EMPLOYMENT RETIREMENT AGREEMENT AND RELEASE

Exhibit 10.1

EMPLOYMENT RETIREMENT AGREEMENT AND RELEASE

This Employment Retirement Agreement and Release (“Agreement”) is a contract entered into between El Paso Electric Company, a Texas corporation (the “Company”), and Scott D. Wilson (“Employee”), on May 7, 2009 unless revoked by Employee within seven (7) days following its execution by Employee.

WHEREAS, the Company and Employee have agreed to Employee’s retirement from the Company effective on or about May 31, 2009;

WHEREAS, the Company and Employee have reached an accord regarding the financial and other aspects of this retirement; and

WHEREAS, the Company and Employee desire to enter into this Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals, and the mutual promises and agreements hereinafter set forth, the Company and Employee agree as follows:

1. Retirement Date . Employee will retire and his employment with the Company, its subsidiaries, and affiliates, effectively cease on May 31, 2009; provided, however, that Employee’s duties as Chief Financial Officer of the Company will cease at close of business on May 5, 2009. At the retirement date, the Employee will have 6 years credit in the Company’s Retirement Income Plan

2. Payment to Employee . In exchange for executing this Agreement, the Company agrees to make a payment to Employee in the amount of One Hundred Twenty Five Thousand Dollars ($125,000.00) (less deductions for applicable federal, state, and local taxes, all and in each instance in accordance with the payment practices of the Company) on January 4, 2010; provided, however, that as conditions precedent to any entitlement to the payment under this Section 2, Employee must (i) execute and deliver this Agreement to the Company, (ii) not revoke or otherwise withdraw his acceptance of this Agreement for a period of seven (7) days following such delivery of this Agreement, and (iii) not be in breach or default of any provision of this Agreement. Employee acknowledges and agrees that he has no entitlement to such payment except as set forth in this Agreement.

3. Other Benefits . Nothing in this Agreement shall affect Employee’s rights (as such exist immediately prior to May 31, 2009) in the Company’s retirement plan, which is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and is qualified under Section 401(a) of the Internal Revenue Code (“the Code”), to include medical benefit coverage and/or life insurance under retirement terms and conditions. Subject to Employee’s retirement, Employee may elect to continue, at Employee’s sole cost and expense, dental benefit coverage under and in accordance with the provisions of the Company’s Employee Welfare Benefit Plan, the Consolidated

Omnibus Budget Reconciliation Act of 1996 (“COBRA”), and Section 4980B of the Code. Employee is also entitled to all amounts, if any, accrued by and vested in Employee under and in accordance with the El Paso Electric Company Savings Plan (“401(k) Plan”) as of May 31, 2009. Employee shall also be entitled to a prorated payout in 2010 under the Company’s 2009 short-term bonus plan for all officers of the Company provided that the Company meets the performance criteria set forth in such plan and bonuses under such plan are approved by the Board compensation committee. Upon retirement and in accordance with Company policy, Employee will be paid for any unused PTO hours in Employee’s current PTO bank and at appropriate value for any eligible hours in Employee’s Old and New Sick Banks. Except as otherwise provided in this Agreement, Employee’s participation in any and all other benefit and compensation plans and arrangements of the Company are deemed by both parties to have ceased on May 31, 2009. Employee shall also be entitled to keep the MacBook laptop computer and Blackberry assigned to him by the Company, subject to the Company removing from such devices all Company confidential and/or proprietary information unrelated to the consulting services Employee has agreed to provide pursuant to a consulting agreement of even date.

4. Release .

(a) Employee agrees to and does fully and completely release, discharge and waive any and all claims, complaints, charges, causes of action, demands of whatever kind or nature which Employee has or may have against the Company, its subsidiaries, affiliates, predecessors, and successors and all of their respective directors, officers, and employees by reason of any event, matter, cause, or thing that has occurred prior to the date of execution of this Agreement (hereinafter “Claims”). Employee agrees that this Agreement specifically covers, but is not limited to, any and all Claims which Employee has or may have against the Company relating in any way to compensation, or to any other terms, conditions, or circumstances of Employee’s employment with the Company, and to the cessation of such employment, whether for retirement, severance, or cessation based on statutory or common law claims for employment discrimination, including claims under the Civil Rights Act of 1964, 42 U.S.C. §2000(e) et seq., the Americans with Disabilities Act, the Age Discrimination in Employment Act, and any and all discrimination or retaliation claims under federal or state law, claims under the Texas Labor Code, wrongful discharge, breach of contract, defamation, or any other theory whether legal or equitable, in contract or in tort; provided, however, that this release shall not affect Employee’s rights, which by statute or law cannot be waived and any rights under or with respect to any retirement plan which is subject to ERISA and is qualified under Section 401(a) of the Code.

(b) Employee agrees and understands that upon receipt of an executed original of this Agreement and the consideration described in Section 2, Employee cannot recover any relief pursuant to any and all Claims pending before any court, agency, or other tribunal.

(c) This Agreement is intended to constitute a general release by Employee of all Claims, is not an admission of liability by the Company, and memorializes the settlement of doubtful and disputed Claims. To the extent any Claims against the Company have not been released by this Agreement, Employee hereby assigns those Claims to the Company. Notwithstanding the foregoing, Employee does not waive nor assign any of his rights to enforc