCo and its  subsidiaries  and, on the other hand, SPS and its
subsidiaries,  (b) as may be  required  by law to  consummate  the  transactions
contemplated  hereby or (c) in the ordinary  course of business  consistent with
past  practice,  neither PSCo nor SPS shall,  nor shall either permit any of its
subsidiaries to, sell, lease, license,  encumber or otherwise dispose of, any of
its assets that are material,  individually  or in the aggregate,  to such party
and its subsidiaries taken as a whole.

                  Section 6.7  Indebtedness.  Except as disclosed in Section 6.7
of the PSCo  Disclosure  Schedule or the SPS  Disclosure  Schedule and except as
provided in the PSCo Budget and the SPS Budget, as the case may be, neither PSCo
nor SPS shall,  nor shall  either  permit any of its  subsidiaries  to, incur or
guarantee  any  indebtedness  (including  any debt  borrowed  or  guaranteed  or
otherwise  assumed,   including,   without  limitation,  the  issuance  of  debt
securities  or  warrants or rights to acquire  debt)  other than (a)  short-term
indebtedness in the ordinary  course of business  consistent with past practice,
(b)  long-term  indebtedness  in  connection  with the  refinancing  of existing
indebtedness  either at its stated  maturity  or at a lower  cost of funds,  (c)
long-term  indebtedness in connection with the refunding of PSCo Preferred Stock
or SPS Preferred Stock at a lower cost of funds, and (d) additional indebtedness
aggregating  in any year not more than 110% of the amount  provided  therefor in
the PSCo Budget with respect to PSCo and its  subsidiaries and in the SPS Budget
with respect to SPS and its subsidiaries.

                  Section  6.8  Capital  Expenditures.  Except as  disclosed  in
Section 6.8 of the PSCo Disclosure Schedule or the SPS Disclosure Schedule or as
required by law,  neither PSCo nor SPS shall, nor shall either permit any of its
subsidiaries  to,  make  any  capital  expenditures,   other  than  (a)  capital
expenditures incurred in connection with the construction

                                      -38-











of new  facilities,  (b) capital  expenditures  to repair or replace  facilities
destroyed  or damaged due to  casualty  or  accident  (whether or not covered by
insurance) and (c) additional capital  expenditures in any year of not more than
110% of the  amount  provided  therefor  in the PSCo  Budget  for that year with
respect  to PSCo and its  subsidiaries  and in the SPS Budget for that year with
respect to SPS and its subsidiaries.

                  Section 6.9  Compensation,  Benefits.  Except as  disclosed in
Section  6.9 of the PSCo  Disclosure  Schedule or the SPS  Disclosure  Schedule,
neither PSCo nor SPS shall,  nor shall either permit any of its subsidiaries to,
(i) enter into, adopt or amend (except as may be required by applicable law), or
increase  the amount or  accelerate  the  payment  or vesting of any  benefit or
amount payable under,  any employee  benefit plan or other contract,  agreement,
commitment, arrangement, plan or policy maintained by, contributed to or entered
into by such party or any of its  subsidiaries,  or increase,  or enter into any
contract,  agreement,  commitment or arrangement to increase in any manner,  the
compensation or fringe benefits,  or otherwise to extend,  expand or enhance the
engagement,  employment or any related rights, of any director, officer or other
employee of such party or any of its  subsidiaries,  except  pursuant to binding
legal  commitments  and  except  for  normal  (including  incentive)  increases,
extensions,  expansions,  enhancements,  amendments or adoptions in the ordinary
course of business consistent with past practice that, in the aggregate,  do not
result in a material increase in benefits or compensation  expense to such party
and  its  subsidiaries  taken  as a whole  or  (ii)  enter  into  or  amend  any
employment,  severance,  special pay arrangement  with respect to termination of
employment or other similar contract, agreement or arrangement with any director
or officer other than in the ordinary  course of business  consistent  with past
practice.

                  Section 6.10 1935 Act. None of the parties  hereto shall,  nor
shall any such party permit any of its  subsidiaries  to,  except as required or
contemplated  by this  Agreement,  engage in any  activities  that would cause a
change in its status, or that of its  subsidiaries,  under the 1935 Act, or that
would  impair the ability of PSCo or SPS,  respectively,  to claim an  exemption
from all provisions of the 1935 Act except Section 9(a)(2) under Section 3(a)(2)
pursuant to Rule 2 of the 1935 Act,  other than (i) the  application  to the SEC
under the 1935 Act  contemplated  by this  Agreement  for approval to the extent
required of the  transactions  contemplated  hereby and (ii) the registration of
the Company pursuant to the 1935 Act.

                  Section 6.11 Accounting. Neither PSCo nor SPS shall, nor shall
either permit any of its  subsidiaries  to, make any changes in their accounting
methods, except as required by law, rule, regulation or GAAP.

                  Section 6.12  Pooling.  Neither PSCo nor SPS shall,  nor shall
either permit any of its  subsidiaries to, take any actions that would, or would
be reasonably  likely to, prevent the parties from accounting for the Mergers as
a pooling of interests in accordance with GAAP and applicable SEC regulations.


                                      -39-











                  Section 6.13 Tax-Free Status.  Neither PSCo nor SPS shall, nor
shall either permit any of its  subsidiaries to, take any actions that would, or
would be reasonably likely to, adversely affect the qualification of the Mergers
as a transaction described in Code section 351.

                  Section 6.14  Discharge of  Liabilities.  Neither PSCo nor SPS
shall pay, discharge or satisfy any material claims,  liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment,  discharge  or  satisfaction,  in the  ordinary  course of business
consistent  with  past  practice  (which  includes  the  payment  of  final  and
unappealable judgments and the refinancing of existing indebtedness for borrowed
money  either  at its  stated  maturity  or at a  lower  cost  of  funds)  or in
accordance with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of such party  included in such party's  reports filed with the SEC, or
incurred in the ordinary course of business  consistent with past practice or as
disclosed in Section 6.7 of the PSCo  Disclosure  Schedule or the SPS Disclosure
Schedule.

                  Section 6.15 Cooperation,  Notification.  Each of PSCo and SPS
shall:   (a)  confer  on  a  regular  and  frequent   basis  with  one  or  more
representatives  of the other to  discuss  the  general  status  of its  ongoing
operations;  (b)  promptly  notify the other of any  significant  changes in its
business,  properties,  assets,  condition  (financial  or other),  prospects or
results of operations;  (c) advise the other of any change or event that has had
or, insofar as reasonably can be foreseen,  is reasonably likely to result in, a
PSCo Material Adverse Effect or a SPS Material  Adverse Effect,  as the case may
be; and (d) promptly  provide the other with copies of all filings made by it or
any of its subsidiaries with any state or federal court,  administrative agency,
commission or other Governmental Authority in connection with this Agreement and
the transactions contemplated hereby.

                  Section 6.16 Rate Matters.  Other than currently  pending rate
filings,  each of PSCo and SPS  shall,  and  shall  cause its  subsidiaries  to,
discuss with the other any changes in its or its  subsidiaries'  regulated rates
or charges  (other than fuel and gas rates or charges),  standards of service or
accounting  from those in effect on the date hereof and  consult  with the other
parties prior to making any filing (or any amendment thereto),  or effecting any
agreement,  commitment,  arrangement or consent, whether written or oral, formal
or informal,  with respect thereto,  and neither shall make any filing to change
its rates on file with the public  utility  commission of any state or FERC that
would  have a  material  adverse  effect  on the  benefits  associated  with the
Mergers.

                  Section 6.17 Third-Party Consents. PSCo shall, and shall cause
its subsidiaries to, use all commercially  reasonable efforts to obtain all PSCo
Required Consents.  PSCo shall promptly notify SPS of any failure or anticipated
failure to obtain any such  consents  and, if  requested by SPS,  shall  provide
copies of all PSCo  Required  Consents  obtained by PSCo to SPS. SPS shall,  and
shall cause its  subsidiaries  to, use all  commercially  reasonable  efforts to
obtain all SPS Required Consents.  SPS shall promptly notify PSCo of any failure
or  anticipated  failure to obtain any such  consents and, if requested by PSCo,
shall provide copies of all SPS Required Consents obtained by SPS to PSCo.

                                      -40-












                  Section  6.18 No Breach,  Etc. No party  shall,  nor shall any
party  permit  any of its  subsidiaries  to,  take any  action  that would or is
reasonably  likely to  result in a  material  breach  of any  provision  of this
Agreement  or in any of its  representations  and  warranties  set forth in this
Agreement being untrue on and as of the Closing Date.

                  Section 6.19  Tax-Exempt  Status.  No party hereto shall,  nor
shall any party  permit any  subsidiary  to, take any action  that would  likely
jeopardize the  qualification  of the  outstanding  revenue bonds issued for the
benefit of PSCo (or any  subsidiary  thereof)  or for the benefit of SPS (or any
subsidiary  thereof) that qualify on the date hereof under Code section142(a) as
"exempt  facility  bonds" or as tax-exempt  industrial  development  bonds under
Section  103(b)(4) of the Internal Revenue Code of 1954, as amended prior to the
Tax Reform Act of 1986.

                  Section 6.20 Transition Management.  PSCo and SPS shall create
a special  transition  management  task force (the "Task Force") to be headed by
Wayne H.  Brunetti (or an  individual  designated by him who shall be reasonably
satisfactory  to the other Task Force head) and Bill D. Helton (or an individual
designated by him and reasonably satisfactory to the other Task Force head). The
Task Force shall  report its  findings to the Board of Directors of each of PSCo
and SPS.  After  the date  hereof  and  prior to the  Effective  Time,  Wayne H.
Brunetti shall  frequently  attend meetings of SPS's Board of Directors and Bill
D. Helton shall frequently  attend meetings of PSCo's Board of Directors as they
deem appropriate in consultation with each other.

                  Section 6.21 Insurance.  Each of PSCo and SPS shall, and shall
cause its  subsidiaries  to,  maintain with  financially  responsible  insurance
companies  insurance  in such  amounts and against  such risks and losses as are
customary for companies engaged in the utility industry and employing methods of
generating electric power and fuel sources similar to those methods employed and
fuels used by such party or such party's subsidiaries.

                  Section 6.22  Permits.  Each party shall,  and shall cause its
subsidiaries  to, use  reasonable  efforts to  maintain  in effect all  existing
Permits (as defined in Section 4.4) pursuant to which such party or such party's
subsidiaries operate.


                                  ARTICLE VII

                             ADDITIONAL AGREEMENTS

                  Section 7.1 Access to Information.  Upon reasonable notice and
during normal business hours, each party shall, and shall cause its subsidiaries
to,  afford  to  the  officers,  directors,  employees,   accountants,  counsel,
investment  banker,  financial  advisor and other  representatives  of the other
(collectively,  "Representatives")  reasonable  access,  during normal  business
hours  throughout  the  period  prior  to  the  Effective  Time,  to  all of its
properties,  books,  contracts,  commitments  and  records  (including,  but not
limited to, Tax Returns) and,  during such period,  each party shall,  and shall
cause its subsidiaries to, furnish

                                      -41-











promptly to the other (i) a copy of each reasonably  available report,  schedule
and other document filed or received by it or any of its  subsidiaries  pursuant
to the  requirements of federal or state  securities laws or filed with the SEC,
the FERC, the NRC, the Department of Justice, the Federal Trade Commission,  the
Colorado  Commission,  the Wyoming  Commission,  the New Mexico Commission,  the
Texas Commission,  the Oklahoma  Commission,  the Kansas Commission or any other
federal  or state  regulatory  agency or  commission,  and (ii) all  information
concerning themselves, their subsidiaries,  directors, officers and shareholders
and such matters as may be reasonably requested by the other party in connection
with any filings,  applications  or approvals  required or  contemplated by this
Agreement.  All documents and information furnished pursuant to this Section 7.1
shall be subject to the Confidentiality  Agreement.  The party requesting copies
of any  documents  from any other  party  hereto  shall be  responsible  for all
out-of-pocket  expenses  incurred  by the party to whom such  request is made in
complying with such request,  including any cost of  reproducing  and delivering
any required information.

                  Section 7.2  Joint Proxy Statement and Registration Statement.

                  (a)  Preparation   and  Filing.   As  promptly  as  reasonably
practicable  after the date hereof,  the parties shall prepare and file with the
SEC the  Registration  Statement  and the Joint Proxy  Statement  (together  the
"Joint  Proxy/Registration  Statement").  The parties shall take such actions as
may be reasonably  required to cause the  Registration  Statement to be declared
effective under the Securities Act as promptly as practicable after such filing.
The parties shall also take such action as may be  reasonably  required to cause
the shares of Company Common Stock issuable in connection with the Mergers to be
registered or to obtain an exemption from  registration  under  applicable state
"blue sky" or securities laws; provided,  however, that none of the Company, SPS
or PSCo shall be required to register or qualify as a foreign  corporation or to
take any other action that would subject it to general service of process in any
jurisdiction  in which  the  Company  will not,  following  the  Mergers,  be so
subject.  Each of the parties shall furnish all  information  concerning  itself
that is required or  customary  for  inclusion  in the Joint  Proxy/Registration
Statement. No representation,  covenant or agreement contained in this Agreement
is made by any party  hereto with respect to  information  supplied by any other
party hereto for inclusion in the Joint Proxy/Registration  Statement. The Joint
Proxy/Registration  Statement  shall comply as to form in all material  respects
with the Securities Act and the rules and  regulations  thereunder.  The parties
shall  take such  action as may be  reasonably  required  to cause the shares of
Company  Common  Stock to be issued in the Mergers to be approved for listing on
the NYSE and any  other  stock  exchanges  agreed to by the  parties,  each upon
official notice of issuance.

                  (b) Letter of PSCo's Accountants.  Following receipt by Arthur
Andersen LLP, PSCo's independent  auditors,  of an appropriate  request from SPS
pursuant to SAS No. 72, PSCo shall use best  efforts to cause to be delivered to
the Company  and SPS a letter of Arthur  Andersen  LLP,  dated a date within two
business  days before the  effective  date of the  Registration  Statement,  and
addressed to the Company and SPS, in form and substance reasonably  satisfactory
to the Company and SPS and customary in scope and substance for

                                      -42-











"cold comfort" letters delivered by independent public accountants in connection
with  registration   statements  and  proxy  statements  similar  to  the  Joint
Proxy/Registration Statement.

                  (c) Letter of SPS's Accountants. Following receipt by Deloitte
& Touche, LLP, SPS's independent  auditors,  of an appropriate request from PSCo
pursuant to SAS No. 72, SPS shall use best  efforts to cause to be  delivered to
the Company and PSCo a letter of Deloitte & Touche, LLP, dated a date within two
business  days before the  effective  date of the  Registration  Statement,  and
addressed to the Company and PSCo,  in form and  substance  satisfactory  to the
Company and PSCo and customary in scope and substance for "cold comfort" letters
delivered by  independent  public  accountants in connection  with  registration
statements  and  proxy  statements  similar  to  the  Joint   Proxy/Registration
Statement.

                  (d) Fairness Opinions.  It shall be a condition to the mailing
of the Joint Proxy  Statement to the  shareholders of SPS and PSCo that (i) PSCo
shall have  received an opinion from Barr Devlin & Co.  Incorporated,  dated the
date of the Joint Proxy  Statement,  to the effect that, as of the date thereof,
the PSCo Conversion  Ratio is fair to the holders of PSCo Common Stock, and (ii)
SPS shall have received an opinion from Dillon,  Read & Co. Inc., dated the date
of the Joint Proxy  Statement,  to the effect that, as of the date thereof,  the
SPS Conversion Ratio is fair to the holders of SPS Common Stock.

                  Section 7.3  Regulatory Matters.

                  (a) HSR  Filings.  Each party hereto shall file or cause to be
filed with the  Federal  Trade  Commission  and the  Department  of Justice  any
notifications  required  to be  filed  by  their  respective  "ultimate  parent"
companies under the  Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976, as
amended (the "HSR Act"),  and the rules and regulations  promulgated  thereunder
with respect to the transactions  contemplated hereby. Such parties will use all
commercially  reasonable efforts to make such filings promptly and shall respond
promptly  to any  requests  for  additional  information  made by either of such
agencies.

                  (b)  Other  Regulatory  Approvals.  Each  party  hereto  shall
cooperate  and use its best efforts to promptly  prepare and file all  necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other documents,  and to use all commercially  reasonable  efforts to obtain
all  necessary   permits,   consents,   approvals  and   authorizations  of  all
Governmental  Authorities  and all  other  persons  necessary  or  advisable  to
consummate  the  transactions  contemplated  by this  Agreement  and the  Merger
Agreements, including, without limitation, the PSCo Required Statutory Approvals
and the SPS Required Statutory Approvals. SPS shall have the right to review and
approve in advance all  characterizations of the information relating to SPS, on
the one hand, and PSCo shall have the right to review and approve in advance all
characterizations  of the  information  relating to PSCo,  on the other hand, in
either case, which appear in any filing made in connection with the transactions
contemplated by this Agreement,  the Merger Agreements or the Mergers.  PSCo and
SPS shall each consult with the other with respect to the obtaining of all such

                                      -43-











necessary  or advisable  permits,  consents,  approvals  and  authorizations  of
Governmental Authorities.

                  Section 7.4  Shareholder Approvals.

                  (a) Approval of SPS  Shareholders.  SPS shall,  as promptly as
reasonably  practicable  after the date  hereof  (i) take all  steps  reasonably
necessary  to call,  give notice of,  convene and hold a special  meeting of its
shareholders  (the "SPS  Special  Meeting")  for the purpose of securing the SPS
Shareholders'  Approvals,  (ii) distribute to its  shareholders  the Joint Proxy
Statement  in  accordance  with  applicable  federal  and state law and with its
articles of  incorporation  and bylaws,  (iii) recommend to its shareholders the
approval of the SPS Merger,  this  Agreement,  the SPS Merger  Agreement and the
transactions contemplated hereby and thereby (provided that nothing contained in
this Section 7.4 shall  require the Board of Directors of SPS to take any action
or refrain from taking any action that such Board  determines  in good faith and
with the advice of counsel as set forth in a  written,  reasoned  opinion  would
result in a breach of its  fiduciary  duties  under  applicable  law),  and (iv)
cooperate and consult with PSCo with respect to each of the foregoing matters.

                  (b) Approval of PSCo Shareholders.  PSCo shall, as promptly as
reasonably  practicable  after the date  hereof  (i) take all  steps  reasonably
necessary  to call,  give notice of,  convene and hold a special  meeting of its
shareholders  (the "PSCo Special  Meeting") for the purpose of securing the PSCo
Shareholders'  Approvals,  (ii) distribute to its  shareholders  the Joint Proxy
Statement in accordance with  applicable  federal and state law and its articles
of incorporation and bylaws, (iii) recommend to its shareholders the approval of
the PSCo Merger, this Agreement,  the PSCo Merger Agreement and the transactions
contemplated hereby and thereby (provided that nothing contained in this Section
7.4 shall  require the Board of  Directors of PSCo to take any action or refrain
from  taking any action  that such Board  determines  in good faith and with the
advice of counsel as set forth in a written,  reasoned opinion would result in a
breach of its fiduciary  duties under  applicable  law),  and (iv) cooperate and
consult with SPS with respect to each of the foregoing matters.

                  (c) Meeting Date. The PSCo Special Meeting and the SPS Special
Meeting shall be held on the same day unless otherwise agreed by PSCo and SPS.

                  (d) Fairness  Opinions Not Withdrawn.  It shall be a condition
to the  obligation of PSCo to hold the PSCo Special  Meeting that the opinion of
Barr Devlin & Co. Incorporated referred to in Section 7.2(d) shall not have been
withdrawn,  and it shall be a condition to the obligation of SPS to hold the SPS
Special  Meeting  that the  opinion of Dillon,  Read & Co.  Inc.  referred to in
Section 7.2(d) shall not have been withdrawn.

                  Section 7.5  Directors' and Officers' Indemnification.

                  (a) Indemnification. To the extent, if any, not provided by an
existing right of indemnification  or other agreement or policy,  from and after
the Effective  Time, the Company shall,  to the fullest extent not prohibited by
applicable law, indemnify, defend and

                                      -44-











hold  harmless  the  present  and  former  directors,  officers  and  management
employees  of the  parties  hereto and their  respective  subsidiaries  (each an
"Indemnified Party" and,  collectively,  the "Indemnified  Parties") against (i)
all  losses,  expenses  (including  reasonable  attorneys'  fees and  expenses),
claims, damages, costs, liabilities, judgments or (subject to the proviso of the
next  succeeding  sentence)  amounts  that  are  paid  in  settlement  of  or in
connection with any claim,  action,  suit,  proceeding or investigation based in
whole or in part on or  arising  in whole or in part out of the fact  that  such
person is or was a director, officer or management employee of such party or any
subsidiary thereof, whether pertaining to any matter existing or occurring at or
prior to or after the Effective  Time and whether  asserted or claimed prior to,
at or after the  Effective  Time and (ii) all  liabilities  based in whole or in
part on, or arising in whole or in part out of, or pertaining to this Agreement,
the Merger Agreements or the transactions contemplated hereby or thereby. In the
event of any such loss, expense,  claim,  damage, cost,  liability,  judgment or
settlement  (whether or not arising before the Effective  Time), (x) the Company
shall  pay  the  reasonable  fees  and  expenses  of  counsel  selected  by  the
Indemnified  Parties,  which  counsel shall be  reasonably  satisfactory  to the
Company,  promptly after statements therefor are received, and otherwise advance
to the Indemnified  Parties upon request  reimbursement  of documented  expenses
reasonably incurred,  in either case to the extent not prohibited by the laws of
the State of Delaware,  as  applicable,  (y) the Company shall  cooperate in the
defense of any such  matter and (z) any  determination  required to be made with
respect to whether an Indemnified  Party's  conduct  complies with the standards
under  applicable  law  or  as  set  forth  in  the  Company's   certificate  of
incorporation or bylaws shall be made by independent counsel mutually acceptable
to the Company and the Indemnified Party;  provided,  however,  that the Company
shall not be liable for any  settlement  effected  without its  written  consent
(which consent shall not be unreasonably  withheld or delayed).  The Indemnified
Parties as a group may retain only one law firm (other than local  counsel) with
respect  to each  related  matter  except  to the  extent  there is, in the sole
opinion  of counsel to an  Indemnified  Party,  under  applicable  standards  of
professional  conduct,  a conflict on any significant issue between positions of
any two or more Indemnified Parties, in which case each Indemnified Party with a
conflicting  position  on a  significant  issue  shall be  entitled  to separate
counsel.  In the event any Indemnified  Party is required to bring any action to
enforce  rights or to collect  moneys due under this Agreement and is successful
in such action,  the Company shall reimburse such  Indemnified  Party for all of
its expenses in bringing and pursuing such action.  Each Indemnified Party shall
be entitled to the  advancement of expenses to the full extent  contemplated  in
this Section 7.5(a) in connection with any such action.

                  (b)  Insurance.  For a  period  of six  (6)  years  after  the
Effective  Time, the Company shall cause to be maintained in effect the policies
of directors'  and  officers'  liability  insurance  maintained by PSCo and SPS;
provided that the Company may substitute  therefor policies of at least the same
coverage  containing terms that are no less advantageous with respect to matters
occurring  at or  prior  to the  Effective  Time to the  extent  such  liability
insurance can be  maintained  annually at a cost to the Company not greater than
200 percent of the current annual premiums for the policies currently maintained
by PSCo and SPS for their directors' and officers' liability insurance; provided
further,  that if such  insurance  cannot be so  maintained  or obtained at such
cost, the Company shall maintain or obtain as

                                      -45-











much of such  insurance  for  each of PSCo  and SPS as can be so  maintained  or
obtained  at a cost  equal  to 200  percent  of the  respective  current  annual
premiums of each of PSCo and SPS for their  directors'  and officers'  liability
insurance and other indemnity agreements.

                  (c)  Successors.  In  the  event  the  Company  or  any of its
successors or assigns (i) consolidates  with or merges into any other person and
shall  not  be the  continuing  or  surviving  corporation  or  entity  of  such
consolidation  or  merger  or (ii)  transfers  all or  substantially  all of its
properties  and  assets to any  person,  then and in either  such  case,  proper
provision  shall be made so that the successors and assigns of the Company shall
assume the obligations set forth in this Section 7.5.

                  (d)  Survival of  Indemnification.  To the fullest  extent not
prohibited  by  law,  from  and  after  the  Effective   Time,   all  rights  to
indemnification  now existing in favor of the  employees,  agents,  directors or
officers of PSCo, SPS and their  respective  subsidiaries  with respect to their
activities  as such prior to or at the  Effective  Time,  as  provided  in their
respective articles of incorporation or bylaws or indemnification  agreements in
effect on the date of such activities or otherwise in effect on the date hereof,
shall  survive  the  Mergers  and shall  continue in full force and effect for a
period of not less than six years from the Effective Time.

                  Section  7.6  Disclosure  Schedules.  On or before the date of
this  Agreement,  (i) SPS has delivered to PSCo a schedule (the "SPS  Disclosure
Schedule") accompanied by a certificate signed by the chief financial officer of
SPS stating that the  Disclosure  Schedule is being  delivered  pursuant to this
Section  7.6(i)  and (ii)  PSCo  has  delivered  to SPS a  schedule  (the  "PSCo
Disclosure Schedule") accompanied by a certificate signed by the chief financial
officer of PSCo stating  that the PSCo  Disclosure  Schedule is being  delivered
pursuant to this  Section  7.6(ii).  The SPS  Disclosure  Schedule  and the PSCo
Disclosure  Schedule  are  collectively  referred  to herein as the  "Disclosure
Schedules".  The  Disclosure  Schedules  constitute  an  integral  part  of this
Agreement and modify the respective  representations,  warranties,  covenants or
agreements  of the  parties  hereto  contained  herein to the  extent  that such
representations,  warranties,  covenants or  agreements  expressly  refer to the
Disclosure  Schedules.  Any and all statements,  representations,  warranties or
disclosures  set forth in the Disclosure  Schedules shall be deemed to have been
made on and as of the date of this Agreement.

                  Section 7.7 Public Announcements. PSCo and SPS shall cooperate
with each other in the  development  and  distribution  of all news releases and
other public information disclosures with respect to this Agreement,  the Merger
Agreements  or any of the  transactions  contemplated  hereby  or  thereby  and,
subject to each party's disclosure  obligations imposed by law or any applicable
national  securities  exchange,  shall  not  issue any  public  announcement  or
statement prior to consultation with the other party.

                  Section  7.8 Rule 145  Affiliates.  SPS  shall  identify  in a
letter to PSCo, and PSCo shall identify in a letter to SPS, all persons who are,
at the Closing Date, "affiliates" of SPS and PSCo, respectively, as such term is
used in Rule 145 under the Securities Act.

                                      -46-











SPS and PSCo shall use their  respective best efforts to cause their  respective
affiliates  to deliver to the Company on or prior to the Closing  Date a written
agreement  substantially  in the form attached as Exhibit C (each, an "Affiliate
Agreement").

                  Section 7.9  Employee Agreements and Workforce Matters.

                  (a) Certain Employee  Agreements.  Subject to Section 7.10 and
Section  7.15,   the  Company  and  its   subsidiaries   shall  honor,   without
modification,  all contracts,  agreements,  collective bargaining agreements and
commitments  of the  parties  that apply to any current or former  employees  or
current or former directors of the parties hereto; provided,  however, that this
undertaking  is  not  intended  to  prevent  the  Company  from  enforcing  such
contracts,  agreements,  collective  bargaining  agreements  and  commitments in
accordance  with  their  terms or from  exercising  any right to amend,  modify,
suspend, revoke or terminate any such contract, agreement, collective bargaining
agreement or commitment.

                  (b)  Workforce  Matters.   Subject  to  applicable  collective
bargaining  agreements,  for a period of two (2) years  following  the Effective
Time,  any  reductions in workforce in respect of employees of the Company shall
be made on a fair and equitable  basis,  in light of the  circumstances  and the
objectives to be achieved without regard to whether  employment was with PSCo or
its subsidiaries or SPS or its subsidiaries,  and any employees whose employment
is terminated or jobs are  eliminated by the Company or any of its  subsidiaries
during such period  shall be entitled  to  participate  on a fair and  equitable
basis in the job opportunity and employment  placement  programs  offered by the
Company  or  any of its  subsidiaries.  Any  workforce  reductions  carried  out
following the Effective Time by the Company and its  subsidiaries  shall be done
in accordance with all applicable collective bargaining agreements, and all laws
and regulations governing the employment relationship thereof including, without
limitation,   the  Worker   Adjustment  and  Retraining   Notification  Act  and
regulations  promulgated  thereunder,  and any  comparable  state or local  law.
However,  no  provision  contained  in this  Section  7.9  shall  be  deemed  to
constitute an employment  contract between the Company and any individual,  or a
waiver of the  Company's  right to discharge  any employee at any time,  with or
without cause.

                  Section 7.10 Employee Benefit Plans.

                  Each of the SPS Benefit  Plans and PSCo  Benefit  Plans (other
than plans  specifically  provided for in Section  7.11),  in effect on the date
hereof (or as amended in  accordance  with or as  permitted  by this  Agreement)
shall be maintained in effect with respect to the employees or former  employees
of SPS and any of its  subsidiaries  and of  PSCo  and any of its  subsidiaries,
respectively,  who are  covered by such plans  immediately  prior to the Closing
Date until the Company  determines  otherwise  on or after the  Effective  Time;
provided,  however, that nothing herein contained,  other than the provisions of
Section 6.9,  shall limit any reserved  right  contained in any such SPS Benefit
Plan or PSCo Benefit Plan to amend,  modify,  suspend,  revoke or terminate  any
such plan.  Without limiting the foregoing,  each participant in any SPS Benefit
Plan or PSCo Benefit Plan shall receive credit for

                                      -47-











purposes of  eligibility  to  participate,  vesting and  eligibility  to receive
benefits  under any benefit  plan of the Company or any of its  subsidiaries  or
affiliates  for service  credited for the  corresponding  purpose under any such
benefit  plan;  provided,  however,  that such  crediting  of service  shall not
operate to duplicate any benefit to any such  participant or the funding for any
such  benefit.  However,  no  provision  contained in this Section 7.10 shall be
deemed  to  constitute  an  employment  contract  between  the  Company  and any
individual,  or a waiver of the Company's right to discharge any employee at any
time, with or without cause.

                  Section 7.11 Incentive, Stock and Other Plans. With respect to
each  of (i) the  PSCo  Employee  Savings  and  Stock  Ownership  Plan,  Omnibus
Incentive Plan,  Annual Incentive Plan and Long Term Incentive Plan and (ii) the
SPS 1989  Stock  Incentive  Plan,  the SPS  Employee  Investment  Plan,  the SPS
Non-Qualified Salary Deferral Plan and the SPS Directors' Deferred  Compensation
Plan and each other employee  benefit plan,  program or arrangement  under which
the delivery of SPS Common Stock,  PSCo Common Stock or Company Common Stock, as
the case may be, is required to be used for purposes of the payment of benefits,
grant of awards or exercise of options (each a "Stock  Plan"),  (i) PSCo and SPS
shall take such action as may be necessary so that,  after the  Effective  Time,
such Stock Plan shall provide for the issuance only of Company  Common Stock and
(ii) the Company shall (x) take all corporate action necessary or appropriate to
obtain  shareholder  approval with respect to such Stock Plan to the extent such
approval is required  for purposes of the Code or other  applicable  law, or, to
the extent the Company deems it  desirable,  to enable such Stock Plan to comply
with Rule 16b-3  promulgated  under the  Exchange  Act, (y) reserve for issuance
under such  Stock Plan or  otherwise  provide a  sufficient  number of shares of
Company Common Stock for delivery upon payment of benefits,  grants of awards or
exercise of options under such Stock Plan and (z) as soon as  practicable  after
the  Effective  Time,  file  one  or  more  registration  statements  under  the
Securities  Act with respect to the shares of Company  Common  Stock  subject to
such Stock Plan to the extent such filing is required  under  applicable law and
use its  best  efforts  to  maintain  the  effectiveness  of  such  registration
statement(s)  (and the current status of the prospectuses  contained  therein or
related  thereto) so long as such  benefits,  grants or awards remain payable or
such  options  remain  outstanding,  as the case may be.  With  respect to those
individuals  who  subsequent  to the  Mergers  will be subject to the  reporting
requirements  under  section  16(a)  of the  Exchange  Act,  the  Company  shall
administer  the Stock Plans,  where  applicable,  in a manner that complies with
Rule  16b-3  under  the  Exchange  Act.  Each of PSCo and SPS shall  obtain  any
shareholder   approvals   that  may  be  necessary  for  the  deduction  of  any
compensation payable under any Stock Plan or other compensation arrangement.

                  Section 7.12 No Solicitations. No party hereto shall, and each
such  party  shall   cause  its   subsidiaries   not  to,   permit  any  of  its
Representatives to, and shall use its best efforts to cause such persons not to,
directly or indirectly,  initiate,  solicit or encourage,  or take any action to
facilitate the making of any offer or proposal that constitutes or is reasonably
likely to lead to any Takeover Proposal (as defined below),  or, in the event of
any  unsolicited  Takeover  Proposal,  engage in  negotiations  or  provide  any
confidential  information  or  data  to any  person  relating  to  any  Takeover
Proposal.  SPS and PSCo shall notify the other orally and in writing of any such
inquiries, offers or proposals (including, without limitation, the

                                      -48-











terms and  conditions of any such proposal and the identity of the person making
it) within 24 hours of the  receipt  thereof and shall give the other five days'
advance notice of any agreement to be entered into with or any information to be
supplied to any person making such inquiry, offer or proposal. Each party hereto
shall immediately cease and cause to be terminated all existing  discussions and
negotiations,  if any, with any other persons conducted  heretofore with respect
to any Takeover Proposal.  Notwithstanding  anything in this Section 7.12 to the
contrary,  in the event of an  unsolicited  Takeover  Proposal,  unless the PSCo
Shareholders'  Approvals  and the SPS  Shareholders'  Approvals  have  all  been
obtained,  PSCo or SPS may,  to the extent that the Board of  Directors  of such
party is advised  in a written,  reasoned  opinion  of  outside  counsel  that a
failure  to do so  would  result  in a  breach  of its  fiduciary  duties  under
applicable  law,  participate  in  discussions  or  negotiations  with,  furnish
information to, and afford access to the  properties,  books and records of such
party and its subsidiaries to any person in connection with a possible  Takeover
Proposal  with  respect to such party by such  person.  As used in this  Section
7.12, "Takeover Proposal" shall mean any tender or exchange offer,  proposal for
a merger, consolidation or other business combination involving any party or any
of its material subsidiaries,  or any proposal or offer to acquire in any manner
a substantial equity interest in, or a substantial portion of the assets of, any
party  or  any  of  its  material  subsidiaries,  other  than  pursuant  to  the
transactions contemplated by this Agreement and the Merger Agreements.

                  Section 7.13 Company Board of Directors.

                  (a) PSCo's and SPS's respective  Boards of Directors will take
such action as may be necessary to cause the number of directors  comprising the
full Board of Directors of the Company at the  Effective  Time to be 14 persons,
eight of whom shall be designated by PSCo prior to the Effective Time and six of
whom  shall be  designated  by SPS  prior to the  Effective  Time.  The  initial
designation of such directors  among the three classes of the Board of Directors
of the Company  shall be agreed to by PSCo and SPS, the PSCo  Designees  and the
SPS  Designees  (each as defined  in  Section  10.7) to be divided as equally as
possible among such classes; provided,  however, that if, prior to the Effective
Time and until the date that is four and one-half years from the Effective Time,
any of the PSCo Designees or SPS Designees  shall decline or be unable to serve,
the party which  designated  such person or the remaining  PSCo Designees or SPS
Designees,  respectively,  shall  designate  or nominate for any election by the
stockholders  another  person to serve in that  person's  place and the  Company
shall use its best efforts to the fullest  extent  permitted by law to cause the
election  of  such  nominated  person  as a  director  of  the  Company  by  the
stockholders.  The Board of Directors of the Company will have at least four (4)
committees consisting of an audit committee, a compensation committee, a finance
committee,  a  nominating  and civic  responsibility  committee  and such  other
committees as the Board of Directors of the Company may determine is appropriate
under the  circumstances.  Two of the above-named  committees will be chaired by
directors  nominated  by PSCo  and  two of the  above-named  committees  will be
chaired  by  directors  nominated  by SPS.  In  addition  to the  chairman,  the
membership of each committee shall consist of four members, two of whom shall be
directors nominated by PSCo and two of whom shall be nominated by SPS.


                                      -49-











                  (b) During the period from the  Effective  Time until four and
one-half years after the Effective Time, (i) the provisions of Section  7.13(a),
Section  7.13(b)(i),  Section 7.15 and Section 7.16 shall not be modified unless
and until the terms of such  modification  are  approved  by, and no  committees
other than the four committees listed in Section 7.13(a) shall be created except
by, the affirmative  vote of two-thirds  (662/3%) of the members of the Board of
Directors of the Company  (i.e.,  10 of the 14 members of the Board of Directors
of the Company), (ii) and the provisions of Section 7.13(b)(ii) and Section 7.14
shall not be  modified  unless  and until  the  terms of such  modification  are
approved by at least 10 of the members of the Board of Directors of the Company.

                  Section 7.14 Company Directors and Officers.  At the Effective
Time,  pursuant to the terms hereof and of the employment  contracts referred to
in Section 7.15: (a) Mr. Helton shall hold the position of Chairman of the Board
of Directors and Chief  Executive  Officer of the Company until the later of (i)
June 30, 1999 or (ii) 30 months from the Effective Time (the "Initial  Period"),
and shall continue to hold the position of Chairman of the Board of Directors of
the Company until May 31, 2001,  and (b) Mr.  Brunetti shall serve as President,
Chief  Operating  Officer  and Vice  Chairman of the Board of  Directors  of the
Company until the end of the Initial Period,  at which time he shall be entitled
to hold the position of Chief  Executive  Officer of the  Company.  In addition,
beginning  June 1, 2001,  Mr.  Brunetti  shall serve as Chairman of the Board of
Directors of the Company  until his  successor is elected or appointed and shall
have qualified in accordance with the General  Corporation Law of Delaware,  the
Certificate of Incorporation  and the By-Laws of the Company.  If either of such
persons is unable or  unwilling  to hold such  offices for the periods set forth
above,  his  successor  shall be selected by the  affirmative  vote of 10 of the
members of the Board of Directors of the Company.

                  Section 7.15 Employment Contracts. The Company shall, as of or
prior to the Effective Time, enter into employment contracts with Mr. Helton and
Mr. Brunetti in the forms set forth in Exhibit D and Exhibit E, respectively.

                  Section 7.16 Corporate Offices.  Following the Effective Time,
the  Company  shall  maintain  its  corporate  offices in Denver,  Colorado  and
significant operating offices in Amarillo, Texas.

                  Section 7.17 Expenses. Subject to Section 7.1 and Section 9.3,
all costs and expenses incurred in connection with this Agreement and the Merger
Agreements and the transactions contemplated hereby and thereby shall be paid by
the party  incurring  such  expenses,  except  that those  expenses  incurred in
connection with printing the Joint Proxy/Registration  Statement, as well as the
filing fee relating  thereto,  shall be shared equally by PSCo, on the one hand,
and SPS, on the other hand.

                  Section 7.18 Further Assurances.

                  (a)  Each  of  SPS  and  PSCo  shall,   and  shall  cause  its
subsidiaries  to, execute such further  documents and  instruments and take such
further actions as may reasonably be

                                      -50-











requested by the other in order to consummate the Mergers and other transactions
contemplated  by this Agreement and the Merger  Agreements,  and to use its best
efforts to take or cause to be taken all actions,  and to do or cause to be done
all things, necessary, proper or advisable under applicable laws and regulations
to  consummate  and  make  effective  the  Mergers  and the  other  transactions
contemplated  hereby  (subject  to the votes of its  shareholders  described  in
Sections 4.13 and 5.13,  respectively),  including  fully  cooperating  with the
other in  obtaining  the SPS Required  Statutory  Approvals,  the PSCo  Required
Statutory   Approvals  and  all  other  approvals  and   authorizations  of  any
Governmental  Authorities  necessary or advisable to consummate the transactions
contemplated hereby.

                  (b) SPS and PSCo  shall be  responsible  for the taking of any
action necessary or advisable to obtain the SPS Required Statutory Approvals and
to obtain the PSCo  Required  Statutory  Approvals,  respectively.  SPS and PSCo
agree to cooperate in obtaining the necessary  approvals  from the NRC, the FERC
and the SEC under the 1935 Act, the Securities Act and the Exchange Act and from
the applicable state  authorities under state "blue sky" or securities laws. SPS
and PSCo shall each  provide the other with copies of any filings  made with any
Governmental Authorities in connection with the foregoing.

                  (c) It may be preferable to effectuate a business  combination
between  PSCo  and SPS by  means  of an  alternative  structure  in light of the
conditions set forth in Sections 8.1(e), 8.2(f) and 8.3(f).  Accordingly, if the
only  conditions to the parties'  obligations to consummate the Mergers that are
not  satisfied  or waived are  receipt  of any one or more of the PSCo  Required
Consents,  PSCo  Statutory  Approvals,  SPS Required  Consents and SPS Statutory
Approvals,  and  the  adoption  of  an  alternative  structure  (that  otherwise
substantially  preserves for PSCo and SPS the economic  benefits of the Mergers)
would result in such  conditions  being  satisfied  or waived,  then the parties
shall use their respective best efforts to effect a business  combination  among
themselves by means of a mutually  agreed upon structure  other than the Mergers
that so  preserves  such  benefits;  provided  that  prior to  closing  any such
restructured  transaction,  all material third party and Governmental  Authority
declarations,  filings,  registrations,  notices,  authorizations,  consents  or
approvals   necessary  for  the  effectuation  of  such   alternative   business
combination  shall have been  obtained and all other  conditions to the parties'
obligations to consummate the Mergers,  as applied to such alternative  business
combination, shall have been satisfied or waived.

                  Section  7.19  Registration  Rights.  Upon  the  receipt  of a
written  notice  within a period of three years  after the Closing  Date from an
affiliate or affiliates of the Company requesting the Company to register, under
the  Securities  Act,  Company  Common Stock  received by such  affiliate in the
Mergers, the Company shall use its reasonable best efforts to cause the offering
of all shares designated in such a request (the "Shares") to be registered,  one
time at the  Company's  expense  and all  other  times  at the  expense  of such
affiliate,  under the Securities  Act and any state  securities or Blue-Sky laws
necessary  to effect a resale of such  Shares;  provided  that (i) no fewer than
20,000 Shares are to be registered pursuant to such a request;  (ii) such shares
are not  immediately  saleable  in the open market at the time in the opinion of
counsel for the holder pursuant to an exemption under the Securities Act without
limitation as to the number of shares which may be sold, the price at which the

                                      -51-











shares may be sold or the ability of the purchaser of such shares to immediately
resell  them in the open  market;  and  (iii)  the  Board of  Directors  has not
determined,  in its reasonable good faith judgment,  that such  registration and
sale would  materially  interfere  with any  financing,  acquisition,  corporate
reorganization  or other material  transaction  involving the Company then under
consideration.

                  Section  7.20  Charter  and  By-Law  Amendments.  Prior to the
Closing:  (a) PSCo and SPS shall  agree upon  amendments  to be  effected to the
Certificate of Incorporation of the Company, including to change the name of the
Company  to  a  name  agreed  upon  by  PSCo  and  SPS  (the  "Company   Charter
Amendments"), and the by-laws of the Company, and (b) the Company shall take all
actions necessary so that the Company Charter  Amendments and such amendments to
the Company by-laws become effective no later than the Effective Time.


                                  ARTICLE VIII

                                   CONDITIONS

                  Section 8.1  Conditions  to Each Party's  Obligation to Effect
the Merger to Which it is Party.  The  respective  obligations  of each party to
effect the Merger to which it is party shall be subject to the  satisfaction  on
or prior to the Closing Date of the following conditions,  except, to the extent
permitted  by  applicable  law,  that such  conditions  may be waived in writing
pursuant to Section 9.5:

                  (a) Shareholder Approvals. The SPS Shareholders' Approvals and
the PSCo Shareholders' Approval shall have been obtained.

                  (b)  No  Injunction.   No  temporary   restraining   order  or
preliminary or permanent injunction or other order by any federal or state court
preventing  consummation of either or both of the Mergers shall have been issued
and  continuing  in  effect,   and  the  Mergers  and  the  other   transactions
contemplated  hereby shall not have been prohibited under any applicable federal
or state law or regulation.

                  (c) Registration  Statement.  The Registration Statement shall
have become  effective in accordance  with the provisions of the Securities Act,
and no stop order  suspending  such  effectiveness  shall  have been  issued and
remain in effect.

                  (d)  Listing of Shares.  The  shares of Company  Common  Stock
issuable in the  Mergers  pursuant  to Article II shall have been  approved  for
listing on the NYSE upon official notice of issuance.

                  (e) Pooling. Each of PSCo and SPS shall have received a letter
of its  independent  public  accountants,  dated the Closing  Date,  in form and
substance reasonably

                                      -52-











satisfactory  to SPS and  PSCo,  respectively,  stating  that the  Mergers  will
qualify as a  pooling-of-interests  transaction  under GAAP and  applicable  SEC
regulations.

                  (f)  Statutory   Approvals.   The  PSCo   Required   Statutory
Approvals,  the SPS Required  Statutory  Approvals  and the finding of the Texas
Commission that the transactions contemplated by the Agreement are in the public
interest  shall  have been  obtained  at or prior to the  Effective  Time,  such
approvals shall have become Final Orders (as hereinafter defined),  and no Final
Order shall impose terms or  conditions  that would have, or would be reasonably
likely  to  have,  a  material  adverse  effect  on  the  business,  operations,
properties, assets, condition (financial or otherwise),  prospects or results of
operations of PSCo or a material  adverse  effect on the  business,  operations,
properties, assets, condition (financial or otherwise),  prospects or results of
operations  of SPS. A "Final  Order"  means  action by the  relevant  regulatory
authority that has not been reversed,  stayed,  enjoined, set aside, annulled or
suspended, with respect to which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has expired, and as to which
all  conditions  to the  consummation  of such  transactions  prescribed by law,
regulation or order have been satisfied,  and as to which all  opportunities for
rehearing are exhausted (whether or not any appeal thereof is pending).

                  (g) The  number  of  shares  of PSCo  Common  Stock  and  PSCo
Preferred Stock held by Dissenting Holders shall not constitute in the aggregate
more than 5% of the number of issued and outstanding shares of PSCo Common Stock
and PSCo Preferred Stock taken together as a single class for this purpose.  The
number of shares of SPS Common Stock and SPS Preferred  Stock held by Dissenting
Holders  shall not in the  aggregate  constitute  more than 5% of the  number of
issued and outstanding  shares of SPS Common Stock and SPS Preferred Stock taken
together as a single class for this purpose.

                  Section 8.2  Conditions to Obligation of SPS to Effect the SPS
Merger.  The obligation of SPS to effect the SPS Merger shall be further subject
to  the  satisfaction,  on or  prior  to the  Closing  Date,  of  the  following
conditions, except as may be waived by SPS in writing pursuant to Section 9.5:

                  (a)  Performance  of  Obligations  of PSCo.  PSCo  shall  have
performed in all material respects its agreements and covenants  contained in or
contemplated by this Agreement required to be performed by it at or prior to the
Effective Time.

                  (b)  Representations  and Warranties.  The representations and
warranties of PSCo set forth in this Agreement  shall be true and correct in all
material respects as of the date hereof and as of the Closing Date as if made on
and as of the Closing Date, except as otherwise contemplated by this Agreement.

                  (c)   Closing   Certificates.   SPS  shall  have   received  a
certificate signed by the Chief Executive Officer and Chief Financial Officer of
PSCo,  dated the  Closing  Date,  to the effect  that,  to the best of each such
officer's  knowledge,  the  conditions  set forth in Section  8.2(a) and Section
8.2(b) have been satisfied.

                                      -53-












                  (d) PSCo Material  Adverse  Effect.  No PSCo Material  Adverse
Effect shall have  occurred and there shall exist no fact or  circumstance  that
would have,  or would be  reasonably  likely to have,  a PSCo  Material  Adverse
Effect.

                  (e) Tax  Opinion.  SPS  shall  have  received  an  opinion  of
counsel,  in form and  substance  satisfactory  to SPS,  dated the Closing Date,
which opinion may be based on appropriate  representations  of PSCo, SPS and the
Company that are in form and substance reasonably  satisfactory to such counsel,
to the effect that the Mergers, taken together, will be treated as a non-taxable
exchange described in Code section 351.

                  (f)  PSCo  Required  Consents.   The  material  PSCo  Required
Consents shall have been obtained.

                  (g) Affiliate Certificates.  The Company shall have received a
certificate  dated the Closing Date from each person who is an affiliate of PSCo
to the  effect  that:  (i) such  person  has no  present  plan or  intention  to
transfer,  sell or otherwise dispose of any Company Common Stock such person may
receive  as a result of the PSCo  Merger;  (ii)  until  such  time as  financial
results  covering at least thirty days of  post-closing  combined  operations of
SPS, PSCo and the Company have been  published,  such person shall not sell such
Company Common Stock in any transaction,  private or public, or in any other way
reduce such person's risk relative to any Company  Common Stock that such person
receives as a result of the PSCo Merger, except to the extent permitted pursuant
to SAB No. 76; (iii) any future disposition by such person of any Company Common
Stock such person receives as the result of the PSCo Merger will be accomplished
in  accordance  with Rule  145(d)  under the  Securities  Act or as  provided in
Section  7.19;  and (iv) such person  agrees that  appropriate  legends shall be
placed upon the  certificates  evidencing  ownership of the Company Common Stock
that such person receives as a result of the PSCo Merger.

                  Section 8.3  Conditions  to  Obligation  of PSCo to Effect the
PSCo Merger.  The  obligation of PSCo to effect the PSCo Merger shall be further
subject to the  satisfaction,  on or prior to the Closing Date, of the following
conditions, except as may be waived by PSCo in writing pursuant to Section 9.5:

                  (a)   Performance  of  Obligations  of  SPS.  SPS  shall  have
performed in all material respects its agreements and covenants  contained in or
contemplated by this Agreement required to be performed by it at or prior to the
Effective Time.

                  (b)  Representations  and Warranties.  The representations and
warranties of SPS set forth in this  Agreement  shall be true and correct in all
material respects as of the date hereof and as of the Closing Date as if made on
and as of the Closing Date, except as otherwise contemplated by this Agreement.

                  (c)  Closing   Certificates.   PSCo  shall  have   received  a
certificate signed by the Chief Executive Officer and Chief Financial Officer of
SPS, dated the Closing Date, to

                                      -54-











the effect that, to the best of each such  officer's  knowledge,  the conditions
set forth in Section 8.3(a) and Section 8.3(b) have been satisfied.

                  (d) SPS  Material  Adverse  Effect.  No SPS  Material  Adverse
Effect shall have  occurred and there shall exist no fact or  circumstance  that
would  have,  or would be  reasonably  likely to have,  a SPS  Material  Adverse
Effect.

                  (e) Tax  Opinion.  PSCo  shall  have  received  an  opinion of
counsel,  in form and substance  satisfactory  to PSCo,  dated the Closing Date,
which opinion may be based on appropriate  representations  of PSCo, SPS and the
Company that are in form and substance reasonably  satisfactory to such counsel,
to the effect that the Mergers, taken together, will be treated as a non-taxable
exchange described in Code section 351.

                  (f) SPS Required Consents.  The material SPS Required Consents
shall have been obtained.

                  (g) Affiliate Certificates.  The Company shall have received a
certificate  dated the Closing  Date from each person who is an affiliate of SPS
to the  effect  that:  (i) such  person  has no  present  plan or  intention  to
transfer,  sell or otherwise dispose of any Company Common Stock such person may
receive as a result of the SPS Merger; (ii) until such time as financial results
covering at least thirty days of post-closing  combined  operations of SPS, PSCo
and Sub have been  published,  such person  shall not sell such  Company  Common
Stock in any  transaction,  private or public,  or in any other way reduce  such
person's risk relative to any Company Common Stock that such person  receives as
a result of the SPS Merger,  except to the extent permitted  pursuant to SAB No.
76; (iii) any future disposition by such person of any Company Common Stock such
person  receives  as the  result  of the  SPS  Merger  will be  accomplished  in
accordance  with Rule 145(d) under the  Securities Act or as provided in Section
7.19; and (iv) such person agrees that appropriate  legends shall be placed upon
the  certificates  evidencing  ownership  of the Company  Common Stock that such
person receives as a result of the SPS Merger.


                                   ARTICLE IX

                       TERMINATION, AMENDMENT AND WAIVER

                  Section  9.1  Termination.   This  Agreement  and  the  Merger
Agreements  may be  terminated  at any time prior to the Closing  Date,  whether
before or after approval by the  shareholders  of the respective  parties hereto
contemplated by this Agreement:

                  (a) by mutual  written  consent of the Boards of  Directors of
PSCo and SPS;

                  (b) by PSCo or SPS,  by written  notice to the  other,  if the
Effective Time shall not have occurred on or before December 31, 1996; provided,
however,  that such date shall automatically be extended to June 30, 1997 if, on
December 31, 1996: (i) the condition

                                      -55-











set forth in Section  8.1(f) has not been  satisfied  or waived;  (ii) the other
conditions to the consummation of the transactions  contemplated hereby are then
capable of being satisfied;  and (iii) any approvals  required by Section 8.1(f)
that have not yet been  obtained  are being  pursued  with  diligence;  provided
further,  that the right to terminate this  Agreement  under this Section 9.1(b)
shall not be  available  to any party whose  failure to fulfill  any  obligation
under this  Agreement  has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the termination date;

                  (c) by PSCo or SPS, by written  notice to the other party,  if
the PSCo  Shareholders'  Approvals  shall not have been  obtained at a duly held
PSCo  Special  Meeting,   including  any  adjournments   thereof,   or  the  SPS
Shareholders'  Approvals shall not have been obtained at a duly held SPS Special
Meeting, including any adjournments thereof;

                  (d) by PSCo or SPS, if any state or federal law,  order,  rule
or  regulation  is adopted or issued,  that has the effect,  as supported by the
written,  reasoned  opinion of outside  counsel for such party,  of  prohibiting
either or both of the Mergers or causing a PSCo Material  Adverse  Effect or SPS
Material  Adverse  Effect,  or by any party  hereto,  if any court of  competent
jurisdiction  in the  United  States or any State  shall  have  issued an order,
judgment or decree permanently  restraining,  enjoining or otherwise prohibiting
either or both of the Mergers or causing a PSCo Material  Adverse  Effect or SPS
Material  Adverse Effect,  and such order,  judgment or decree shall have become
final and nonappealable;

                  (e) by SPS,  upon two days'  prior  notice  to PSCo,  if, as a
result of a tender offer by a party other than PSCo or any of its  affiliates or
any  written  offer or  proposal  with  respect to a merger,  sale of a material
portion  of  its  assets  or  other  business  combination  (each,  a  "Business
Combination") by a party other than PSCo or any of its affiliates,  the Board of
Directors of SPS determines in good faith that the fiduciary obligations of such
directors  under  applicable law require that such tender offer or other written
offer  or  proposal  be  accepted;  provided,  however,  that  (i) the  Board of
Directors  of SPS shall  have been  advised in a  written,  reasoned  opinion by
outside  counsel  that,  notwithstanding  a binding  commitment to consummate an
agreement of the nature of this Agreement entered into in the proper exercise of
their applicable  fiduciary duties, and notwithstanding all concessions that may
be offered by PSCo in  negotiations  entered into pursuant to clause (ii) below,
such  fiduciary  duties would also  require the  directors  to  reconsider  such
commitment  as a result of such tender offer or such  written  offer or proposal
and (ii)  prior  to any  such  termination,  SPS  shall,  and  shall  cause  its
respective  financial and legal  advisors to,  negotiate  with PSCo to make such
adjustments in the terms and conditions of this Agreement as would enable SPS to
proceed with the transactions  contemplated herein;  provided further, that PSCo
and SPS  acknowledge and affirm that,  notwithstanding  anything in this Section
9.1(e) to the  contrary,  PSCo and SPS intend this  Agreement to be an exclusive
agreement and, accordingly,  nothing in this Agreement is intended to constitute
a  solicitation  of an offer or proposal  for a Business  Combination,  it being
acknowledged and agreed that any such offer or proposal would interfere with the
strategic  advantages  and benefits  that PSCo and SPS expect to derive from the
Mergers and other transactions contemplated hereby;


                                      -56-











                  (f) by PSCo,  upon two days'  prior  notice  to SPS,  if, as a
result of a tender offer by a party other than SPS or any of its  affiliates  or
any written offer or proposal with respect to a Business  Combination by a party
other  than  SPS or any of its  affiliates,  the  Board  of  Directors  of  PSCo
determines in good faith that the fiduciary  obligations of such directors under
applicable law require that such tender offer or other written offer or proposal
be accepted;  provided,  however,  that (i) the Board of Directors of PSCo shall
have been  advised in a written,  reasoned  opinion  by  outside  counsel  that,
notwithstanding a binding commitment to consummate an agreement of the nature of
this Agreement entered into in the proper exercise of their applicable fiduciary
duties,  and  notwithstanding  all  concessions  that may be  offered  by SPS in
negotiations  entered into pursuant to clause (ii) below,  such fiduciary duties
would also require the  directors to reconsider  such  commitment as a result of
such tender offer or such  written  offer or proposal and (ii) prior to any such
termination,  PSCo shall,  and shall cause its  respective  financial  and legal
advisors  to,  negotiate  with SPS to make  such  adjustments  in the  terms and
conditions  of  this  Agreement  as  would  enable  PSCo  to  proceed  with  the
transactions   contemplated  herein;   provided  further,   that  PSCo  and  SPS
acknowledge and affirm that,  notwithstanding anything in this Section 9.1(f) to
the contrary,  PSCo and SPS intend this  Agreement to be an exclusive  agreement
and,  accordingly,  nothing  in this  Agreement  is  intended  to  constitute  a
solicitation  of an offer  or  proposal  for a  Business  Combination,  it being
acknowledged and agreed that any such offer or proposal would interfere with the
strategic  advantages  and benefits  that PSCo and SPS expect to derive from the
Mergers and other transactions contemplated hereby;

                  (g) by SPS,  by  written  notice to PSCo,  if (i) there  exist
breaches of the  representations  and  warranties  of PSCo made herein as of the
date hereof which breaches,  individually or in the aggregate, would or would be
reasonably likely to result in a PSCo Material Adverse Effect, and such breaches
shall not have been  remedied  within  twenty (20) days after receipt by PSCo of
notice  in  writing  from  SPS,  specifying  the  nature  of such  breaches  and
requesting   that  they  be  remedied,   (ii)  PSCo   (and/or  its   appropriate
subsidiaries)  shall not have  performed  and complied with its  agreements  and
covenants  contained  in Section  6.2  (Dividends),  Section  6.3  (Issuance  of
Securities) and Section 6.7  (Indebtedness)  or shall have failed to perform and
comply with,  in all  material  respects,  its other  agreements  and  covenants
hereunder  and such  failure  to  perform  or  comply  with  shall not have been
remedied  within  twenty (20) days after  receipt by PSCo of a notice in writing
from SPS,  specifying  the  nature of such  failure  and  requesting  that it be
remedied;  or (iii) the Board of Directors of PSCo or any committee  thereof (A)
shall  withdraw  or  modify  in any  manner  adverse  to  SPS  its  approval  or
recommendation of this Agreement or the PSCo Merger,  (B) shall fail to reaffirm
such  approval  or  recommendation  upon  SPS's  request,  (C) shall  approve or
recommend any acquisition of PSCo or a material  portion of PSCo's assets or any
tender offer for shares of capital stock of PSCo, in each case, by a party other
than  SPS or any of its  affiliates  or (D)  shall  resolve  to take  any of the
actions specified in clause (A), (B) or (C).

                  (h) by PSCo,  by  written  notice to SPS,  if (i) there  exist
breaches of the representations and warranties of SPS made herein as of the date
hereof  which  breaches,  individually  or in the  aggregate,  would or would be
reasonably likely to result in a SPS

                                      -57-











Material  Adverse Effect,  and such breaches shall not have been remedied within
twenty  (20)  days  after  receipt  by PSCo of  notice  in  writing  from  PSCo,
specifying  the nature of such  breaches and  requesting  that they be remedied,
(ii) PSCo (and/or its  appropriate  subsidiaries)  shall not have  performed and
complied with its agreements and covenants contained in Section 6.2 (Dividends),
Section 6.3 (Issuance of  Securities)  and Section 6.7  (Indebtedness)  or shall
have failed to perform and comply  with,  in all  material  respects,  its other
agreements  and  covenants  hereunder and such failure to perform or comply with
shall not have been  remedied  within twenty (20) days after receipt by SPS of a
notice  in  writing  from  PSCo,  specifying  the  nature  of such  failure  and
requesting  that it be  remedied;  or (iii) the Board of Directors of SPS or any
committee thereof (A) shall withdraw or modify in any manner adverse to PSCo its
approval or recommendation  of this Agreement or the SPS Merger,  (B) shall fail
to reaffirm  such  approval or  recommendation  upon PSCo's  request,  (C) shall
approve or  recommend  any  acquisition  of SPS or a  material  portion of SPS's
assets or any tender offer for shares of capital  stock of SPS, in each case, by
a party other than PSCo or any of its  affiliates  or (D) shall  resolve to take
any of the actions specified in clause (A), (B) or (C).


                  Section 9.2 Effect of Termination. In the event of termination
of this  Agreement by either PSCo or SPS pursuant to Section 9.1, there shall be
no liability on the part of either PSCo or SPS or their  respective  officers or
directors hereunder,  except that Section 7.17 and Section 9.3 and the agreement
contained  in the second to the last  sentence of Section 7.1 shall  survive any
such termination.

                  Section 9.3  Termination Fee; Expenses.

                  (a) Expenses  Payable upon Breach.  If this  Agreement and the
Merger  Agreements  are  terminated  pursuant  to one (but not both) of  Section
9.1(g)(i),  (ii) or (iii) or  Section  9.1(h)(i),  (ii) or  (iii),  then (i) the
breaching  party or the  withdrawing  or  modifying  party (the  "Nonterminating
Party")  shall  promptly (but not later than five business days after receipt of
notice of the amount due from the other party) pay to the  terminating  party an
amount equal to all documented  out-of-pocket expenses and fees incurred by such
terminating party (including,  without limitation,  fees and expenses payable to
all  legal,  accounting,  financial,  public  relations  and other  professional
advisors  arising  out of, in  connection  with or related to the Mergers or the
transactions  contemplated  by this  Agreement) not to exceed $10 million in the
aggregate  ("Out-of-Pocket  Expenses") in the form  provided in Section  9.3(e);
provided,  however, that, if this Agreement is terminated by a party as a result
of a  willful  breach or  failure  to  perform  or comply  with  agreements  and
covenants by the Nonterminating  Party (including without limitation the actions
set forth in Section  9.1(g)(iii) and  9.1(h)(iii)),  the  Nonterminating  Party
shall promptly (but not later than five business days after receipt of notice of
the amount due from the other party) pay to such terminating party an additional
$35 million in the form provided in Section 9.3(e).

                  (b) Expenses  Payable upon  Acceptance of a Proposal.  If this
Agreement and the Merger  Agreements are  terminated  pursuant to one of Section
9.1(e) or Section

                                      -58-











9.1(f)  but not the other on the  basis of a good  faith  determination  made as
provided in such Section 9.1(e) or Section 9.1(f) that the fiduciary obligations
of  the  directors  of  the  terminating  party  under  applicable  law  require
acceptance  of a tender offer or other written offer or proposal with respect to
a Business  Combination and such  terminating  party (or an affiliate  thererof)
enters  into an  agreement  (whether  or not such  agreement  is  embodied  in a
definitive  manner) to  consummate a Business  Combination  with the third party
that made such  proposal or with a subsidiary  or affiliate  thereof  within one
year of such  termination,  then the  terminating  party shall promptly (but not
later than five business days after receipt of notice of the amount due from the
other party),  but prior to entering into such  agreement  with the third party,
pay to the  other  party an  amount  equal to  Out-of-Pocket  Expenses  plus $35
million in the form provided in Section 9.3(e).

                  (c)  Termination  Fee In Certain  Other  Events.  If: (i) this
Agreement  and the Merger  Agreements  are  terminated  (x)  pursuant to Section
9.1(g)(i),  (ii) or (iii),  Section 9.1(h)(i),  (ii) or (iii), Section 9.1(b) or
Section 9.1(d),  (y) following a failure of the share- holders of SPS or PSCo to
grant the necessary approvals described in Section 4.13 and Section 5.13, as the
case may be (a  "Shareholder  Disapproval"),  or (z) as a result  of a  material
breach of Section 7.4; (ii) at the time of such  termination (or, in the case of
any termination  following a Shareholder  Disapproval,  prior to the shareholder
meeting at which such Shareholder Disapproval occurred), there shall have been a
third-party  tender offer for shares of, or a third-party offer or proposal with
respect to a Business  Combination  involving,  SPS or PSCo (as the case may be,
the  "Target  Party")  or the  affiliates  thereof  which,  at the  time of such
termination (or of the meeting of the Target Party's  shareholders,  as the case
may be) shall not have been (A)  rejected  by the Target  Party and its Board of
Directors  and (B)  withdrawn by the third party,  then  promptly (but not later
than five business days after receipt of notice of the amount due from the other
party) after the  termination of this Agreement (1) if PSCo is the Target Party,
PSCo shall pay to SPS a termination fee equal to $35 million plus  Out-of-Pocket
Expenses  in the form  provided  in Section  9.3(e) and (2) if SPS is the Target
Party,  SPS  shall  pay to PSCo a  termination  fee  equal to $35  million  plus
Out-of-Pocket  Expenses  in the  form  provided  in  Section  9.3(e);  provided,
however, that no such amounts shall be payable if and to the extent the party to
make such payment shall have paid such amounts pursuant to Section 9.3(a).

                  (d) Additional Termination Fee. If Section 9.3 (a), (b) or (c)
is applicable and if any Business Combination involving the Target Party (or any
affiliate  thereof)  is  accepted  within  one year of the  termination  of this
Agreement and is consummated  within two and one-half years from the date of the
acceptance of such Business Combination by the Target Party (or such affiliate),
if PSCo is the  Target  Party,  PSCo  shall pay to SPS and if SPS is the  Target
Party,  SPS shall pay to PSCo, an additional $25 million in the form provided in
Section 9.3(e).

                  (e) All  payments  made  pursuant to Section  9.3,  other than
payments for  Out-of-Pocket  Expenses  shall be payable in shares of PSCo Common
Stock or SPS Common Stock,  as the case may be, the aggregate  fair market value
(as defined below) of which shall equal the amount due; provided,  however, that
if such stock cannot, in the opinion of the

                                      -59-











payor's  counsel,  be legally and validly issued within six months from the date
of the receipt of notice of the amount due for the payee, such payments shall be
made in cash. If such opinion is issued by the payor's counsel,  the payor shall
use its best  efforts to ensure  that the stock is issued to the  payee.  In the
event,  that  notwithstanding  the fact that an opinion  was  obtained  from the
payor's counsel,  the stock of the payor has not been issued to the payee during
the six month period  provided for above,  all amounts owed  pursuant to Section
9.3 shall  become  immediately  due and  payable in cash.  For the  purposes  of
Section  9.3,  the fair market  value of the PSCo Common Stock or the SPS Common
Stock,  as the case may be, shall be the average closing price during the twenty
trading day period prior to the date of the written notice from the payee.

                  (f) The holder of any stock  issued  pursuant  to Section  9.3
shall have the right, during the three year period from the date of issuance, to
require the issuer to effect the registration of such stock under the Securities
Act and the  issuer  shall  use its  reasonable  best  efforts  to  effect  such
registration;  provided  that (i) only  one  such  registration  shall be at the
issuer's  expense,  (ii) such  shares are not  immediately  saleable in the open
market at the time in the  opinion of  counsel  for the  holder  pursuant  to an
exemption under the Securities Act without limitation as to the number of shares
which may be sold,  the price at which the shares may be sold or the  ability of
the  purchaser  of such shares to  immediately  resell them in the open  market,
(iii) the Board of Directors  has not  determined,  in its good faith  judgment,
that such  registration and sale would materially  interfere with any financing,
acquisition,  corporate  reorganization or other material transaction  involving
the issuer then under consideration, and (iv) the issuer shall have the right to
delay for up to 120 days any request for  registration  hereunder  if the issuer
intends to proceed with a registration to be sold by the issuer. In the event of
a delay in the sales of the  shares  pursuant  to  clause  (iii) or (iv) of this
Section  9.3(f),  the period in which the  holder  shall have a right to require
registration shall be extended by the amount of the delay.

                  (g) Expenses.  The parties agree that the agreements contained
in this Section 9.3 are an integral  part of the  transactions  contemplated  by
this Agreement and the Merger Agreements and constitute  liquidated  damages and
not a  penalty.  If one party  fails to  promptly  pay to the other any fees due
hereunder,  such  defaulting  party shall pay the costs and expenses  (including
legal fees and expenses) in connection with any action,  including the filing of
any lawsuit or other  legal  action,  taken to collect  payment,  together  with
interest on the amount of any unpaid fee at the publicly announced prime rate of
Bank of America  National  Trust and Savings  Association in effect from time to
time from the date such fee was required to be paid.

                  (h) Limitation of Fees. Notwithstanding anything herein to the
contrary,  the aggregate  amount payable by PSCo and its affiliates  pursuant to
Section  9.3(a),  Section  9.3(b),  Section  9.3(c) and Section 9.3(d) shall not
exceed $60 million (excluding  Out-of-Pocket  Expenses) and the aggregate amount
payable by SPS and its affiliates  pursuant to Section  9.3(a),  Section 9.3(b),
Section  9.3(c) and  Section  9.3(d)  shall not exceed  $60  million  (excluding
Out-of-Pocket Expenses).


                                      -60-











                  Section  9.4   Amendment.   This   Agreement  and  the  Merger
Agreements may be amended by the parties hereto or thereto pursuant to action of
the  respective  Boards of Directors of each of PSCo and SPS, at any time before
or after approval  hereof by the  shareholders  of PSCo and SPS and prior to the
Effective Time, but after such  approvals,  no such amendment shall (a) alter or
change  the amount or kind of shares,  rights or any of the  proceedings  of the
exchange  and/or  conversion  under  Article  II, (b) alter or change any of the
terms and  conditions of this  Agreement if any of the  alterations  or changes,
alone or in the aggregate,  would  materially and adversely affect the rights of
holders of PSCo Common Stock or SPS Common Stock or (c) alter or change any term
of the certificate of  incorporation  of the Company,  except for alterations or
changes  that  could  otherwise  be  adopted  by the Board of  Directors  of the
Company,  without the  further  approval of such  shareholders,  as  applicable.
Neither this Agreement nor either of the Merger Agreements may be amended except
by an  instrument in writing  signed on behalf of each of the parties  hereto or
thereto.

                  Section 9.5 Waiver.  At any time prior to the Effective  Time,
the  parties  hereto may (a) extend the time for the  performance  of any of the
obligations  or  other  acts  of  the  other  parties  hereto,   (b)  waive  any
inaccuracies in the  representations  and warranties  contained herein or in any
document  delivered  pursuant  hereto and (c) waive  compliance  with any of the
agreements or conditions  contained herein.  Any agreement to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed by
a duly authorized officer of each party.


                                   ARTICLE X

                               GENERAL PROVISIONS

                  Section  10.1  Non-Survival  of  Representations,  Warranties,
Covenants  and  Agreements.  All  representations,   warranties,  covenants  and
agreements in this Agreement shall not survive the Mergers, except the covenants
and  agreements  contained in this Section 10.1 and in Article II  (Treatment of
Shares), the second to the last sentence of Section 7.1 (Access to Information),
Section 7.5  (Directors' and Officers'  Indemnification),  Section 7.9 (Employee
Agreements  and  Workforce  Matters),  Section 7.10  (Employee  Benefit  Plans),
Section 7.11 (Incentive,  Stock and Other Plans), Section 7.13 (Company Board of
Directors),   Section  7.14  (Company   Officers),   Section  7.15   (Employment
Contracts),  Section  7.16  (Corporate  Offices),  Section 7.17  (Expenses)  and
Section 10.7  (Parties in  Interest),  each of which shall survive in accordance
with its terms.

                  Section 10.2  Brokers.  PSCo  represents  and  warrants  that,
except for Barr Devlin  Associates,  its  investment  banking  firm,  no broker,
finder or investment banker is entitled to any brokerage,  finder's or other fee
or commission in connection with the Mergers or the transactions contemplated by
this  Agreement  based  upon  arrangements  made by or on  behalf  of PSCo.  SPS
represents and warrants that, except for Dillon, Read & Co. Inc., its investment
banking  firm,  no  broker,  finder  or  investment  banker is  entitled  to any
brokerage,

                                      -61-











finder's  or other fee or  commission  in  connection  with the  Mergers  or the
transactions  contemplated by this Agreement based upon  arrangements made by or
on behalf of SPS.

                  Section  10.3  Notices.  All notices and other  communications
hereunder  shall be in  writing  and  shall be  deemed  given  (a) if  delivered
personally,  or (b) if sent by overnight  courier service (receipt  confirmed in
writing),   or  (c)  if  delivered  by  facsimile   transmission  (with  receipt
confirmed),  or (d) five days after being mailed by registered or certified mall
(return  receipt  requested)  to the  parties,  in each  case  to the  following
addresses  (or at such other  address for a party as shall be  specified by like
notice):

                  (i)      If to SPS, to:

                      Southwestern Public Service Company
                           Tyler at Sixth
                           Amarillo, Texas  79101
                           Attention: Bill D. Helton

                           with a copy to:

                           Cahill Gordon & Reindel
                           80 Pine Street
                            New York, New York 10005
                         Attention: Gary W. Wolf, Esq.

                  (ii)     If to PSCo, to:

                       Public Service Company of Colorado
                           1227 Seventeenth Street
                           Denver, Colorado  80202
                           Attention:  D. D. Hock

                           with a copy to:

                           LeBoeuf, Lamb, Greene & MacRae, L.L.P.
                           125 West 55th Street
                            New York, New York 10019
                       Attention: Douglas W. Hawes, Esq.
                             Steven H. Davis, Esq.

                  Section 10.4  Miscellaneous.  This  Agreement  (including  the
documents  and  instruments  referred to  herein):  (a)  constitutes  the entire
agreement and supersedes all other prior  agreements  and  understandings,  both
written and oral, among the parties, or any of them, with respect to the subject
matter  hereof other than the  Confidentiality  Agreement;  and (b) shall not be
assigned by operation of law or otherwise.  This Agreement  shall be governed by
and construed in accordance with the laws of the State of New York applicable

                                      -62-











to contracts executed in and to be fully performed in such State, without giving
effect to its conflicts of laws statutes, rules or principles. The invalidity or
unenforceability  of any  provision  of this  Agreement  shall  not  affect  the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect.  The parties  hereto  shall  negotiate  in good
faith  to  replace  any   provision  of  this   Agreement  so  held  invalid  or
unenforceable with a valid provision that is as similar as possible in substance
to the invalid or unenforceable provision.

                  Section 10.5  Interpretation.  When  reference is made in this
Agreement  to  Articles,  Sections or Exhibits,  such  reference  shall be to an
Article,  Section  or  Exhibit  of this  Agreement,  as the case may be,  unless
otherwise  indicated.  The table of  contents  and  headings  contained  in this
Agreement are for reference purposes and shall not affect in any way the meaning
or interpretation of this Agreement.  Whenever the words "include",  "includes",
or "including" are used in this  Agreement,  they shall be deemed to be followed
by the words  "without  limitation."  Whenever "or" is used in this Agreement it
shall be construed in the nonexclusive sense.

                  Section  10.6  Counterparts;  Effect.  This  Agreement  may be
executed  in one or more  counterparts,  each of which  shall be deemed to be an
original, but all of which shall constitute one and the same agreement.

                  Section  10.7  Parties in Interest.  This  Agreement  shall be
binding upon and inure solely to the benefit of each party hereto,  and,  except
for rights of Indemnified  Parties as set forth in Section 7.5  (Directors'  and
Officers'  Indemnification),  nothing in this Agreement,  express or implied, is
intended  to confer  upon any  person  any  rights  or  remedies  of any  nature
whatsoever under or by reason of this Agreement.  Notwithstanding  the foregoing
and any other provision of this Agreement, and in addition to any other required
action of the Board of  Directors  of the  Company,  (a) a  majority  of the SPS
Designees (or their successors) serving on the Board of Directors of the Company
who are  designated by SPS pursuant to Section 7.13 (Company Board of Directors)
shall be entitled  during the four and one-half  year period  commencing  at the
Effective  Time (the  "Applicable  Period") to enforce the provisions of Section
7.9 (Employee Agreements and Workforce Matters),  Section 7.10 (Employee Benefit
Plans),  Section  7.11  (Incentive,  Stock and Other  Plans),  and Section  7.15
(Employment  Contracts) on behalf of the SPS officers,  directors and employees,
as the  case  may  be,  and (b) a  majority  of the  PSCo  Designees  (or  their
successors)  serving on the Board of Directors of the Company who are designated
by PSCo pursuant to Section 7.13 (Company Board of Directors)  shall be entitled
during the Applicable  Period to enforce the provisions of Section 7.9 (Employee
Agreements  and  Workforce  Matters),  Section 7.10  (Employee  Benefit  Plans),
Section 7.11  (Incentive,  Stock and Other  Plans) and Section 7.15  (Employment
Contracts) on behalf of the PSCo officers,  directors and employees, as the case
may be. Such  directors'  rights and remedies  under the preceding  sentence are
cumulative and are in addition to any other rights and remedies they may have at
law or in equity,  but in no event shall this  Section  10.7 be deemed to impose
any additional duties on any such directors.  The Company shall pay, at the time
they are incurred,  or shall advance upon  reasonable  request,  all  reasonable
costs, fees and expenses of such directors incurred in

                                      -63-











connection  with the assertion of any rights or remedies on behalf of any of the
persons set forth above  pursuant to this  Section  10.7.  For  purposes of this
Section 10.7 and Section 7.13 (Company Board of Directors),  a "SPS Designee" or
"PSCo Designee", as the case may be, shall at any time mean a person who at such
time is a member of the Board of  Directors  of the  Company  who either (i) was
designated  a member of the Board of Directors of the Company by SPS or by PSCo,
as the case may be, pursuant to Section  7.13(a) or (ii) was designated  (before
his or her  initial  election  as a  member  of the  Board of  Directors  of the
Company) as a "SPS Designee" or a "PSCo  Designee" by a majority of the then SPS
Designees or PSCo Designees, as the case may be.

                  Section 10.8 Specific  Performance.  The parties  hereto agree
that  irreparable  damage would occur in the event that any of the provisions of
this  Agreement  were not performed in accordance  with their  specific terms or
were otherwise breached.  It is accordingly agreed that the parties hereto shall
be  entitled  to an  injunction  or  injunctions  to  prevent  breaches  of this
Agreement and to enforce  specifically  the terms and  provisions  hereof in any
court of the  United  States or any state  having  jurisdiction,  this  being in
addition to any other remedy to which they are entitled at law or in equity.


                                      -64-











                  IN WITNESS WHEREOF, PSCo, SPS and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first above written.

                                        PUBLIC SERVICE COMPANY OF COLORADO


                                       By
                                Name: D. D. Hock
                              Title: Chairman and
                            Chief Executive Officer


                                        SOUTHWESTERN PUBLIC SERVICE COMPANY


                                       By
                                        Name: Bill D. Helton
                                        Title: Chairman and Chief Executive
                                    Officer


                                        M-P NEW CO.


                                       By
                                        Name: Doyle R. Bunch, II
                                        Title: Chairman and Secretary




                                     And By
                                        Name: Richard C. Kelly
                                        Title: President and Treasurer



                                      -65-








                             INDEX OF DEFINED TERMS

Term                                                                      Page

Affiliate Agreement........................................................47
Agreement         ..........................................................1
Applicable Period .........................................................63
Atomic Energy Act .........................................................10
Business Combination.......................................................56
CBCA              ..........................................................2
Certificates      ..........................................................5
Closing           ..........................................................7
Closing Agreement .........................................................13
Closing Date      ..........................................................7
Code              ..........................................................1
Colorado Commission........................................................10
Common Shares Trust.........................................................6
Company           ..........................................................1
Company Charter Amendments.................................................52
Company Common Stock........................................................3
Company Shares    ..........................................................5
Converted Shares  ..........................................................5
Disclosure Schedules.......................................................46
Dissenting Holder ..........................................................4
Effective Time    ..........................................................3
Environmental Claim........................................................20
Environmental Laws.........................................................21
Environmental Permits......................................................19
ERISA             .........................................................15
Excess Shares     ..........................................................6
Exchange Act      .........................................................10
Exchange Agent    ..........................................................4
FERC              .........................................................10
Final Order       .........................................................53
GAAP              .........................................................11
Governmental Authority......................................................9
Hazardous Materials........................................................21
HSR Act           .........................................................43
Indemnified Parties........................................................45
Indemnified Party .........................................................45
IRS               .........................................................14
Joint Proxy Statement......................................................12
Joint Proxy/Registration Statement.........................................42
Joint venture     ..........................................................8
Kansas Commission .........................................................25

                                      -v-








Term                                                                     Page

Merger Agreements ..........................................................2
Merger Sub A      ..........................................................2
Merger Sub B      ..........................................................2
Merger Subsidiaries.........................................................2
Mergers           ..........................................................1
New Mexico Commission......................................................25
1935 Act          ..........................................................8
NMBCA             ..........................................................3
Non-terminating Party......................................................58
NRC               .........................................................10
NYSE              ..........................................................6
Oklahoma Commission........................................................25
Out-of-Pocket Expenses.....................................................58
PBGC              .........................................................16
Permits           .........................................................10
Power Act         .........................................................10
PSCo              ..........................................................1
PSCo Benefit Plans.........................................................15
PSCo Common Stock ..........................................................3
PSCo Conversion Ratio.......................................................3
PSCo Designee     .........................................................64
PSCo Disclosure Schedule...................................................46
PSCo ERISA Affiliate.......................................................15
PSCo Financial Statements..................................................11
PSCo Material Adverse Effect................................................7
PSCo Merger       ..........................................................2
PSCo Merger Agreement.......................................................2
PSCo Preferred Stock........................................................4
PSCo Required Consents......................................................9
PSCo Required Statutory Approvals..........................................10
PSCo Rights       .........................................................22
PSCo Rights Agreement......................................................22
PSCo SEC Reports  .........................................................10
PSCo Shareholders' Approvals...............................................22
PSCo Special Meeting.......................................................44
Registration Statement.....................................................11
Release           .........................................................21
Representatives   .........................................................41
SEC               .........................................................10
Securities Act    .........................................................10
Shareholder Disapproval....................................................59
Shares            .........................................................51
SPS               ..........................................................1

                                      -vi-








Term                                                                     Page

SPS Benefit Plans .........................................................30
SPS Common Stock  ..........................................................3
SPS Conversion Ratio........................................................3
SPS Designee      .........................................................64
SPS Disclosure Schedule....................................................46
SPS ERISA Affiliate........................................................30
SPS Financial Statements...................................................26
SPS Material Adverse Effect................................................23
SPS Merger        ..........................................................3
SPS Merger Agreement........................................................2
SPS Preferred Stock.........................................................4
SPS Required Consents......................................................24
SPS Required Statutory Approvals...........................................25
SPS Rights        .........................................................36
SPS Rights Agreement.......................................................36
SPS SEC Reports   .........................................................25
SPS Shareholders' Approval.................................................35
SPS Special Meeting........................................................44
Stock Plan        .........................................................48
Subsidiary        ..........................................................7
Takeover Proposal .........................................................49
Target Party      .........................................................59
Task Force        .........................................................41
Tax Return        .........................................................12
Tax Ruling        .........................................................13
Taxes             .........................................................12
Texas Commission  .........................................................25
Violation         ..........................................................9
Wyoming Commission.........................................................10


                                     -vii-



                                                                   Exhibit A



                                 PLAN OF MERGER


                  PLAN OF  MERGER  (the  "Plan of  Merger"),  dated as of _____,
199_, by and among Public Service Company of Colorado,  a Colorado  corporation,
("PSCO"), [M-P New Co.], a Delaware corporation (the "Company") and PSCO Merger,
Inc., a Colorado corporation and wholly owned subsidiary of the Company ("Merger
Sub  A").  The  parties  to  this  Plan  of  Merger  are  hereinafter  sometimes
collectively referred to as the "Constituent Corporations".

                  WHEREAS, Merger Sub A is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado. As of the
date hereof the outstanding  capital stock of Merger Sub A consisted solely of [
] shares  of  common  stock,  par  value $[ ] per  share  ("Merger  Sub A Common
Stock");

                  WHEREAS,  PSCO  is  a  corporation  duly  organized,   validly
existing and in good standing under the laws of the State of Colorado. As of the
date hereof the authorized capital stock of PSCO consisted solely of 140,000,000
shares of common  stock,  par value $5 per share (the "PSCO Common  Stock"),  of
which [ ] shares were  outstanding on  _______________,  ____,  199_,  4,000,000
shares of  Cumulative  Preferred  Stock,  par value $25 per share (the "PSCO $25
Preferred Stock"),  of which [ ] shares were outstanding on ______________  ___,
199_, and 3,000,000  shares of Cumulative  Preferred  Stock,  par value $100 per
share (the "PSCO $100 Preferred Stock" and, together with the PSCO $25 Preferred
Stock,  the "PSCO  Preferred  Stock"),  of which [ ] shares were  outstanding on
_______________ ___, 199_; and

                  WHEREAS,  PSCO,  [Plain],  a New Mexico  corporation,  and the
Company have entered into an Agreement  and Plan of  Reorganization  dated as of
August  _____,  1995,  setting  forth  representations,  warranties,  covenants,
conditions  and other  terms in  connection  with the merger of equals and other
transactions contemplated thereby and hereby (the "Reorganization Agreement").

                  NOW,  THEREFORE,  in  consideration  of the  foregoing and the
mutual covenants and agreements  herein  contained,  the parties hereto agree as
follows:


                                   ARTICLE I.

                                   THE MERGER

                  Section 1.1 The Merger.  In accordance  with the provisions of
this Plan of Merger and the Colorado Business  Corporation Act (the "CBCA"),  at
the  Effective  Time (as defined in Section 1.2  hereof),  Merger Sub A shall be
merged with and into PSCO (the "Merger") and the separate corporate existence of
Merger Sub A shall cease. PSCO shall be the surviving  corporation in the Merger
(sometimes hereinafter referred to as the "Surviving











Corporation")  and shall continue its corporate  existence under the laws of the
State of Colorado.  The name of the Surviving  Corporation  shall continue to be
"Public  Service  Company of  Colorado".  The Merger  shall have the effects set
forth in the CBCA. In furtherance of and not in limitation of the foregoing,  at
the  Effective  Time,  the  Surviving  Corporation  shall  have all the  rights,
privileges,  immunities  and  powers  and shall be subject to all the duties and
liabilities of a corporation organized under the CBCA; the Surviving Corporation
shall then and thereafter possess all the rights,  privileges,  immunities,  and
franchises,  of a public as well as of a private nature, of each of Merger Sub A
and PSCO;  and all property,  real,  personal,  and mixed,  and all debts due on
whatever  account  and all other  choses in  action,  and every  other  interest
belonging  to or due to each of Merger  Sub A and PSCO so merged  shall be taken
and deemed to be transferred to and vested in the Surviving  Corporation without
further act or deed; the Surviving  Corporation shall then be liable for all the
liabilities  and  obligations  of each of Merger  Sub A and PSCO so  merged.  In
addition,  any reference to either of the merging  corporations in any contract,
instrument  or document,  whether  executed or taking effect before or after the
Effective Time, shall be considered a reference to the Surviving  Corporation if
not  inconsistent  with the other  provisions  of the  contract,  instrument  or
document.

                  Section 1.2 Effective  Time;  Conditions.  The Merger shall be
effective  (the  "Effective  Time") upon  delivery of a copy of the  Articles of
Merger with the Secretary of State for the State of Colorado pursuant to Section
7-111-105 of the CBCA. If the  Reorganization  Agreement and this Plan of Merger
are duly approved by the  shareholders of each of the Constituent  Corporations,
the other conditions  precedent set forth in Article VIII of the  Reorganization
Agreement are satisfied or (where  permissible)  waived, and this Plan of Merger
is not terminated  under Section 3.1 hereof,  articles of merger  complying with
Section  7-111-105 of the CBCA shall be  delivered to the  Secretary of State of
the State of Colorado in accordance with Section 7-111-105 of the CBCA.

                  Section  1.3  Articles  of  Incorporation  and  By-Laws.   The
Articles of  Incorporation  (the  "Articles")  and By-laws of PSCO following the
Effective  Time  shall be such  Articles  and  By-Laws  of PSCO as are in effect
immediately prior to the Effective Time.

                  Section 1.4 Directors and Officers.  (a) The following persons
shall  be  the  initial  directors  of the  Surviving  Corporation  until  their
respective successors are duly elected and qualified:


                                  [LIST NAMES]


                  (b) The following  persons shall, form and after the Effective
Time, be the officers of the Surviving Corporation,  to serve in accordance with
the By-laws  thereof,  until their  respective  successors  are duly  elected or
appointed and qualified or until their earlier death,  resignation or removal in
accordance  with the  Surviving  Corporation's  Articles  of  Incorporation  and
By-Laws:

                                  [LIST NAMES]














                                  ARTICLE II.

                              CONVERSION OF SHARES

                  Section 2.1  Conversion of Shares.  At the Effective  Time, by
virtue of the Merger and without any action on the part of PSCO, Merger Sub A or
the holder of any securities of PSCO or Merger Sub A:

                  (a) PSCO Common  Stock.  Each share of PSCO Common Stock which
shall be  outstanding  immediately  before the Effective Time (other than shares
with  respect to which the holder  thereof  has  properly  perfected  dissenters
rights) shall be converted into [ ] share[s] of common stock, par value $[ ] per
share, of the Company, and PSCO shall thereafter be a wholly owned subsidiary of
the Company.

                  (b) PSCO  Preferred  Stock.  Each share of PSCO $25  Preferred
Stock and each share of PSCO $100  Preferred  Stock which  shall be  outstanding
immediately  before the Effective  Time (other than shares with respect to which
the holder  thereof has  properly  perfected  dissenters  rights)  shall  remain
outstanding as a share of preferred stock of the Surviving Corporation.

                  (c)  Merger  Sub A Common  Stock.  Each  share of Merger Sub A
Common Stock which shall be  outstanding  immediately  before the Effective time
shall be converted into one share of the Surviving  Corporation  (the "Surviving
Corporation  Common  Stock").  Each  certificate  which  immediately  before the
Effective  Time  represented  outstanding  shares of Merger  Sub A Common  Stock
shall,  on and after the Effective Time, be deemed for all purposes to represent
the number of shares of Surviving Corporation Common Stock into which the shares
of Merger Sub A Common Stock  represented  by such  certificate  shall have been
converted pursuant to this Section 2.1(c).

                  Section  2.2  Exchange  of  PSCO  Common  Stock  Certificates.
                                ------------------------------------------

                  (a) Deposit with Exchange Agent. As soon as practicable  after
the Effective  Time,  the Company  shall  deposit with a bank,  trust company or
other  agent  ("Exchange  Agent")  certificates  representing  shares of Company
Common Stock required to effect the conversion of PSCO Common Stock into Company
Common Stock referred to in Section 2.1(a).

                  (b)  Exchange  Procedures.  As soon as  practicable  after the
Effective  Time,  the  Exchange  Agent  shall mail to each holder of record of a
certificate  or  certificates  which  immediately  prior to the  Effective  Time
represented issued and outstanding shares of PSCO Common Stock  ("Certificates")
that were  converted  ("Converted  Shares") into the right to receive  shares of
Company Common Stock  ("Company  Shares"),  (i) a letter of  transmittal  (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates  shall pass,  only upon actual deliver of the  Certificates  to the
Exchange  Agent) and (ii)  instructions  for use in  effecting  the  exchange of
Certificates for certificates representing











Company  Shares.  Upon  delivery  of a  Certificate  to the  Exchange  Agent for
exchange,  together with a duly executed  letter of  transmittal  and such other
documents as the Exchange  Agent shall require,  the holder of such  Certificate
shall be  entitled to receive in exchange  therefor a  certificate  representing
that number of whole Company Shares and the amount of cash in lieu of fractional
share  interests  which such  holder has the right to  receive  pursuant  to the
provisions  of this  Article  II. In the event of a  transfer  of  ownership  of
Converted  Shares which is not  registered  in the  transfer  records of PSCO, a
certificate  to a transferee  if the  Certificate  representing  such  Converted
Shares is presented to the Exchange Agent, accompanied by all documents required
to  evidence  and effect  such  transfer  and by  evidence  satisfactory  to the
Exchange  Agent that any applicable  stock transfer taxes have been paid.  Until
delivered as contemplated by this Section 2.2, each Certificate  shall be deemed
at any time after the Effective Time to represent only the right to receive upon
such delivery the  certificate  representing  Company Shares and cash in lieu of
any fractional  shares of Company Common Stock as  contemplated  by this Section
2.2.

                  (c)  Distributions  with  Respect to  Unexchanged  Shares.  No
dividends or other distributions  declared or made after the Effective Time with
respect to Company  Shares with a record date after the Effective  Time shall be
paid to the holder of any  undelivered  Certificate  with respect to the Company
Shares  represented  thereby,  and no cash payment in lieu of fractional  shares
shall be paid to any such holder pursuant to Section 2.2(d), until the holder of
record of such  Certificate  (or a transferee  as  described in Section  2.2(b))
shall have delivered such Certificate as contemplated in Section 2.2(b). Subject
to the  effect  of  unclaimed  property,  escheat  and  other  applicable  laws,
following  delivery of any such  Certificate,  there shall be paid to the record
holder (or  transferee) of the  certificates  representing  whole Company Shares
issued in exchange therefor, without interest, (i) at the time of such delivery,
the amount of any cash payable in lieu of a fractional  share of Company  Common
Stock to which such  holder (or  transferee)  is  entitled  pursuant  to Section
2.2(d) and the amount of  dividends  or other  distributions  with a record date
after the  Effective  Time  theretofore  paid with respect to such whole Company
Shares and (ii) at the  appropriate  payment  date,  the amount of  dividends or
other  distributions  with a record date after the  Effective  Time but prior to
delivery and payment date  subsequent  to delivery  payable with respect to such
whole Company Shares, as the case may be.

                  (d)  No  Fractional  Shares.  (i)  No  certificates  or  scrip
representing  fractional shares of Company Common Stock shall be issued upon the
delivery for exchange of Certificates,  and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a  shareholder  of the
Company.

                       (ii) As promptly as  practicable  following the Effective
Time,  the Exchange  Agent shall  determine the excess of (x) the number of full
shares of Company  Common Stock  delivered to the Exchange  Agent by the Company
pursuant  to  Section  2.2(a)  of the  Reorganization  Agreement  over  (y)  the
aggregate  number of full shares of Company  Common Stock to be  distributed  to
holders  of  PSCO  Common  Stock  and  Plain  Common  Stock(as  defined  in  the
Reorganization  Agreement)  pursuant  to  Section  2.2(b) of the  Reorganization
Agreement (such excess being herein called the "Excess  Shares").  As soon after
the Effective Time as practicable,  the Exchange Agent, as agent for the holders
of the Excess Shares at then prevailing











prices on the New York Stock Exchange  ("NYSE"),  all in the manner  provided in
Section 2.2(d)(iii).

                       (iii) The sale of the Excess shares by the Exchange Agent
shall be executed on they NYSE  through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. Until the proceeds of
such sale or sales have been distributed to the holders of PSCO Common Stock and
Plain Common Stock, the Exchange Agent shall, until remitted pursuant to Section
2.2(f),  hold such  proceeds in trust for the  holders of PSCO Common  Stock and
Plain  Common  Stock  ("Common  Shares  Trust").   The  Company  shall  pay  all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation, of the Exchange Agent incurred in connection with
such sale of the Excess Shares.  The Exchange Agent shall  determine the portion
of the proceeds  comprising the Common Shares Trust to which each holder of PSCO
Common  Stock  shall be  entitled,  if any,  by  multiplying  the  amount of the
aggregate  proceeds  comprising  the  Common  Shares  Trust  by a  fraction  the
numerator of which is the amount of the fractional  share interest to which such
holder of PSCO Common  Stock is  entitled  and the  denominator  of which is the
aggregate  amount of  fractional  share  interests  to which all holders of PSCO
Common Stock and Plain Common Stock are entitled.

                       (iv) As soon as  practicable  after  the  sale of  Excess
Shares  pursuant to clause  (iii) above and the  determination  of the amount of
cash,  if any,  to be paid  to  holders  of  PSCO  Common  Stock  in lieu of any
fractional share interests,  the Exchange Agent shall distribute such amounts to
holders of PSCO Common Stock who have  theretofore  delivered  Certificates  for
PSCO Common Stock for exchange pursuant to this Article II.

                  (e) Closing of Transfer  Books.  From and after the  Effective
Time,  the stock  transfer  books of PSCO with  respect to shares of PSCO Common
Stock, issued and outstanding prior to the Effective Time shall be closed and no
transfer of any shares shall  thereafter be made. If, after the Effective  Time,
Certificates are presented to the Company, they shall be cancelled and exchanged
for certificates representing the appropriate number of whole Company Shares and
cash in lieu of  fractional  shares of Company  Common Stock as provided in this
Section 2.2.

                  (f)   Termination   of  Exchange   Agent.   Any   certificates
representing  Company  Shares  deposited  with the  Exchange  Agent  pursuant to
Section  2.2(a)  and not  exchanged  within one year  after the  Effective  Time
pursuant to this  Section 2.2 shall be  returned  by the  Exchange  Agent to the
Company,  which shall  thereafter act as Exchange  Agent.  All funds held by the
Exchange  Agent for  payment to the  holders  of  undelivered  Certificates  and
unclaimed  at the end of one year from the  Effective  Time shall be remitted to
the Company, after which time any holder of undelivered  Certificates shall look
as a general  creditor  only to the  Company  for payment of such funds to which
such holder may be due,  subject to  applicable  law.  The Company  shall not be
liable to any person for such  shares or funds  delivered  to a public  official
pursuant to any applicable abandoned property, escheat or similar law.













                                  ARTICLE III.

                           TERMINATION AND AMENDMENT

                  Section 3.1  Termination.  Notwithstanding  the  approval  and
adoption  of this Plan of Merger by the  shareholders  of PSCO,  the Company and
Merger Sub A, this Plan of Merger  shall  terminate  forthwith in the event that
the Reorganization  Agreement shall be terminated as therein provided and may be
terminated as otherwise provided in the Reorganization  Agreement.  In the event
of the termination of this Plan of Merger as provided above, this Plan of Merger
shall  forthwith  become void and there shall be no liability on the part of any
of the  parties  hereto  except  as  otherwise  provided  in the  Reorganization
Agreement.

                  Section  3.2  Amendment.  This  Plan of  Merger  shall  not be
amended  except  in  accordance  with  the  provisions  of  Section  9.4  of the
Reorganization Agreement.


                                  ARTICLE IV.

                                 MISCELLANEOUS

                  Section  4.1  Governing  Law.  This  Plan of  Merger  shall be
governed by the laws of the State of Colorado.

                  Section 4.2 Counterparts.  This Plan of Merger may be executed
in two or more  counterparts,  each of which shall be deemed to be an  original,
but all of which shall constitute one and the same agreement.

                  Section 4.3  Authorized  Officers.  The chairman of the board,
president,  vice  president,  secretary and  assistant  secretary of each of the
merging  corporations  are  each  authorized  by it in its name to  execute  and
deliver  or  cause  to  be  executed  and  delivered  any  articles  of  merger,
agreements, certificates, appointments, or other instruments, and to do anything
else that he or they deem to be necessary or  desirable in  connection  with the
Merger.













                  IN WITNESS  WHEREOF,  the parties hereto have caused this Plan
of Merger to be signed by their respective officers thereunto duly authorized as
of the date first written above.



                                              PUBLIC SERVICE COMPANY OF COLORADO


                                      By:

                                                               PSCO MERGER, INC.

                                      By:


                                          [M-P NEW CO.]

                                      By:






                                                               Exhibit B



                                 PLAN OF MERGER


          PLAN OF MERGER  (the  "Plan of  Merger"),  dated as of , 199_,  by and
among Southwestern Public Service Company, a New Mexico corporation ("SPS"), M-P
New Co., a Delaware  corporation  (the  "Company")  and SPS Merger,  Inc., a New
Mexico  corporation and wholly owned subsidiary of the Company ("Merger Sub B").
The  parties  to this  Plan of Merger  are  hereinafter  sometimes  collectively
referred to as the "Constituent Corporations".

          WHEREAS,  Merger  Sub  B  is a  corporation  duly  organized,  validly
existing and in good standing  under the laws of the State of New Mexico.  As of
the date hereof the outstanding  capital stock of Merger Sub B consisted  solely
of [ ] shares of common  stock,  par value $[ ] per share  ("Merger Sub B Common
Stock");

          WHEREAS,  Southwestern  Public Service  Company is a corporation  duly
organized,  validly existing and in good standing under the laws of the State of
New Mexico. As of the date hereof the outstanding capital stock of SPS consisted
solely of 100,000,000  shares of common stock,  par value $1 per share (the "SPS
Common Stock"), of which [ ] shares were outstanding on , 199_, 3,000,000 shares
of Cumulative  Preferred  Stock, par value $25 per share (the "SPS $25 Preferred
Stock"), of which [ ] shares were outstanding on
          , 199_, and 2,000,000 shares of Cumulative  Preferred Stock, par value
$100 per share (the "SPS $100  Preferred  Stock" and,  together with the SPS $25
Preferred  Stock,  the  "SPS  Preferred  Stock"),  of  which  [  ]  shares  were
outstanding on , 199_; and

          WHEREAS, SPS, [Mountain], a Colorado corporation, and the Company have
entered into an Agreement and Plan of Reorganization  dated as of August , 1995,
setting forth representations, warranties, covenants, conditions and other terms
in  connection  with the  merger of equals and other  transactions  contemplated
thereby and hereby (the "Reorganization Agreement").

          NOW,  THEREFORE,  in  consideration  of the  foregoing  and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:













                                    -2-




                                   ARTICLE I

                                   THE MERGER

            Section 1.1 The Merger.  In accordance  with the  provisions of this
Plan of Merger and the New Mexico Business Corporation Act (the "NMBCA"), at the
Effective Time (as defined in Section 1.2 hereof),  Merger Sub B shall be merged
with and into SPS (the "Merger") and the separate corporate  existence of Merger
Sub B  shall  cease.  SPS  shall  be the  surviving  corporation  in the  Merger
(sometimes  hereinafter  referred to as the "Surviving  Corporation")  and shall
continue its corporate  existence under the laws of the State of New Mexico. The
name of the Surviving  Corporation  shall  continue to be  "Southwestern  Public
Service  Company".  The Merger shall have the effects set forth in the NMBCA. In
furtherance  of and not in limitation of the foregoing,  at the Effective  Time,
the Surviving Corporation shall have all the rights, privileges,  immunities and
powers and shall be subject to all the duties and  liabilities  of a corporation
organized under the NMBCA; the Surviving  Corporation  shall then and thereafter
possess all the rights,  privileges,  immunities, and franchises, of a public as
well as of a private nature,  of each of Merger Sub B and SPS; and all property,
real,  personal and mixed,  and all debts due on whatever  account and all other
choses in action, and every other interest belonging to or due to each of Merger
Sub B and SPS so merged  shall be taken  and  deemed  to be  transferred  to and
vested in the Surviving  Corporation  without further act or deed; the Surviving
Corporation shall then be liable for all the liabilities and obligations of each
of Merger Sub B and SPS so merged.  In addition,  any reference to either of the
merging corporations in any contract,  instrument or document,  whether executed
or taking  effect  before or after the  Effective  Time,  shall be  considered a
reference  to the  Surviving  Corporation  if not  inconsistent  with the  other
provisions of the contract, instrument or document.

            Section  1.2  Effective  Time;  Conditions.   The  Merger  shall  be
effective  (the  "Effective  Time") upon  delivery1 of a copy of the Articles of
Merger  with the  State  Corporation  Commission  for the  State  of New  Mexico
pursuant to Section 53-14-4
-------------------
1     The  statute  permits  companies  to  provide  for  a  specific  date  for
      effectiveness,  no more than 30 days after delivery of the Articles to the
      commission.










                                    -3-



of the NMBCA. If the  Reorganization  Agreement and this Plan of Merger are duly
approved by the shareholders of each of the Constituent Corporations,  the other
conditions  precedent set forth in Article VIII of the Reorganization  Agreement
are  satisfied  or (where  permissible)  waived,  and this Plan of Merger is not
terminated  under Section 3.1 hereof,  articles of merger complying with Section
53-14-4 of the NMBCA shall be delivered to the State  Corporation  Commission of
the State of New Mexico in accordance with Section 53-14-4 of the NMBCA.

            Section 1.3 Articles of Incorporation  and By-Laws.  The Articles of
Incorporation  (the  "Articles") and By-laws of SPS following the Effective Time
shall be such Articles and By-laws of SPS as are in effect  immediately prior to
the Effective Time.

            Section 1.4 Directors and Officers.  (a) The following persons shall
be the initial  directors of the Surviving  Corporation  until their  respective
successors are duly elected and qualified:


                                  [LIST NAMES]


            (b) The following  persons shall, from and after the Effective Time,
be the officers of the Surviving  Corporation,  to serve in accordance  with the
By-laws thereof, until their respective successors are duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and By-Laws:


                                  [LIST NAMES]





                                   ARTICLE II

                              CONVERSION OF SHARES

          Section 2.1 Conversion of Shares.  At the Effective Time, by virtue of
the Merger and without any action on the











                                    -4-



part of SPS,  Merger Sub B or the holder of any  securities of SPS or Merger Sub
B:

            (a) SPS Common Stock.  Each share of SPS Common Stock which shall be
outstanding  immediately  before the  Effective  Time  (other  than  shares with
respect to which the holder thereof has properly perfected  dissenters'  rights)
shall be converted into [ ] share[s] of common stock,  par value $[ ] per share,
of the Company,  and SPS shall  thereafter  be a wholly owned  subsidiary of the
Company.

            (b) SPS Preferred  Stock.  Each share of SPS $25 Preferred Stock and
each share of SPS $100 Preferred  Stock which shall be  outstanding  immediately
before the  Effective  Time (other than shares with  respect to which the holder
thereof has properly perfected dissenters' rights) shall remain outstanding as a
share of preferred stock of the Surviving Corporation.

            (c)  Merger  Sub B Common  Stock.  Each share of Merger Sub B Common
Stock which shall be outstanding  immediately before the Effective Time shall be
converted  into  one  share  of  the  Surviving   Corporation   (the  "Surviving
Corporation  Common  Stock").  Each  certificate  which  immediately  before the
Effective  Time  represented  outstanding  shares of Merger  Sub B Common  Stock
shall,  on and after the Effective Time, be deemed for all purposes to represent
the number of shares of Surviving Corporation Common Stock into which the shares
of Merger Sub B Common Stock  represented  by such  certificate  shall have been
converted pursuant to this Section 2.1(c).

            Section 2.2  Exchange of SPS Common Stock Certificates.

            (a) Deposit with Exchange  Agent.  As soon as practicable  after the
Effective  Time,  the Company shall deposit with a bank,  trust company or other
agent  ("Exchange  Agent")  certificates  representing  shares of Company Common
Stock  required to effect the conversion of SPS Common Stock into Company Common
Stock referred to in Section 2.1(a).

            (b) Exchange Procedures.  As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates  which immediately  prior to the Effective Time represented  issued
and outstanding shares of SPS Common Stock  ("Certificates") that were converted
("Converted  Shares") into the right to receive  shares of Company  Common Stock
("Company Shares"), (i) a letter of










                                    -5-



transmittal  (which shall specify that delivery  shall be effected,  and risk of
loss and title to the Certificates  shall pass, only upon actual delivery of the
Certificates to the Exchange Agent) and (ii)  instructions  for use in effecting
the exchange of Certificates for certificates  representing Company Shares. Upon
delivery of a Certificate  to the Exchange  Agent for exchange,  together with a
duly executed  letter of  transmittal  and such other  documents as the Exchange
Agent shall require, the holder of such Certificate shall be entitled to receive
in exchange  therefor a  certificate  representing  that number of whole Company
Shares and the amount of cash in lieu of fractional  share  interests which such
holder has the right to receive  pursuant to the  provisions of this Article II.
In the  event of a  transfer  of  ownership  of  Converted  Shares  which is not
registered in the transfer records of SPS, a certificate representing the proper
number  of  Company  Shares  may be issued to a  transferee  if the  Certificate
representing   such  Converted  Shares  is  presented  to  the  Exchange  Agent,
accompanied  by all documents  required to evidence and effect such transfer and
by  evidence  satisfactory  to the  Exchange  Agent  that any  applicable  stock
transfer taxes have been paid.  Until  delivered as contemplated by this Section
2.2, each  Certificate  shall be deemed at any time after the Effective  Time to
represent  only  the  right  to  receive  upon  such  delivery  the  certificate
representing Company Shares and cash in lieu of any fractional shares of Company
Common Stock as contemplated by this Section 2.2.

            (c) Distributions  with Respect to Unexchanged  Shares. No dividends
or other distributions declared or made after the Effective Time with respect to
Company  Shares with a record date after the Effective Time shall be paid to the
holder  of any  undelivered  Certificate  with  respect  to the  Company  Shares
represented  thereby,  and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section  2.2(d),  until the holder of record
of such  Certificate (or a transferee as described in Section 2.2(b)) shall have
delivered such  Certificate as contemplated  in Section  2.2(b).  Subject to the
effect of  unclaimed  property,  escheat and other  applicable  laws,  following
delivery of any such  Certificate,  there shall be paid to the record holder (or
transferee)  of the  certificates  representing  whole Company  Shares issued in
exchange  therefor,  without  interest,  (i) at the time of such  delivery,  the
amount of any cash payable in lieu of a fractional share of Company Common Stock
to which such holder (or transferee) is entitled  pursuant to Section 2.2(d) and
the amount of  dividends  or other  distributions  with a record  date after the
Effective Time theretofore paid with respect to such










                                    -6-



whole Company  Shares and (ii) at the  appropriate  payment date,  the amount of
dividends or other distributions with a record date after the Effective Time but
prior to delivery and a payment date subsequent to delivery payable with respect
to such whole Company Shares, as the case may be.

            (d) No Fractional  Shares. (i) No certificates or scrip representing
fractional  shares of Company Common Stock shall be issued upon the delivery for
exchange of  Certificates,  and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a shareholder of the Company.

                  (ii) As promptly as practicable  following the Effective Time,
the Exchange  Agent shall  determine the excess of (x) the number of full shares
of Company Common Stock delivered to the Exchange Agent by the Company  pursuant
to Section 2.2(a) of the Reorganization  Agreement over (y) the aggregate number
of full  shares of  Company  Common  Stock to be  distributed  to holders of SPS
Common  Stock and  Mountain  Common  Stock  (as  defined  in the  Reorganization
Agreement)  pursuant to Section  2.2(b) of the  Reorganization  Agreement  (such
excess being herein  called the "Excess  Shares").  As soon after the  Effective
Time as practicable,  the Exchange Agent, as agent for the holders of SPS Common
Stock and Mountain Common Stock, shall sell the Excess Shares at then prevailing
prices on the New York Stock Exchange  ("NYSE"),  all in the manner  provided in
Section 2.2(d)(iii).

                  (iii)  The sale of the  Excess  Shares by the  Exchange  Agent
shall be executed on the NYSE  through one or more member  firms of the NYSE and
shall be executed in round lots to the extent practicable. Until the proceeds of
such sale or sales have been  distributed to the holders of SPS Common Stock and
Mountain  Common Stock,  the Exchange Agent shall,  until  remitted  pursuant to
Section 2.2(f),  hold such proceeds in trust for the holders of SPS Common Stock
and Mountain  Common Stock ("Common  Shares  Trust").  The Company shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation, of the Exchange Agent incurred in connection with
such sale of the Excess Shares.  The Exchange Agent shall  determine the portion
of the proceeds  comprising  the Common Shares Trust to which each holder of SPS
Common  Stock  shall be  entitled,  if any,  by  multiplying  the  amount of the
aggregate  proceeds  comprising  the  Common  Shares  Trust  by a  fraction  the
numerator of which is the amount of the fractional  share interest to which such
holder of










                                    -7-



SPS Common  Stock is  entitled  and the  denominator  of which is the  aggregate
amount of  fractional  share  interests to which all holders of SPS Common Stock
and Mountain Common Stock are entitled.

                  (iv) As soon as  practicable  after the sale of Excess  Shares
pursuant to clause (iii) above and the  determination  of the amount of cash, if
any, to be paid to holders of SPS Common Stock in lieu of any  fractional  share
interests,  the Exchange Agent shall  distribute  such amounts to holders of SPS
Common Stock who have  theretofore  delivered  Certificates for SPS Common Stock
for exchange pursuant to this Article II.

            (e) Closing of Transfer  Books.  From and after the Effective  Time,
the stock  transfer  books of SPS with  respect to shares of SPS  Common  Stock,
issued  and  outstanding  prior to the  Effective  Time  shall be closed  and no
transfer of any shares shall  thereafter be made. If, after the Effective  Time,
Certificates are presented to the Company, they shall be cancelled and exchanged
for certificates representing the appropriate number of whole Company Shares and
cash in lieu of  fractional  shares of Company  Common Stock as provided in this
Section 2.2.

            (f) Termination of Exchange  Agent.  Any  certificates  representing
Company Shares  deposited with the Exchange Agent pursuant to Section 2.2(a) and
not exchanged  within one year after the Effective Time pursuant to this Section
2.2  shall be  returned  by the  Exchange  Agent  to the  Company,  which  shall
thereafter  act as  Exchange  Agent.  All funds held by the  Exchange  Agent for
payment to the holders of undelivered  Certificates  and unclaimed at the end of
one year from the Effective  Time shall be remitted to the Company,  after which
time any holder of  undelivered  Certificates  shall look as a general  creditor
only to the  Company  for payment of such funds to which such holder may be due,
subject to  applicable  law.  The Company  shall not be liable to any person for
such shares or funds delivered to a public  official  pursuant to any applicable
abandoned property, escheat or similar law.


                                  ARTICLE III

                           TERMINATION AND AMENDMENT

            Section 3.1  Termination.  Notwithstanding the
approval and adoption of this Plan of Merger by the sharehold-
ers of SPS, the Company and Merger Sub B, this Plan of Merger










                                    -8-



shall terminate  forthwith in the event that the Reorganization  Agreement shall
be terminated as therein provided and may be terminated as otherwise provided in
the  Reorganization  Agreement.  In the event of the termination of this Plan of
Merger as provided above,  this Plan of Merger shall  forthwith  become void and
there shall be no liability on the part of any of the parties  hereto  except as
otherwise provided in the Reorganization Agreement.

            Section  3.2  Amendment.  This Plan of Merger  shall not be  amended
except in accordance  with the  provisions of Section 9.4 of the  Reorganization
Agreement.


                                   ARTICLE IV

                                 MISCELLANEOUS

            Section 4.1  Governing Law.  This Plan of Merger
shall be governed by the laws of the State of New Mexico.

            Section 4.2 Counterparts. This Plan of Merger may be executed in two
or more counterparts,  each of which shall be deemed to be an original,  but all
of which shall constitute one and the same agreement.

            Section  4.3  Authorized  Officers.   The  chairman  of  the  board,
president,  vice  president,  secretary and  assistant  secretary of each of the
merging  corporations  are  each  authorized  by it in its name to  execute  and
deliver  or  cause  to  be  executed  and  delivered  any  articles  of  merger,
agreements, certificates, appointments, or other instruments, and to do anything
else that he or they deem to be necessary or  desirable in  connection  with the
Merger.























                                    -9-



            IN WITNESS  WHEREOF,  the  parties  hereto  have caused this Plan of
Merger to be signed by their respective officers thereunto duly authorized as of
the date first written above.


                              SOUTHWESTERN PUBLIC SERVICE COMPANY


                          By: ________________________



                                SPS MERGER, INC.

                          By: ________________________


                                  M-P NEW CO.


                          By: ________________________





                                                               Exhibit C

                          Form of Affiliate Agreement


Gentlemen:

         The undersigned is a holder of shares of Common Stock, par value $_____
per share ("Common Stock"), of  ____________________,  a __________ corporation]
(the  "Company")  and is entitled to receive in connection  with the merger (the
"Merger")  of the  Company  with  a  subsidiary  of  M-P  New  Co.,  a  Delaware
corporation ("Newco"), securities of Newco (the "Securities").

         The  undersigned  acknowledges  that the  undersigned  may be deemed an
"affiliate"  of Newco  within the meaning of Rule 145 ("Rule  145")  promulgated
under the Securities Act of 1933, as amended (the "Act"), and/or as such term is
used in and for purposes of Accounting  Series Releases 130 and 135, as amended,
of the Securities and Exchange Commission (the  "Commission"),  although nothing
contained herein shall be construed as an admission of such status.

         If in fact the  undersigned  were an  affiliate of Newco under the Act,
the undersigned's ability to sell, assign or transfer any Securities received by
the undersigned in exchange for any shares of the Company pursuant to the Merger
may be restricted  unless such  transaction  is  registered  under the Act or an
exemption from such registration is available.  The undersigned understands that
such  exemptions are limited and the  undersigned has obtained advice of counsel
as to the nature and conditions of such exemptions,  including  instruction with
respect to the  applicability  to the sale of such  Securities  of Rules 144 and
145(d) promulgated under the Act.

         The  undersigned  hereby  represents  to and covenants to Newco that it
will not sell, assign or transfer any Securities  received by the undersigned in
exchange  for  shares of the Common  Stock  pursuant  to the  Merger  except (i)
pursuant  to an  effective  registration  statement  under  the Act  (including,
without limitation,  a registration  pursuant to any registration rights granted
to that certain Agreement and Plan of Reorganization dated as of August 22, 1995
by and among  the  Company,  Newco  and  [PSCo or SPS,  as the case may be] (the
"Reorganization  Agreement")),  (ii) by a  transaction  in  conformity  with the
volume and other limitations of Rule 145 or Rule 144, to the extent  applicable,
or any  other  applicable  rules  promulgated  by the  Commission  or (iii) in a
transaction which, in the opinion of independent counsel reasonably satisfactory
to the Company, or as described in a "no-action" or interpretive letter from the
Staff of the Commission, is not required to be registered under the Act.

         In the  event  of a sale  of  Securities  pursuant  to  Rule  145,  the
undersigned will supply the Company with evidence of compliance











with  such  Rule,  in the  form of  customary  seller's  and  broker's  Rule 145
representation  letters  or as  Newco  may  otherwise  reasonably  request.  The
undersigned  understands  that Newco may instruct its transfer agent to withhold
the  transfer  of any  Securities  disposed  of by the  undersigned  in a manner
inconsistent with this letter.

         The undersigned  acknowledges and agrees that appropriate  legends will
be placed on certificates representing Securities received by the undersigned in
the Merger or held by a transferee thereof, which legends will be removed (i) by
delivery  of  substitute  certificates  upon  receipt  of an opinion in form and
substance  reasonably  satisfactory to Newco to the effect that such legends are
no longer  required for the purposes of the Act and the rules and regulations of
the  Commission  promulgated  thereunder  or (ii) in the  event of a sale of the
Securities which has been registered under the Act.

         The undersigned further represents to, and covenants with Newco and the
Company that the undersigned will not, during the 30 days prior to the effective
time of the Merger sell,  transfer or  otherwise  dispose of, or reduce any risk
relative to, any securities of the Company, [PSCo or SPS, as the case may be] or
Newco, and the undersigned will not sell,  transfer or otherwise  dispose of, or
reduce any risk relative to, the Securities  received by the  undersigned in the
Merger or any other  shares of the capital  stock of Newco until after such time
as results  covering  at least 30 days of  operations  of Newco  (including  the
combined  operations  of the  Company  and [PSCo or SPS, as the case may be]) or
Newco have been published by Newco in the form of a quarterly  earnings  report,
an effective registration  statement filed with the Commission,  a report to the
Commission  on  Form  10-K,  10-Q,  or  8-K,  or  any  other  public  filing  or
announcement which includes such results of operations.

         The undersigned acknowledges that it has carefully reviewed this letter
and understands  the  requirements  hereof and the limitations  imposed upon the
distribution,  sale,  transfer  or  other  disposition  of  Securities.  Nothing
contained herein shall be deemed to limit any registration rights granted to the
undersigned pursuant to the Reorganization Agreement.


                                                               Very truly yours,


                                                       -------------------------
                                                                          [Name]












Dated:

         As an inducement to the above individual to deliver this letter,  Newco
agrees that for so long as and to the extent necessary to permit such individual
to sell the Securities pursuant to Rule 145 and, to the extent applicable,  Rule
144 under the Act, Newco shall use all  reasonable  efforts to file, on a timely
basis,  all  reports  and data  required  to be filed by it with the  Commission
pursuant to Section 13 of the Securities and Exchange Act of 1934.

                                                     Very truly yours,

                                                     [NEWCO]



                                                       By:______________________
                                                     Name:
                                                    Title:









                                                                     EXHIBIT D





                              EMPLOYMENT AGREEMENT

                                 BILL D. HELTON







                               TABLE OF CONTENTS

                                                                            PAGE

Employment Period.........................................................  1

Position and Duties.......................................................  1

Compensation..............................................................  2

Termination of Employment.................................................  4

Obligations of the Company upon Termination...............................  7

Non-Exclusivity of Rights.................................................  9

Full Settlement...........................................................  9

Non-Competition Provision and Confidential Information....................  9

Certain Additional Payments by the Company................................ 10

Attorneys' Fees........................................................... 12

Successors................................................................ 12

Miscellaneous............................................................. 13









                              EMPLOYMENT AGREEMENT


          THIS AGREEMENT by and between M-P New Co., a Delaware corporation (the
"Company"),  and Bill D. Helton (the  "Executive"),  dated as of the ____ day of
__________, 199__.


                                WITNESSETH THAT

          WHEREAS,  Public Service Company of Colorado,  a Colorado  corporation
("PSC")  and  Southwestern  Public  Service  Company,  a New Mexico  corporation
("SPS") have entered into an Agreement  and Plan of  Reorganization  dated as of
August  22,  1995  (the  "Reorganization   Agreement"),   whereby  wholly  owned
subsidiaries of Company will merge into PSC and SPS; and

          WHEREAS,  PSC and SPS wish to provide  for the orderly  succession  of
management  of the  Company  following  the  Effective  Time (as  defined in the
Reorganization Agreement the "Effective Time"); and

          WHEREAS, PSC and SPS further wish to provide for the employment by the
Company of the Executive,  and the Executive wishes to serve the Company, in the
capacities and on the terms and conditions set forth in this Agreement;

          NOW, THEREFORE, it is hereby agreed as follows:

          1. Employment Period. The Company shall employ the Executive,  and the
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement,  for an initial  period (the "Initial  Period") and a further  period
(the  "Secondary  Period")  (the  Initial  Period and the  Secondary  Period are
hereinafter  referred  to in the  aggregate  as the  "Employment  Period").  The
Initial   Period  shall  begin  at  the  Effective   Time  (as  defined  in  the
Reorganization  Agreement the "Effective Time") and end on the later of (i) June
30, 1999,  or (ii) two and one-half (2 1/2) years from the Effective  Time.  The
Secondary  Period  shall  begin on the first  day  after the end of the  Initial
Period and end on May 31, 2001.

         2.       Position and Duties.

                  (a) During the Initial  Period,  the Executive  shall serve as
Chief Executive Officer of the Company and Chairman of the Board of Directors of
the Company (the  "Board").  During the Secondary  Period,  the Executive  shall
serve as Chairman of the Board.  The Executive  shall serve in each such case as
an employee of the  Company  and with such  duties and  responsibilities  as are
customarily   assigned   to  such   positions,   and  such   other   duties  and
responsibilities not inconsistent therewith as may from time to time be assigned
to him by the Board. The Executive shall be a



                                       1




member of the Board on the first  day of the  Employment  Period,  and the Board
shall  propose  the  Executive  for  re-election  to the  Board  throughout  the
Employment Period.

                  (b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled,  the Executive shall
devote  reasonable  attention  and  time  during  normal  business  hours to the
business  and affairs of the Company  and, to the extent  necessary to discharge
the  responsibilities  assigned to the Executive under this  Agreement,  use the
Executive's   reasonable  best  efforts  to  carry  out  such   responsibilities
faithfully  and  efficiently.  It shall not be  considered  a  violation  of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees,  so long as such activities do not significantly interfere
with the performance of the Executive's  responsibilities  as an employee of the
Company in accordance with this Agreement.

                  (c) The Executive's  services shall be performed  primarily at
the Company's headquarters in Denver, Colorado.

         3.       Compensation.

                  (a) Base  Salary.  The  Executive's  compensation  during  the
Employment  Period shall be determined by the Board upon the  recommendation  of
the  Compensation  Committee  of the  Board,  subject to the next  sentence  and
Section 3(b).  During the  Employment  Period,  the  Executive  shall receive an
annual  base  salary  ("Annual  Base  Salary")  of not less than his annual base
salary from SPS as in effect  immediately  before the Effective Time. During the
Initial  Period,   Executive  shall  be  compensated  by  the  Company  and  its
subsidiaries  at a level that is higher than the  compensation  from the Company
and its subsidiaries received by any other executive officer of the Company. The
Annual Base Salary shall be payable in  accordance  with the  Company's  regular
payroll  practice  for its senior  executives,  as in effect  from time to time.
During the Employment  Period, the Annual Base Salary shall be reviewed at least
annually.  Any  increase in the Annual Base Salary shall not limit or reduce any
other obligation of the Company under this Agreement.

                  (b) Incentive Compensation.  During the Employment Period, the
Executive  shall  participate  in short-term  incentive  compensation  plans and
long-term incentive  compensation plans (the latter to consist of plans offering
stock options,  restricted  stock and other  long-term  incentive  compensation)
providing him with the opportunity to earn, on a year-by-year basis,  short-term
and long- term incentive  compensation  (the "Incentive  Compensation") at least
equal to the  greater of (i) the  amounts  that he had the  opportunity  to earn
under the comparable plans of SPS as in effect  immediately before the Effective
Time, or (ii) the amounts that the next highest executive officer of the Company
has the opportunity to earn under the plans of the Company and its  subsidiaries
for that year.



                                       2





                  (c)      Other Benefits.

                       (i) Supplemental  Executive  Retirement Plan.  During the
Employment Period,  the Executive shall participate in a supplemental  executive
retirement  plan  ("SERP")  such  that the  aggregate  value  of the  retirement
benefits that he and his spouse will receive at the end of the Employment Period
under all  defined  benefit  plans of the Company  and its  affiliates  (whether
qualified or not) will be not less than the  aggregate  value of the benefits he
and his spouse would have received (and with the same forms of benefit payments)
had he  continued,  through  the end of the  Employment  Period,  to accrue  the
supplemental  retirement  benefits  provided  by the  terms of the  Supplemental
Retirement  Income  Plan of SPS as in effect  immediately  before the  Effective
Time.  The  Company  shall  maintain  and fund one or more  grantor  trusts (the
"Trusts"),  or  such  other  funding  mechanism  as may be  satisfactory  to the
Executive, which shall comply with the following sentence and which shall at all
times be adequate to provide for the payment of all  benefits  under the SERP to
the  Executive,  as well as any elective  deferrals by the  Executive  under any
non-qualified  plan (with  such  adequacy  being  determined  by an  independent
consulting  firm  acceptable to the  Executive,  whose fees shall be paid by the
Company).  The  assets of the  Trusts (if any) shall be subject to the claims of
the Company's creditors,  and the Trusts (if any) shall in all other respects be
designed to prevent the  Executive and his spouse from being taxed on the assets
or income thereof, except as and when such assets or income are paid to them.

                       (ii) During the  Employment  Period,  the  Company  shall
provide the Executive with life insurance  coverage providing a death benefit to
such  beneficiary  or  beneficiaries  as the Executive may designate of not less
than two times his Annual Base Salary.

                       (iii) In addition, and without limiting the generality of
the foregoing,  during the Employment  Period and thereafter:  (A) the Executive
shall be  entitled  to  participate  in all  applicable  incentive,  savings and
retirement  plans,  practices,  policies  and  programs  of the  Company and its
subsidiaries to the same extent as other senior  executives of the Company;  and
(B) the Executive  and/or the Executive's  family,  as the case may be, shall be
eligible  for  participation  in, and shall  receive  all  benefits  under,  all
applicable welfare benefit plans,  practices,  policies and programs provided by
the  Company  and its  subsidiaries,  other  than  severance  plans,  practices,
policies and programs but including, without limitation,  medical, prescription,
dental,  disability,  sick leave, employee life insurance, group life insurance,
accidental death and travel accident  insurance plans and programs,  to the same
extent as other senior executives of the Company.

                  (d)  Fringe  Benefits.   During  the  Employment  Period,  the
Executive  shall be  entitled to receive  fringe  benefits on the same terms and
conditions as the greater of (i) the fringe  benefits  received by, or available
to, him from SPS immediately before the



                                       3




Effective Time, including but not limited to, relocation  assistance under SPS's
Relocation  Assistance  Policy,  or (ii) the  fringe  benefits  provided  by the
Company or its  subsidiaries  which are available to the next highest  executive
officer of the Company for the year.

         4.       Termination of Employment.

                  (a) Death or  Disability.  The  Executive's  employment  shall
terminate automatically upon the Executive's death during the Employment Period.
The Company shall be entitled to terminate the Executive's employment because of
the Executive's Disability during the Employment Period. "Disability" means that
(i) the  Executive  has been unable,  for a period of 180  consecutive  business
days, to perform the  Executive's  duties under this  Agreement,  as a result of
physical  or mental  illness  or injury,  and (i) a  physician  selected  by the
Company or its insurers,  and  acceptable  to the  Executive or the  Executive's
legal  representative,  has determined that the Executive's  incapacity is total
and permanent.  A termination of the  Executive's  employment by the Company for
Disability  shall be communicated to the Executive by written notice,  and shall
be effective on the 30th day after receipt of such notice by the Executive  (the
"Disability   Effective  Date"),  unless  the  Executive  returns  to  full-time
performance of the Executive's duties before the Disability Effective Date.

                  (b)      By the Company.

                       (i) The Company may terminate the Executive's  employment
during the Employment Period for Cause or without Cause. "Cause" means:

                       A. the willful  and  continued  failure of the  Executive
substantially to perform the Executive's duties under this Agreement (other than
as a result of  physical or mental  illness or  injury),  after the Board of the
Company  delivers to the Executive a written demand for substantial  performance
that  specifically  identifies  the manner in which the Board  believes that the
Executive has not substantially performed the Executive's duties; or

                       B. illegal conduct or gross  misconduct by the Executive,
in either case that is willful and results in material and  demonstrable  damage
to the business or reputation of the Company.

                       No act or  failure  to act on the  part of the  Executive
shall be considered  "willful"  unless it is done, or omitted to be done, by the
Executive in bad faith or without  reasonable belief that the Executive's action
or omission was in the best interests of the Company.  Any act or failure to act
that is based upon authority  given pursuant to a resolution duly adopted by the
Board, or the advice of counsel for the Company, shall be conclusively presumed



                                       4




to be done, or omitted to be done, by the Executive in good faith
and in the best interests of the Company.

                       (ii) A  termination  of the  Executive's  employment  for
Cause shall be effected in accordance with the following procedures. The Company
shall give the Executive  written notice  ("Notice of Termination for Cause") of
its intention to terminate the Executive's  employment for Cause,  setting forth
in reasonable  detail the specific conduct of the Executive that it considers to
constitute  Cause and the specific  provision(s)  of this  Agreement on which it
relies,  and stating the date,  time and place of the Special  Board Meeting for
Cause. The "Special Board Meeting for Cause" means a meeting of the Board called
and held specifically for the purpose of considering the Executive's termination
for Cause,  that takes place not less than ten and not more than twenty business
days after the  Executive  receives  the Notice of  Termination  for Cause.  The
Executive shall be given an opportunity,  together with counsel,  to be heard at
the Special Board Meeting for Cause. The Executive's termination for Cause shall
be  effective  when and if a  resolution  is duly  adopted at the Special  Board
Meeting for Cause by affirmative  vote of at least the greater of (A) two-thirds
(2/3) of the entire  membership of the Board  (excluding the Executive who shall
not vote on this matter) or (B) ten (10)  members of the Board,  stating that in
the good faith  opinion of the Board,  the  Executive  is guilty of the  conduct
described in the Notice of Termination for Cause,  and that conduct  constitutes
Cause under this Agreement.

                       (iii) A termination of the Executive's employment without
Cause shall be  effective  in  accordance  with the  following  procedures.  The
Company shall give the Executive written notice ("Notice of Termination  without
Cause") of its intention to terminate the Executive's  employment without Cause,
stating the date, time and place of the Special Board Meeting without Cause. The
"Special  Board Meeting  without  Cause" means a meeting of the Board called and
held  specifically  for the purpose of considering the  Executive's  termination
without  Cause,  that  takes  place not less  than ten and not more than  twenty
business days after the  Executive  receives the Notice of  Termination  without
Cause. The Executive shall be given an opportunity, together with counsel, to be
heard at the Special Board Meeting without Cause.  The  Executive's  termination
without Cause shall be effective when and if a resolution is duly adopted at the
Special Board Meeting without Cause by affirmative  vote of at least the greater
of (A)  two-thirds  (2/3) of the entire  membership of the Board  (excluding the
Executive  who shall not vote on this  matter)  or (B) ten (10)  members  of the
Board, stating that the Executive is terminated without Cause.

                  (c)      Good Reason.

                       (i) The  Executive  may  terminate  employment  for  Good
Reason or without Good Reason. "Good Reason" means:




                                       5




                       A.  the   assignment  to  the  Executive  of  any  duties
inconsistent in any respect with paragraph (a) of Section 2 of his Agreement, or
any other action by the Company that results in a diminution in the  Executive's
position,  authority,  duties  or  responsibilities,  other  than  an  isolated,
insubstantial  and  inadvertent  action  that is not  taken in bad  faith and is
remedied  by the  Company  promptly  after  receipt of notice  thereof  from the
Executive;

                       B.  any  failure  by  the  Company  to  comply  with  any
provision of Section 3 of this Agreement, other than an isolated,  insubstantial
and  inadvertent  failure  that is not taken in bad faith and is remedied by the
Company promptly after receipt of notice thereof from the Executive;

                       C. the assignment or  reassignment  by the Company of the
Executive  without the  Executive's  consent to another place of employment more
than 50 miles from the Company's headquarters indicated in Section 2(d);

                       D.  any   purported   termination   of  the   Executive's
employment by the Company for a reason or in a manner not expressly permitted by
this Agreement;

                       E. any failure by the  Company to comply  with  paragraph
(c) of Section 11 of this Agreement; or

                       F. any other substantial  breach of this Agreement by the
Company that either is not taken in good faith or is not remedied by the Company
promptly after receipt of notice thereof from the Executive.

The Company and the Executive,  upon mutual written agreement,  may waive any of
the foregoing provisions which would otherwise constitute Good Reason.

                       (ii) A  termination  of  employment  by the Executive for
Good Reason shall be effectuated by giving the Company  written notice  ("Notice
of Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific  conduct of the Company that constitutes Good Reason and the
specific  provision(s)  of this  Agreement  on which  the  Executive  relies.  A
termination of employment by the Executive for Good Reason shall be effective on
the fifth  business day  following the date when the Notice of  Termination  for
Good  Reason is given,  unless the notice  sets forth a later date  (which  date
shall in no event be later than 30 days after the notice is given). For purposes
of this Section 4(c), any good faith  determination of "Good Reason" made by the
Executive shall be conclusive.

                       (iii) A termination of the Executive's  employment by the
Executive  without Good Reason  shall be effected by giving the Company  written
notice of the termination.




                                       6




                  (d)  No  Waiver.   The  failure  to  set  forth  any  fact  or
circumstance  in a Notice of  Termination  for  Cause,  a Notice of  Termination
without Cause or a Notice of Termination  for Good Reason shall not constitute a
waiver of the right to assert,  and shall not preclude  the party giving  notice
from  asserting,  such fact or  circumstance  in an attempt to enforce any right
under or provision of this Agreement.

                  (e) Date of Termination.  The "Date of Termination"  means the
date of the Executive's death, the Disability  Effective Date, the date on which
the  termination  of the  Executive's  employment  by the  Company  for Cause or
without Cause or by the  Executive for Good Reason is effective,  or the date on
which the  Executive  gives the Company  notice of a  termination  of employment
without Good Reason, as the case may be.

         5.       Obligations of the Company upon Termination.

                  (a) By the Company other than for cause or disability;  by the
Executive  for Good  Reason.  If,  during the  Employment  Period,  the  Company
terminates the Executive's  employment,  other than for Cause or Disability,  or
the Executive terminates  employment for Good Reason, the Company shall continue
to  provide  the  Executive  with the  compensation  and  benefits  set forth in
paragraphs  (a), (b) and (c) of Section 3 as if he had remained  employed by the
Company pursuant to this Agreement  through the end of the Employment Period and
then  retired  (at which  time he will be treated as  eligible  for all  retiree
welfare benefits and other benefits  provided to retired senior  executives,  as
set  forth  in  Section  3(c)(ii)  and  (iii));  PROVIDED,  that  the  Incentive
Compensation   for  such  period  shall  be  based  upon  the  target  Incentive
Compensation  for the year in which the Date of  Termination  occurs;  PROVIDED,
further,  that in lieu of stock options,  restricted stock and other stock-based
awards,  the  Executive  shall be paid cash equal to the fair market value as of
the Date of Termination  (without  regard to any  restrictions  and based upon a
valuation  model  generally  utilized for purposes of valuing  comparable  stock
based  compensation  awards) of the stock  options,  restricted  stock and other
stock-based  awards that would  otherwise have been granted with such cash being
paid within 90 days after the Date of Termination;  PROVIDED,  further,  that to
the  extent  any  benefits  described  in  paragraph  (c) of Section 3 cannot be
provided  pursuant  to the plan or program  maintained  by the  Company  for its
executives, the Company shall provide such benefits outside such plan or program
at no additional cost (including  without  limitation tax cost) to the Executive
and his family; and PROVIDED, finally, that during any period when the Executive
is eligible to receive benefits of the type described in clause (B) of paragraph
(c)(iii)  of  Section  3 under  another  employer-provided  plan,  the  benefits
provided by the Company under  paragraph (a) of Section 5 may be made  secondary
to those  provided  under  another  plan.  In  addition  to the  foregoing,  any
restricted stock outstanding on the Date of Termination shall be fully vested as
of the Date of Termination and all options outstanding on the Date of



                                       7




Termination shall be fully vested and exercisable and shall remain in effect and
exercisable  through the end of their  respective  terms,  without regard to the
termination of the Executive's  employment.  The payments and benefits  provided
pursuant to this  paragraph (a) of Section 5 are intended as liquidated  damages
for a termination  of the  Executive's  employment by the Company other than for
Cause or Disability  or for the actions of the Company  leading to a termination
of the Executive's employment by the Executive for Good Reason, and shall be the
sole and exclusive remedy therefor.

                  (b) Death or  Disability.  If the  Executive's  employment  is
terminated  by  reason  of  the  Executive's  death  or  Disability  during  the
Employment Period, the Company shall pay to the Executive or, in the case of the
Executive's death, to the Executive's designated  beneficiaries (or, if there is
no such beneficiary,  to the Executive's  estate or legal  representative)  in a
lump sum in cash  within 30 days after the Date of  Termination,  the sum of the
following  amounts  (the  "Accrued   Obligations"):   (1)  any  portion  of  the
Executive's  Annual Base Salary through the Date of Termination that has not yet
been paid; (2) an amount representing the target Incentive  Compensation for the
year that includes the Date of Termination, computed by assuming that the amount
of all such target Incentive  Compensation  would be equal to the amount of such
target  Incentive  Compensation  that the Executive  would have been eligible to
earn for such period,  and multiplying that amount by a fraction,  the numerator
of which is the number of days in such period  through the Date of  Termination,
and the  denominator of which is the total number of days in the relevant period
(3) any  compensation  previously  deferred by the Executive  (together with any
accrued  interest or earnings  thereon) that has not yet been paid;  and (4) any
accrued but unpaid  Incentive  Compensation  and  vacation  pay; and the Company
shall have no further  obligations under this Agreement,  except as specified in
Section  6 below.  If the  Executive's  employment  is  terminated  by reason of
Disability,  he shall be entitled to receive  the  maximum  disability  payments
which can be provided under the disability plans described in Section  3(c)(ii),
reduced, however, by actual disability benefits received under such plans.

                  (c) By the Company for Cause;  by the Executive other than for
Good Reason.  If the  Executive's  employment  is  terminated by the Company for
Cause during the  Employment  Period,  the Company  shall pay the  Executive the
Annual  Base  Salary  through  the Date of  Termination  and the  amount  of any
compensation  previously  deferred by the Executive  (together  with any accrued
interest or earnings thereon),  in each case to the extent not yet paid, and the
Company  shall  have no further  obligations  under  this  Agreement,  except as
specified in Section 6 below. If the Executive voluntarily terminates employment
during the Employment Period,  other than for Good Reason, the Company shall pay
the Accrued Obligations to the Executive in a lump sum in cash within 30 days of
the Date of Termination, and the Company shall have no further obligations under
this Agreement, except as specified in Section 6 below.



                                       8





          6. Non-Exclusivity of Rights.  Nothing in this Agreement shall prevent
or limit  the  Executive's  continuing  or  future  participation  in any  plan,
program,  policy or practice  provided  by the Company or any of its  affiliated
companies for which the Executive may qualify,  nor, subject to paragraph (f) of
Section 12, shall  anything in this  Agreement  limit or  otherwise  affect such
rights as the  Executive  may have  under any  contract  or  agreement  with the
Company or any of its affiliated  companies.  Vested  benefits and other amounts
that the Executive is otherwise  entitled to receive under the SERP or any other
plan,  policy,  practice or program of, or any contract or agreement  with,  the
Company or any of its  affiliated  companies on or after the Date of Termination
shall be  payable  in  accordance  with the  terms of each  such  plan,  policy,
practice,  program,  contract  or  agreement,  as the  case  may be,  except  as
explicitly modified by this Agreement.

          7. Full  Settlement.  The  Company's  obligation  to make the payments
provided for in, and otherwise to perform its obligations  under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim,  right or action  that the  Company may have  against  the  Executive  or
others. In no event shall the Executive be obligated to seek other employment or
take any  other  action  by way of  mitigation  of the  amounts  payable  to the
Executive  under  any of  the  provisions  of  this  Agreement  and,  except  as
specifically  provided in  paragraph  (a) of Section 5 with  respect to benefits
described in clause (B) of paragraph  (c)(iii) of Section 3, such amounts  shall
not be reduced, regardless of whether the Executive obtains other employment.

         8.       Non-Competition Provision and Confidential Information.

                  (a) Without  prior  written  consent of the  Company,  for the
greater  of (i)  the  twenty-four  (24)  month  period  following  the  Date  of
Termination,  or (ii) the remaining term of this Agreement,  the Executive shall
not, as a shareholder,  officer,  director,  partner,  consultant, or otherwise,
engage  directly  or  indirectly  in any  business  or  enterprise  which is "in
competition" with the Company or its successors or assigns;  provided,  however,
that the  Executive's  ownership  of less than five  percent  of the  issued and
outstanding  voting securities of a publicly-traded  company shall not be deemed
to  constitute  such  competition.  A business or enterprise is deemed to be "in
competition"  if  it  is  engaged  in  the  business  of  generation,  purchase,
transmission,  distribution,  or  sale  of  electricity,  or  in  the  purchase,
transmission,  distribution,  sale or  transportation  of natural gas within the
States of Colorado, New Mexico, Texas, Wyoming, Kansas or Oklahoma.


                  (b) The Executive  shall hold in a fiduciary  capacity for the
benefit of the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated  companies and their respective
businesses that the Executive  obtains during the Executive's  employment by the
Company or any of its  affiliated  companies  and that is not  public  knowledge
(other



                                       9




than as a result of the Executive's  violation of this Section 8) ("Confidential
Information").  The  Executive  shall not  communicate,  divulge or  disseminate
Confidential  Information at any time during or after the Executive's employment
with the  Company,  except with the prior  written  consent of the Company or as
otherwise  required  by law or legal  process.  In no event  shall any  asserted
violation of the  provisions  of this Section 8 constitute a basis for deferring
or  withholding  any  amounts  otherwise  payable  to the  Executive  under this
Agreement.

         9.       Certain Additional Payments by the Company.

                  (a)    Anything   in   this    Agreement   to   the   contrary
notwithstanding,  in the  event it  shall be  determined  that  any  payment  or
distribution by the Company to or for the benefit of the Executive (whether paid
or  payable  or  distributed  or  distributable  pursuant  to the  terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment")  would be subject to the excise tax
imposed by Section  4999 of the Internal  Revenue Code of 1986,  as amended (the
"Code") or any interest or penalties are incurred by the Executive  with respect
to such  excise  tax (such  excise  tax,  together  with any such  interest  and
penalties,  are hereinafter  collectively referred to as the "Excise Tax"), then
the Executive  shall be entitled to receive an  additional  payment (a "Gross-Up
Payment")  in an amount such that after  payment by the  Executive  of all taxes
(including  any  interest or  penalties  imposed  with  respect to such  taxes),
including,  without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up  Payment,
the Executive  retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

                  (b) Subject to the provisions of paragraph (c) of this Section
9, all  determinations  required  to be made  under this  Section  9,  including
whether and when a Gross-Up  Payment is required and the amount of such Gross-up
Payment and the  assumptions  to be utilized in arriving at such  determination,
shall  be made by a  nationally  recognized  certified  public  accounting  firm
designated  by the  Executive  (the  "Accounting  Firm"),  which  shall  provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive  that there has been a
Payment,  or such earlier  time as is  requested  by the  Company.  All fees and
expenses  of the  Accounting  Firm  shall be borne  solely by the  Company.  Any
Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the  Executive  within  five days of the  receipt  of the  Accounting
Firm's determination.  Any determination by the Accounting Firm shall be binding
upon the  Company  and the  Executive.  As a result  of the  uncertainty  in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting  Firm hereunder,  it is possible that Gross-Up  Payments which
will not have been made by the Company  should  have been made  ("Underpayment")
consistent with the calculations



                                       10




required  to be made  hereunder.  In the event  that the  Company  exhausts  its
remedies  pursuant  to  paragraph  (c)  of  this  Section  9 and  the  Executive
thereafter is required to make a payment of any Excise Tax, the Accounting  Firm
shall  determine the amount of the  Underpayment  that has occurred and any such
Underpayment  shall be promptly paid by the Company to or for the benefit of the
Executive.

                  (c) The  Executive  shall notify the Company in writing of any
claim by the Internal  Revenue  Service that, if  successful,  would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as  practicable  but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such  claim and the date on which  such claim is  requested  to be paid.  The
Executive  shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period  ending on the date that any payment of taxes with  respect to such claim
is  due).  If the  Company  notifies  the  Executive  in  writing  prior  to the
expiration  of such period that it desires to contest such claim,  the Executive
shall:

                       (i) give the Company any information reasonably requested
by the Company relating to such claim,

                       (ii) take such action in connection  with contesting such
claim as the  Company  shall  reasonably  request in writing  from time to time,
including,  without limitation,  accepting legal  representation with respect to
such claim by an attorney reasonably selected by the Company,

                       (iii)  cooperate  with the Company in good faith in order
effectively to contest such claim, and

                       (iv) permit the Company to participate in any proceedings
relating to such claim;

          PROVIDED,  however,  that the Company  shall bear and pay directly all
costs and expenses  (including  additional  interest and penalties)  incurred in
connection  with  such  contest  and  shall  indemnify  and hold  the  Executive
harmless,  on an after-tax  basis,  for any Excise Tax or income tax  (including
interest  and  penalties  with  respect  thereto)  imposed  as a result  of such
representation  and payment of costs and  expenses.  Without  limitation  on the
foregoing  provisions  of this  paragraph  (c) of Section 9, the  Company  shall
control all  proceedings  taken in connection with such contest and, at its sole
option,  may pursue or forego any and all administrative  appeals,  proceedings,
hearings and conferences  with the taxing authority in respect of such claim and
may, at its sole option,  either direct the Executive to pay the tax claimed and
sue for a refund  or  contest  the  claim  in any  permissible  manner,  and the
Executive  agrees to  prosecute  such  contest  to a  determination  before  any
administrative tribunal, in a court of initial



                                       11




jurisdiction  and  in  one or  more  appellate  courts,  as  the  Company  shall
determine;  PROVIDED,  however, that if the Company directs the Executive to pay
such claim and sue for a refund,  the Company  shall  advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including  interest or penalties with respect  thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and PROVIDED, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive  with respect to which
such  contested  amount is claimed to be due is limited solely to such contested
amount.  Furthermore,  the Company's  control of the contest shall be limited to
issues with respect to which a Gross-Up  Payment would be payable  hereunder and
the  Executive  shall be entitled to settle or contest,  as the case may be, any
other  issue  raised  by  the  Internal  Revenue  Service  or any  other  taxing
authority.

                  (d) If,  after  the  receipt  by the  Executive  of an  amount
advanced  by the  Company  pursuant  to  paragraph  (c) of this  Section  9, the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive  shall (subject to the Company's  complying with the  requirements  of
paragraph  (c) of this Section 9) promptly pay to the Company the amount of such
refund  (together  with  any  interest  paid or  credited  thereon  after  taxes
applicable thereto). If after the receipt by the Executive of an amount advanced
by the Company  pursuant to paragraph (c) of this Section 9, a determination  is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the  Executive in writing of its intent to
contest  such  denial of refund  prior to the  expiration  of 30 days after such
determination,  then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance  shall offset,  to the extent  thereof,
the amount of Gross-Up Payment required to be paid.

          10.  Attorneys'  Fees. The Company agrees to pay, as incurred,  to the
fullest extent  permitted by law, all legal fees and expenses that the Executive
may reasonably  incur as a result of any contest  (regardless of the outcome) by
the Company,  the  Executive or others of the validity or  enforceability  of or
liability  under,  or otherwise  involving,  any  provision  of this  Agreement,
together with  interest on any delayed  payment at the  applicable  federal rate
provided for in Section 7872(f)(2)(A) of the Code.

         11.      Successors.

                  (a) This Agreement is personal to the Executive  and,  without
the  prior  written  consent  of the  Company,  shall not be  assignable  by the
Executive  otherwise than by will or the laws of descent and distribution.  This
Agreement  shall inure to the benefit of and be enforceable  by the  Executive's
legal representatives.




                                       12




                  (b)  This  Agreement  shall  inure  to the  benefit  of and be
binding upon the Company and its successors and assigns.

                  (c) The Company shall require any successor (whether direct or
indirect,   by  purchase,   merger,   consolidation  or  otherwise)  to  all  or
substantially  all of the  business  and/or  assets of the Company  expressly to
assume and agree to perform  this  Agreement  in the same manner and to the same
extent  that the  Company  would  have been  required  to  perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such  successor  that assumes and agrees to
perform this Agreement, by operation of law or otherwise.

         12.      Miscellaneous.

                  (a) This  Agreement  shall be governed  by, and  construed  in
accordance  with,  the  laws of the  State of  Colorado,  without  reference  to
principles of conflict of laws.  The captions of this  Agreement are not part of
the provisions hereof and shall have no force or effect.  This Agreement may not
be amended or  modified  except by a written  agreement  executed by the parties
hereto or their respective successors and legal representatives.

                  (b) All notices and other  communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or by
registered  or  certified  mail,  return  receipt  requested,  postage  prepaid,
addressed as follows:

If to the Executive:
                                    Mr. Bill D. Helton
                                    7801 Tarrytown Avenue
                                    Amarillo, TX  79121

If to the Company:
                                  M-P New Co.
                                1225 17th Street
                                Denver, CO 80202
                                    Attention: General Counsel

or to such other  address as either  party  furnishes to the other in writing in
accordance  with this  paragraph (b) of Section 12.  Notices and  communications
shall be effective when actually received by the addressee.

                  (c) The  invalidity  or  unenforceability  of any provision of
this  Agreement  shall not affect the  validity or  enforceability  of any other
provision of this  Agreement.  If any provision of this Agreement  shall be held
invalid or  unenforceable  in part,  the  remaining  portion of such  provision,
together  with all other  provisions of this  Agreement,  shall remain valid and
enforceable  and  continue  in full  force  and  effect  to the  fullest  extent
consistent with law.




                                       13




                  (d) Notwithstanding any other provision of this Agreement, the
Company may withhold  from amounts  payable  under this  Agreement  all federal,
state,  local and foreign  taxes that are required to be withheld by  applicable
laws or regulations.

                  (e) The  Executive's  or the Company's  failure to insist upon
strict  compliance  with any  provision  of, or to assert any right under,  this
Agreement  (including,  without  limitation,  the  right  of  the  Executive  to
terminate  employment for Good Reason  pursuant to paragraph (c) of Section 4 of
this Agreement) shall not be deemed to be a waiver of such provision or right or
of any other provision of or right under this Agreement.

                  (f)  The  Executive  and the  Company  acknowledge  that  this
Agreement   supersedes  and  terminates  any  other   severance  and  employment
agreements  between  the  Executive  and  the  Company,  SPS  or  the  Company's
affiliates.

                  (g) The  rights  and  benefits  of the  Executive  under  this
Agreement may not be anticipated,  assigned, alienated or subject to attachment,
garnishment,  levy,  execution  or other legal or  equitable  process  except as
required by law. Any attempt by the Executive to  anticipate,  alienate  assign,
sell,  transfer,  pledge,  encumber  or charge the same shall be void.  Payments
hereunder  shall  not be  considered  assets  of the  Executive  in the event of
insolvency or bankruptcy.

                  (h) This  Agreement  may be executed in several  counterparts,
each of  which  shall  be  deemed  an  original,  and  said  counterparts  shall
constitute but one and the same instrument.

          IN WITNESS  WHEREOF,  the Executive  has hereunto set the  Executive's
hand and, pursuant to the  authorization of its Board of Directors,  the Company
has caused this  Agreement  to be executed in its name on its behalf,  all as of
the day and year first above written.

                                               -------------------------------
                                               Bill D. Helton

                                          COMPANY

                                               By:______________________________



                                       14




                                                                     EXHIBIT E









                              EMPLOYMENT AGREEMENT

                               WAYNE H. BRUNETTI







                               TABLE OF CONTENTS

                                                                            PAGE

Employment Period.........................................................  1

Position and Duties.......................................................  1

Compensation..............................................................  2

Termination of Employment.................................................  4

Obligations of the Company upon Termination...............................  7

Non-Exclusivity of Rights.................................................  9

Full Settlement...........................................................  9

Non-Competition Provision and Confidential Information....................  9

Certain Additional Payments by the Company................................ 10

Attorneys' Fees........................................................... 12

Successors................................................................ 13

Miscellaneous............................................................. 13













                              EMPLOYMENT AGREEMENT


         THIS AGREEMENT by and between M-P New Co., a Delaware  corporation (the
"Company"), and Wayne H. Brunetti (the "Executive"), dated as of the ____ day of
__________, 199__.


                                WITNESSETH THAT

         WHEREAS,  Public Service  Company of Colorado,  a Colorado  corporation
("PSC")  and  Southwestern  Public  Service  Company,  a New Mexico  corporation
("SPS") have entered into an Agreement  and Plan of  Reorganization  dated as of
August  22,  1995  (the  "Reorganization   Agreement"),   whereby  wholly  owned
subsidiaries of Company will merge into PSC and SPS; and

         WHEREAS,  PSC and SPS wish to provide  for the  orderly  succession  of
management  of the  Company  following  the  Effective  Time (as  defined in the
Reorganization Agreement); and

         WHEREAS,  PSC and SPS further wish to provide for the employment by the
Company of the Executive,  and the Executive wishes to serve the Company, in the
capacities and on the terms and conditions set forth in this Agreement;

         NOW, THEREFORE, it is hereby agreed as follows:

         1. Employment Period.  The Company shall employ the Executive,  and the
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement,  for an initial  period (the "Initial  Period") and a further  period
(the  "Secondary  Period")  (the  Initial  Period and the  Secondary  Period are
hereinafter  referred  to in the  aggregate  as the  "Employment  Period").  The
Initial   Period  shall  begin  at  the  Effective   Time  (as  defined  in  the
Reorganization  Agreement the "Effective Time") and end on the later of (i) June
30, 1999,  or (ii) two and one-half (2 1/2) years from the Effective  Time.  The
Secondary  Period  shall  begin on the first  day  after the end of the  Initial
Period and end on May 31, 2001.

         2.       Position and Duties.

                  (a) During the Initial  Period,  the Executive  shall serve as
President and Chief Operating  Officer of the Company,  and as  Vice-Chairman of
the Board of the  Company  (the  "Board").  During  the  Secondary  Period,  the
Executive shall serve as President of the Company,  Chief  Executive  Officer of
the Company and  Vice-Chairman  of the Board.  The Executive shall serve in each
case as an employee of the Company and with such duties and  responsibilities as
are  customarily  assigned  to  such  positions,   and  such  other  duties  and
responsibilities not inconsistent therewith as may from time to time be assigned
to him by the Board. The Executive shall



                                       1








be a member  of the Board on the first  day of the  Employment  Period,  and the
Board shall propose the Executive for  re-election  to the Board  throughout the
Employment Period.

                  (b) During the Initial  Period as is customary,  the Executive
shall report to the Chief Executive  Officer and during the Secondary Period, as
is customary the Executive shall report to the Board.

                  (c) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled,  the Executive shall
devote  reasonable  attention  and  time  during  normal  business  hours to the
business  and affairs of the Company  and, to the extent  necessary to discharge
the  responsibilities  assigned to the Executive under this  Agreement,  use the
Executive's   reasonable  best  efforts  to  carry  out  such   responsibilities
faithfully  and  efficiently.  It shall not be  considered  a  violation  of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees,  so long as such activities do not significantly interfere
with the performance of the Executive's  responsibilities  as an employee of the
Company in accordance with this Agreement.

                  (d)      The Executive's services shall be performed
primarily at the Company's headquarters in Denver, Colorado.

         3.       Compensation.

                  (a) Base  Salary.  The  Executive's  compensation  during  the
Employment  Period shall be determined by the Board upon the  recommendation  of
the  Compensation  Committee  of the  Board,  subject to the next  sentence  and
Section 3(b).  During the  Employment  Period,  the  Executive  shall receive an
annual  base  salary  ("Annual  Base  Salary")  of not less than his annual base
salary from PSC as in effect  immediately  before the Effective Time. During the
Initial  Period,   Executive  shall  be  compensated  by  the  Company  and  its
subsidiaries  at a level that is higher than the  compensation  from the Company
and its  subsidiaries  received  by any other  executive  officer of the Company
except the Chief  Executive  Officer and Chairman of the Board.  The Annual Base
Salary  shall be  payable  in  accordance  with the  Company's  regular  payroll
practice for its senior  executives,  as in effect from time to time. During the
Employment  Period,  the Annual Base Salary shall be reviewed at least annually.
Any  increase  in the  Annual  Base  Salary  shall not limit or reduce any other
obligation of the Company under this Agreement.

                  (b) Incentive Compensation.  During the Employment Period, the
Executive  shall  participate  in short-term  incentive  compensation  plans and
long-term incentive  compensation plans (the latter to consist of plans offering
stock options,  restricted  stock and other  long-term  incentive  compensation)
providing him with the opportunity to earn, on a year-by-year basis,  short-term
and long-term incentive compensation (the "Incentive Compensation") at least



                                       2








equal to the  greater of (i) the  amounts  that he had the  opportunity  to earn
under the comparable plans of PSC as in effect  immediately before the Effective
Time, or (ii) the amounts that the next highest executive officer of the Company
has the opportunity to earn under plans of the Company and its  subsidiaries for
that year.

                  (c)      Other Benefits.

                       (i) Supplemental  Executive  Retirement Plan.  During the
Employment Period,  the Executive shall participate in a supplemental  executive
retirement  plan  ("SERP")  such  that the  aggregate  value  of the  retirement
benefits that he and his spouse will receive at the end of the Employment Period
under all  defined  benefit  plans of the Company  and its  affiliates  (whether
qualified or not) will be not less than the  aggregate  value of the benefits he
and his spouse would have received (and with the same forms of benefit payments)
had he  continued,  through  the end of the  Employment  Period,  to accrue  the
supplemental  retirement  benefits  provided  by the  terms  of  his  employment
agreement  with PSC as in effect  immediately  before the  Effective  Time.  The
Company shall  maintain and fund one or more grantor trusts (the  "Trusts"),  or
such other funding  mechanism as may be  satisfactory  to the  Executive,  which
shall  comply  with the  following  sentence  and  which  shall at all  times be
adequate  to  provide  for the  payment  of all  benefits  under the SERP to the
Executive,  as  well  as any  elective  deferrals  by the  Executive  under  any
non-qualified  plan (with  such  adequacy  being  determined  by an  independent
consulting  firm  acceptable to the  Executive,  whose fees shall be paid by the
Company).  The  assets of the  Trusts (if any) shall be subject to the claims of
the Company's creditors,  and the Trusts (if any) shall in all other respects be
designed to prevent the  Executive and his spouse from being taxed on the assets
or income thereof, except as and when such assets or income are paid to them.

                       (ii) During the  Employment  Period,  the  Company  shall
provide the Executive with life insurance  coverage providing a death benefit to
such  beneficiary  or  beneficiaries  as the Executive may designate of not less
than two times his Annual Base Salary.

                       (iii) In addition, and without limiting the generality of
the foregoing,  during the Employment  Period and thereafter:  (A) the Executive
shall be  entitled  to  participate  in all  applicable  incentive,  savings and
retirement  plans,  practices,  policies  and  programs  of the  Company and its
subsidiaries to the same extent as other senior  executives of the Company;  and
(B) the Executive  and/or the Executive's  family,  as the case may be, shall be
eligible  for  participation  in, and shall  receive  all  benefits  under,  all
applicable welfare benefit plans,  practices,  policies and programs provided by
the  Company  and its  subsidiaries,  other  than  severance  plans,  practices,
policies and programs but including, without limitation,  medical, prescription,
dental,  disability,  sick leave, employee life insurance, group life insurance,
accidental death and travel accident insurance plans and



                                       3








programs,  to the same extent as other senior  executives of the Company.

                       (d) Fringe Benefits.  During the Employment  Period,  the
Executive  shall be  entitled to receive  fringe  benefits on the same terms and
conditions as the greater of (i) the fringe  benefits  received by, or available
to, him from PSC  immediately  before  the  Effective  Time,  or (ii) the fringe
benefits provided by the Company or its subsidiaries  which are available to the
next highest executive officer of the Company for the year.

         4.       Termination of Employment.

                  (a) Death or  Disability.  The  Executive's  employment  shall
terminate automatically upon the Executive's death during the Employment Period.
The Company shall be entitled to terminate the Executive's employment because of
the Executive's Disability during the Employment Period. "Disability" means that
(i) the  Executive  has been unable,  for a period of 180  consecutive  business
days, to perform the  Executive's  duties under this  Agreement,  as a result of
physical  or mental  illness  or injury,  and (i) a  physician  selected  by the
Company or its insurers,  and  acceptable  to the  Executive or the  Executive's
legal  representative,  has determined that the Executive's  incapacity is total
and permanent.  A termination of the  Executive's  employment by the Company for
Disability  shall be communicated to the Executive by written notice,  and shall
be effective on the 30th day after receipt of such notice by the Executive  (the
"Disability   Effective  Date"),  unless  the  Executive  returns  to  full-time
performance of the Executive's duties before the Disability Effective Date.

                  (b)      By the Company.

                           (i)  The Company may terminate the Executive's
employment during the Employment Period for Cause or without Cause.
"Cause" means:

                           A.       the willful and continued failure of the
Executive  substantially to perform the Executive's  duties under this Agreement
(other  than as a result of physical  or mental  illness or  injury),  after the
Board of the Company  delivers to the Executive a written demand for substantial
performance that specifically  identifies the manner in which the Board believes
that the Executive has not substantially performed the Executive's duties; or

                           B.       illegal conduct or gross misconduct by the
Executive,  in  either  case  that  is  willful  and  results  in  material  and
demonstrable damage to the business or reputation of the Company.

         No  act  or  failure  to act on the  part  of the  Executive  shall  be
considered  "willful" unless it is done, or omitted to be done, by the Executive
in bad faith or without reasonable belief that the



                                       4








Executive's action or omission was in the best interests of the Company. Any act
or failure to act that is based upon  authority  given  pursuant to a resolution
duly adopted by the Board,  or the advice of counsel for the  Company,  shall be
conclusively  presumed to be done,  or omitted to be done,  by the  Executive in
good faith and in the best interests of the Company.

                           (ii)  A termination of the Executive's employment
for Cause shall be effected in  accordance  with the following  procedures.  The
Company shall give the Executive  written  notice  ("Notice of  Termination  for
Cause") of its  intention to terminate  the  Executive's  employment  for Cause,
setting forth in reasonable detail the specific conduct of the Executive that it
considers to constitute Cause and the specific provision(s) of this Agreement on
which it relies,  and  stating  the date,  time and place of the  Special  Board
Meeting for Cause.  The "Special Board Meeting for Cause" means a meeting of the
Board  called  and  held   specifically  for  the  purpose  of  considering  the
Executive's  termination  for Cause,  that takes place not less than ten and not
more than  twenty  business  days  after the  Executive  receives  the Notice of
Termination for Cause.  The Executive  shall be given an  opportunity,  together
with  counsel,  to be  heard  at  the  Special  Board  Meeting  for  Cause.  The
Executive's termination for Cause shall be effective when and if a resolution is
duly adopted at the Special  Board Meeting for Cause by  affirmative  vote of at
least the greater of (A) two-thirds (2/3) of the entire  membership of the Board
(excluding  the  Executive  who shall not vote on this  matter)  or (B) ten (10)
members of the Board,  stating that in the good faith opinion of the Board,  the
Executive is guilty of the conduct  described in the Notice of  Termination  for
Cause, and that conduct constitutes Cause under this Agreement.

                           (iii)            A termination of the Executive's
employment  without  Cause shall be effective in  accordance  with the following
procedures.  The Company shall give the  Executive  written  notice  ("Notice of
Termination  without  Cause") of its  intention  to  terminate  the  Executive's
employment without Cause,  stating the date, time and place of the Special Board
Meeting without Cause. The "Special Board Meeting without Cause" means a meeting
of the Board called and held  specifically  for the purpose of  considering  the
Executive's  termination  without Cause,  that takes place not less than ten and
not more than twenty  business days after the  Executive  receives the Notice of
Termination without Cause. The Executive shall be given an opportunity, together
with  counsel,  to be heard at the Special  Board  Meeting  without  Cause.  The
Executive's  termination  without  Cause  shall  be  effective  when  and  if  a
resolution  is duly  adopted  at the  Special  Board  Meeting  without  Cause by
affirmative  vote of the greater of (A) at least  two-thirds (2/3) of the entire
membership  of the Board  (excluding  the  Executive  who shall not vote on this
matter) or (B) ten members of the Board stating that the Executive is terminated
without Cause.





                                       5








         (c)      Good Reason.

                       (i) The  Executive  may  terminate  employment  for  Good
Reason or without Good Reason. "Good Reason" means:

                       A.  the   assignment  to  the  Executive  of  any  duties
inconsistent in any respect with paragraph (a) of Section 2 of his Agreement, or
any other action by the Company that results in a diminution in the  Executive's
position,  authority,  duties  or  responsibilities,  other  than  an  isolated,
insubstantial  and  inadvertent  action  that is not  taken in bad  faith and is
remedied  by the  Company  promptly  after  receipt of notice  thereof  from the
Executive;

                       B.  any  failure  by  the  Company  to  comply  with  any
provision of Section 3 of this Agreement, other than an isolated,  insubstantial
and  inadvertent  failure  that is not taken in bad faith and is remedied by the
Company promptly after receipt of notice thereof from the Executive;

                       C. the assignment or  reassignment  by the Company of the
Executive  without the  Executive's  consent to another place of employment more
than 50 miles from the Company's headquarters indicated in Section 2(d);

                       D.  any   purported   termination   of  the   Executive's
employment by the Company for a reason or in a manner not expressly permitted by
this Agreement;

                       E. any failure by the  Company to comply  with  paragraph
(c) of Section 11 of this Agreement; or

                       F. any other substantial  breach of this Agreement by the
Company that either is not taken in good faith or is not remedied by the Company
promptly after receipt of notice thereof from the Executive.

The Company and the Executive,  upon mutual written agreement,  may waive any of
the foregoing provisions which would otherwise constitute Good Reason.

                       (ii) A  termination  of  employment  by the Executive for
Good Reason shall be effectuated by giving the Company  written notice  ("Notice
of Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific  conduct of the Company that constitutes Good Reason and the
specific  provision(s)  of this  Agreement  on which  the  Executive  relies.  A
termination of employment by the Executive for Good Reason shall be effective on
the fifth  business day  following the date when the Notice of  Termination  for
Good  Reason is given,  unless the notice  sets forth a later date  (which  date
shall in no event be later than 30 days after the notice is given). For purposes
of this Section 4(c), any good faith  determination of "Good Reason" made by the
Executive shall be conclusive.



                                       6









                           (iii)  A termination of the Executive's employment
by the  Executive  without  Good Reason  shall be effected by giving the Company
written notice of the termination.

                  (d)  No  Waiver.   The  failure  to  set  forth  any  fact  or
circumstance  in a Notice of  Termination  for  Cause,  a Notice of  Termination
without Cause or a Notice of Termination  for Good Reason shall not constitute a
waiver of the right to assert,  and shall not preclude  the party giving  notice
from  asserting,  such fact or  circumstance  in an attempt to enforce any right
under or provision of this Agreement.

                  (e) Date of Termination.  The "Date of Termination"  means the
date of the Executive's death, the Disability  Effective Date, the date on which
the  termination  of the  Executive's  employment  by the  Company  for Cause or
without Cause or by the  Executive for Good Reason is effective,  or the date on
which the  Executive  gives the Company  notice of a  termination  of employment
without Good Reason, as the case may be.

         5.       Obligations of the Company upon Termination.

                  (a) By the Company other than for cause or disability;  by the
Executive  for Good  Reason.  If,  during the  Employment  Period,  the  Company
terminates the Executive's  employment,  other than for Cause or Disability,  or
the Executive terminates  employment for Good Reason, the Company shall continue
to  provide  the  Executive  with the  compensation  and  benefits  set forth in
paragraphs  (a), (b) and (c) of Section 3 as if he had remained  employed by the
Company pursuant to this Agreement  through the end of the Employment Period and
then  retired  (at which  time he will be treated as  eligible  for all  retiree
welfare benefits and other benefits  provided to retired senior  executives,  as
set  forth  in  Section  3(c)(ii)  and  (iii));  PROVIDED,  that  the  Incentive
Compensation   for  such  period  shall  be  based  upon  the  target  Incentive
Compensation  for the year in which the Date of  Termination  occurs;  PROVIDED,
further,  that in lieu of stock options,  restricted stock and other stock-based
awards,  the  Executive  shall be paid cash equal to the fair market value as of
the Date of Termination  (without  regard to any  restrictions  and based upon a
valuation  model  generally  utilized for purposes of valuing  comparable  stock
based  compensation  awards) of the stock  options,  restricted  stock and other
stock-based  awards that would  otherwise have been granted with such cash being
paid within 90 days after the Date of Termination;  PROVIDED,  further,  that to
the  extent  any  benefits  described  in  paragraph  (c) of Section 3 cannot be
provided  pursuant  to the plan or program  maintained  by the  Company  for its
executives, the Company shall provide such benefits outside such plan or program
at no additional cost (including  without  limitation tax cost) to the Executive
and his family; and PROVIDED, finally, that during any period when the Executive
is eligible to receive benefits of the type described in clause (B) of paragraph
(c)(iii)  of  Section  3 under  another  employer-provided  plan,  the  benefits
provided by the Company under paragraph (a) of



                                       7








Section  5 may be made  secondary  to those  provided  under  another  plan.  In
addition to the  foregoing,  any  restricted  stock  outstanding  on the Date of
Termination  shall be fully vested as of the Date of Termination and all options
outstanding on the Date of Termination shall be fully vested and exercisable and
shall  remain in effect  and  exercisable  through  the end of their  respective
terms,  without regard to the  termination of the  Executive's  employment.  The
payments and benefits  provided  pursuant to this paragraph (a) of Section 5 are
intended as liquidated  damages for a termination of the Executive's  employment
by the  Company  other than for Cause or  Disability  or for the  actions of the
Company leading to a termination of the Executive's  employment by the Executive
for Good Reason, and shall be the sole and exclusive remedy therefor.

                  (b) Death or  Disability.  If the  Executive's  employment  is
terminated  by  reason  of  the  Executive's  death  or  Disability  during  the
Employment Period, the Company shall pay to the Executive or, in the case of the
Executive's death, to the Executive's designated  beneficiaries (or, if there is
no such beneficiary,  to the Executive's  estate or legal  representative)  in a
lump sum in cash  within 30 days after the Date of  Termination,  the sum of the
following  amounts  (the  "Accrued   Obligations"):   (1)  any  portion  of  the
Executive's  Annual Base Salary through the Date of Termination that has not yet
been paid; (2) an amount representing the target Incentive  Compensation for the
year that includes the Date of Termination, computed by assuming that the amount
of all such target Incentive  Compensation  would be equal to the amount of such
target  Incentive  Compensation  that the Executive  would have been eligible to
earn for such period,  and multiplying that amount by a fraction,  the numerator
of which is the number of days in such period  through the Date of  Termination,
and the  denominator of which is the total number of days in the relevant period
(3) any  compensation  previously  deferred by the Executive  (together with any
accrued  interest or earnings  thereon) that has not yet been paid;  and (4) any
accrued but unpaid  Incentive  Compensation  and  vacation  pay; and the Company
shall have no further  obligations under this Agreement,  except as specified in
Section  6 below.  If the  Executive's  employment  is  terminated  by reason of
Disability,  he shall be entitled to receive  the  maximum  disability  payments
which can be provided under the disability plans described in Section  3(c)(ii),
reduced, however, by actual disability benefits received under such plans.

                  (c) By the Company for Cause;  by the Executive other than for
Good Reason.  If the  Executive's  employment  is  terminated by the Company for
Cause during the  Employment  Period,  the Company  shall pay the  Executive the
Annual  Base  Salary  through  the Date of  Termination  and the  amount  of any
compensation  previously  deferred by the Executive  (together  with any accrued
interest or earnings thereon),  in each case to the extent not yet paid, and the
Company  shall  have no further  obligations  under  this  Agreement,  except as
specified in Section 6 below. If the Executive voluntarily terminates employment
during the Employment Period, other than for



                                       8








Good Reason, the Company shall pay the Accrued Obligations to the Executive in a
lump sum in cash  within  30 days of the Date of  Termination,  and the  Company
shall have no further  obligations under this Agreement,  except as specified in
Section 6 below.

         6.  Non-Exclusivity of Rights.  Nothing in this Agreement shall prevent
or limit  the  Executive's  continuing  or  future  participation  in any  plan,
program,  policy or practice  provided  by the Company or any of its  affiliated
companies for which the Executive may qualify,  nor, subject to paragraph (f) of
Section 12, shall  anything in this  Agreement  limit or  otherwise  affect such
rights as the  Executive  may have  under any  contract  or  agreement  with the
Company or any of its affiliated  companies.  Vested  benefits and other amounts
that the Executive is otherwise  entitled to receive under the SERP or any other
plan,  policy,  practice or program of, or any contract or agreement  with,  the
Company or any of its  affiliated  companies on or after the Date of Termination
shall be  payable  in  accordance  with the  terms of each  such  plan,  policy,
practice,  program,  contract  or  agreement,  as the  case  may be,  except  as
explicitly modified by this Agreement.

         7. Full  Settlement.  The  Company's  obligation  to make the  payments
provided for in, and otherwise to perform its obligations  under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim,  right or action  that the  Company may have  against  the  Executive  or
others. In no event shall the Executive be obligated to seek other employment or
take any  other  action  by way of  mitigation  of the  amounts  payable  to the
Executive  under  any of  the  provisions  of  this  Agreement  and,  except  as
specifically  provided in  paragraph  (a) of Section 5 with  respect to benefits
described in clause (B) of paragraph  (c)(iii) of Section 3, such amounts  shall
not be reduced, regardless of whether the Executive obtains other employment.

         8.       Non-Competition Provision and Confidential Information.

                  (a) Without  prior  written  consent of the  Company,  for the
greater  of (i)  the  twenty-four  (24)  month  period  following  the  Date  of
Termination,  or (ii) the remaining term of this Agreement,  the Executive shall
not, as a shareholder,  officer,  director,  partner,  consultant, or otherwise,
engage  directly  or  indirectly  in any  business  or  enterprise  which is "in
competition" with the Company or its successors or assigns;  provided,  however,
that the  Executive's  ownership  of less than five  percent  of the  issued and
outstanding  voting securities of a publicly-traded  company shall not be deemed
to  constitute  such  competition.  A business or enterprise is deemed to be "in
competition"  if  it  is  engaged  in  the  business  of  generation,  purchase,
transmission,  distribution,  or  sale  of  electricity,  or  in  the  purchase,
transmission,  distribution,  sale or  transportation  of natural gas within the
States of Colorado, New Mexico, Texas, Wyoming, Kansas or Oklahoma.





                                       9








                  (b) The Executive  shall hold in a fiduciary  capacity for the
benefit of the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated  companies and their respective
businesses that the Executive  obtains during the Executive's  employment by the
Company or any of its  affiliated  companies  and that is not  public  knowledge
(other  than  as a  result  of the  Executive's  violation  of this  Section  8)
("Confidential  Information").  The Executive shall not communicate,  divulge or
disseminate Confidential Information at any time during or after the Executive's
employment  with the  Company,  except  with the prior  written  consent  of the
Company or as otherwise required by law or legal process.  In no event shall any
asserted  violation of the  provisions  of this Section 8 constitute a basis for
deferring or withholding  any amounts  otherwise  payable to the Executive under
this Agreement.

         9.       Certain Additional Payments by the Company.

                  (a)    Anything   in   this    Agreement   to   the   contrary
notwithstanding,  in the  event it  shall be  determined  that  any  payment  or
distribution by the Company to or for the benefit of the Executive (whether paid
or  payable  or  distributed  or  distributable  pursuant  to the  terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment")  would be subject to the excise tax
imposed by Section  4999 of the Internal  Revenue Code of 1986,  as amended (the
"Code") or any interest or penalties are incurred by the Executive  with respect
to such  excise  tax (such  excise  tax,  together  with any such  interest  and
penalties,  are hereinafter  collectively referred to as the "Excise Tax"), then
the Executive  shall be entitled to receive an  additional  payment (a "Gross-Up
Payment")  in an amount such that after  payment by the  Executive  of all taxes
(including  any  interest or  penalties  imposed  with  respect to such  taxes),
including,  without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up  Payment,
the Executive  retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

                  (b) Subject to the provisions of paragraph (c) of this Section
9, all  determinations  required  to be made  under this  Section  9,  including
whether and when a Gross-Up  Payment is required and the amount of such Gross-up
Payment and the  assumptions  to be utilized in arriving at such  determination,
shall  be made by a  nationally  recognized  certified  public  accounting  firm
designated  by the  Executive  (the  "Accounting  Firm"),  which  shall  provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive  that there has been a
Payment,  or such earlier  time as is  requested  by the  Company.  All fees and
expenses  of the  Accounting  Firm  shall be borne  solely by the  Company.  Any
Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the  Executive  within  five days of the  receipt  of the  Accounting
Firm's determination. Any determination by the



                                       10








Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder,  it is possible that
Gross-Up  Payments which will not have been made by the Company should have been
made  ("Underpayment")  consistent  with the  calculations  required  to be made
hereunder.  In the event that the  Company  exhausts  its  remedies  pursuant to
paragraph (c) of this Section 9 and the Executive thereafter is required to make
a payment of any Excise Tax, the Accounting  Firm shall  determine the amount of
the Underpayment that has occurred and any such  Underpayment  shall be promptly
paid by the Company to or for the benefit of the Executive.

                  (c) The  Executive  shall notify the Company in writing of any
claim by the Internal  Revenue  Service that, if  successful,  would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as  practicable  but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such  claim and the date on which  such claim is  requested  to be paid.  The
Executive  shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period  ending on the date that any payment of taxes with  respect to such claim
is  due).  If the  Company  notifies  the  Executive  in  writing  prior  to the
expiration  of such period that it desires to contest such claim,  the Executive
shall:

                           (i)    give the Company any information reasonably
requested by the Company relating to such claim,

                           (ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time to time,
including,  without limitation,  accepting legal  representation with respect to
such claim by an attorney reasonably selected by the Company,

                           (iii)  cooperate with the Company in good faith in
order effectively to contest such claim, and

                           (iv)     permit the Company to participate in any
proceedings relating to such claim;

         PROVIDED,  however,  that the Company  shall bear and pay  directly all
costs and expenses  (including  additional  interest and penalties)  incurred in
connection  with  such  contest  and  shall  indemnify  and hold  the  Executive
harmless,  on an after-tax  basis,  for any Excise Tax or income tax  (including
interest  and  penalties  with  respect  thereto)  imposed  as a result  of such
representation  and payment of costs and  expenses.  Without  limitation  on the
foregoing  provisions  of this  paragraph  (c) of Section 9, the  Company  shall
control all  proceedings  taken in connection with such contest and, at its sole
option, may pursue or forego any and all



                                       11








administrative  appeals,  proceedings,  hearings and conferences with the taxing
authority  in respect of such claim and may, at its sole option,  either  direct
the  Executive  to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a  determination  before  any  administrative  tribunal,  in a court of  initial
jurisdiction  and  in  one or  more  appellate  courts,  as  the  Company  shall
determine;  PROVIDED,  however, that if the Company directs the Executive to pay
such claim and sue for a refund,  the Company  shall  advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including  interest or penalties with respect  thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and PROVIDED, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive  with respect to which
such  contested  amount is claimed to be due is limited solely to such contested
amount.  Furthermore,  the Company's  control of the contest shall be limited to
issues with respect to which a Gross-Up  Payment would be payable  hereunder and
the  Executive  shall be entitled to settle or contest,  as the case may be, any
other  issue  raised  by  the  Internal  Revenue  Service  or any  other  taxing
authority.

                  (d) If,  after  the  receipt  by the  Executive  of an  amount
advanced  by the  Company  pursuant  to  paragraph  (c) of this  Section  9, the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive  shall (subject to the Company's  complying with the  requirements  of
paragraph  (c) of this Section 9) promptly pay to the Company the amount of such
refund  (together  with  any  interest  paid or  credited  thereon  after  taxes
applicable thereto). If after the receipt by the Executive of an amount advanced
by the Company  pursuant to paragraph (c) of this Section 9, a determination  is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the  Executive in writing of its intent to
contest  such  denial of refund  prior to the  expiration  of 30 days after such
determination,  then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance  shall offset,  to the extent  thereof,
the amount of Gross-Up Payment required to be paid.

         10.  Attorneys'  Fees. The Company  agrees to pay, as incurred,  to the
fullest extent  permitted by law, all legal fees and expenses that the Executive
may reasonably  incur as a result of any contest  (regardless of the outcome) by
the Company,  the  Executive or others of the validity or  enforceability  of or
liability  under,  or otherwise  involving,  any  provision  of this  Agreement,
together with  interest on any delayed  payment at the  applicable  federal rate
provided for in Section 7872(f)(2)(A) of the Code.




                                       12








         11.      Successors.

                  (a) This Agreement is personal to the Executive  and,  without
the  prior  written  consent  of the  Company,  shall not be  assignable  by the
Executive  otherwise than by will or the laws of descent and distribution.  This
Agreement  shall inure to the benefit of and be enforceable  by the  Executive's
legal representatives.

                  (b)      This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

                  (c) The Company shall require any successor (whether direct or
indirect,   by  purchase,   merger,   consolidation  or  otherwise)  to  all  or
substantially  all of the  business  and/or  assets of the Company  expressly to
assume and agree to perform  this  Agreement  in the same manner and to the same
extent  that the  Company  would  have been  required  to  perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such  successor  that assumes and agrees to
perform this Agreement, by operation of law or otherwise.

         12.      Miscellaneous.

                  (a) This  Agreement  shall be governed  by, and  construed  in
accordance  with,  the  laws of the  State of  Colorado,  without  reference  to
principles of conflict of laws.  The captions of this  Agreement are not part of
the provisions hereof and shall have no force or effect.  This Agreement may not
be amended or  modified  except by a written  agreement  executed by the parties
hereto or their respective successors and legal representatives.

                  (b) All notices and other  communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or by
registered  or  certified  mail,  return  receipt  requested,  postage  prepaid,
addressed as follows:

If to the Executive:
                               Wayne H. Brunetti
                                295 High Street
                                Denver, CO 80209

If to the Company:
                                  M-P New Co.
                                1225 17th Street
                                Denver, CO 80202
                                    Attention: General Counsel

or to such other  address as either  party  furnishes to the other in writing in
accordance  with this  paragraph (b) of Section 12.  Notices and  communications
shall be effective when actually received by the addressee.




                                       13








                  (c) The  invalidity  or  unenforceability  of any provision of
this  Agreement  shall not affect the  validity or  enforceability  of any other
provision of this  Agreement.  If any provision of this Agreement  shall be held
invalid or  unenforceable  in part,  the  remaining  portion of such  provision,
together  with all other  provisions of this  Agreement,  shall remain valid and
enforceable  and  continue  in full  force  and  effect  to the  fullest  extent
consistent with law.

                  (d) Notwithstanding any other provision of this Agreement, the
Company may withhold  from amounts  payable  under this  Agreement  all federal,
state,  local and foreign  taxes that are required to be withheld by  applicable
laws or regulations.

                  (e) The  Executive's  or the Company's  failure to insist upon
strict  compliance  with any  provision  of, or to assert any right under,  this
Agreement  (including,  without  limitation,  the  right  of  the  Executive  to
terminate  employment for Good Reason  pursuant to paragraph (c) of Section 4 of
this Agreement) shall not be deemed to be a waiver of such provision or right or
of any other provision of or right under this Agreement.

                  (f)  The  Executive  and the  Company  acknowledge  that  this
Agreement   supersedes  and  terminates  any  other   severance  and  employment
agreements  between  the  Executive  and  the  Company,  PSC  or  the  Company's
affiliates.

                  (g) The  rights  and  benefits  of the  Executive  under  this
Agreement may not be anticipated,  assigned, alienated or subject to attachment,
garnishment,  levy,  execution  or other legal or  equitable  process  except as
required by law. Any attempt by the Executive to  anticipate,  alienate  assign,
sell,  transfer,  pledge,  encumber  or charge the same shall be void.  Payments
hereunder  shall  not be  considered  assets  of the  Executive  in the event of
insolvency or bankruptcy.

                  (h) This  Agreement  may be executed in several  counterparts,
each of  which  shall  be  deemed  an  original,  and  said  counterparts  shall
constitute but one and the same instrument.




                                       14







         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and,  pursuant to the  authorization of its Board of Directors,  the Company has
caused this  Agreement  to be executed in its name on its behalf,  all as of the
day and year first above written.


                                                -------------------------------
                                                Wayne H. Brunetti


                                    COMPANY



                                               By:______________________________






                                       15