April 6, 2000

PERSONAL AND CONFIDENTIAL

Mr. Kevern R. Joyce
Texas-New Mexico Power Company
4100 International Plaza
Fort Worth, Texas 76109

Dear Mr. Joyce:

               We are pleased to offer you the position of Chairman, President
and Chief Executive Officer of Texas-New Mexico Power Company (the "Company"),
and a Board Member of TNP Enterprises, Inc. under the terms and conditions
herein indicated. For purposes of this agreement the term "Company" shall also
include any affiliate of Texas-New Mexico Power Company to which you are
transferred during the term of this agreement with your consent.

               This agreement is effective as of and only upon the closing (the
"Closing") as defined in the Agreement and Plan of Merger dated as of May 24,
1999 by an among SW Acquisition, L.P., ST Acquisition Corp. and TNP Enterprises,
Inc. The terms and conditions set forth herein shall remain in effect until the
third anniversary of the Closing, except as otherwise noted herein, provided you
remain employed by the Company through such date. This agreement supersedes all
previous agreements relating to your employment with the Company, including, but
not limited to, your Texas-New Mexico Power Company Executive Agreement for
Severance Upon Change in Control dated as of February 16, 1998 and all such
agreements will have no further force and effect.

               During the term of this agreement, you will be entitled to annual
compensation of not less than $1,200,000, payable as described below.

1.

Your annual salary will be $1,091,375, comprised of the following components: an
annual Base Salary of $434,500, which shall be payable in accordance with the
Company's customary payroll practices and an annual Bonus of $656,875, payable
to you in a lump sum on each of the first, second and third anniversaries of the
date hereof, provided that you have not terminated your employment with the
Company as of the day immediately prior to the date of payment of such annual
Bonus.

2.

You will be eligible to receive an annual incentive bonus ranging from 0% to
37.5% of your Base Salary if you remain employed by the Company through the end
of each calendar year during the term of this agreement. The amount of your
annual incentive bonus will be based on the attainment of certain
pre-established financial and operational goals of the Company. Your target
annual incentive bonus shall be equal to 25% of your Base Salary.

3.

In the event that the total compensation you receive during any of the three
succeeding 12-month periods commencing on the date hereof, including your Base
Salary, Bonus and incentive bonus, is less than $1,200,000, you shall be
entitled to an additional bonus for such 12-month period equal to the amount of
such shortfall, which amount shall be payable as soon as practicable following
the first, second and third anniversaries of the date hereof, as applicable,
provided that you have not terminated your employment with the Company prior to
the completion of such 12-month period.

               You will be eligible for all of the Company's benefits, including
major medical, dental, life, and long-term disability insurance, pension plan
participation, excess benefit plan participation, thrift plan participation,
deferred compensation plan participation, holiday pay and vacation pay, in
accordance with the Company's plans and policies as in effect from time to time.

               Notwithstanding any other provision of this agreement, in the
event that during the term of this agreement, your employment with the Company
is terminated by you for Good Reason (as defined below) or by the Company for
any reason other than for Cause (as defined below), you shall be entitled to
receive (a) an amount equal to the product of (i) your average annual Base
Salary received under this agreement prior to the date of your termination, and
(ii) a fraction having a numerator equal to the number of months (or portion
thereof) remaining from the date of such termination of employment until the
third anniversary of the date hereof, and a denominator equal to 12, and (b) an
amount equal to the product of (x) $656,875, and (y) a fraction having a
numerator equal to the number of months (or portion thereof) you were employed
by the Company in the year of your termination of employment, and a denominator
equal to 12.

               In addition, if your employment with the Company terminates after
the Closing you (or your estate, in the event of your death) shall be entitled
to receive a special lump sum retirement benefit equal to $3,048,183.

               In the event that during the term of this agreement, your
employment with the Company is terminated for Cause, all rights under this
agreement (other than the special retirement benefit provided under the
preceding paragraph) shall cease and you shall not be entitled to any additional
compensation or payments hereunder.

               For the purposes of this agreement, Cause shall mean (i) your
willful and continued failure to substantially perform your duties with the
Company (excluding any failure resulting from your disability), subject to any
appeal or grievance procedure set forth in the Company's Personnel Policy
Manual; (ii) your performance of any act or acts constituting a felony involving
moral turpitude and which results or is intended to result in damage or harm to
the Company, whether monetary or otherwise, or which results in or is intended
to result in improper gain or personal enrichment; or (iii) violations of the
Company's Personnel Policy Manual, as constituted at any time prior to the
expiration of this agreement, concerning personal conduct; provided, that the
Company must follow its disciplinary procedures as set forth therein.

               For the purposes of this agreement, Good Reason shall mean any of
the following (without your prior express written consent) (i) a material
adverse change in your title, position, duties or responsibilities or you are
assigned any duties or responsibilities materially inconsistent with your duties
or responsibilities immediately prior to the execution of this agreement
(provided, however, that a redesignation of your title, duties or
responsibilities among TNP Enterprises, the Company and its primary affiliates
shall not constitute Good Reason if your overall duties and status among TNP
Enterprises, Inc., the Company and its primary affiliates are not substantially
adversely affected); (ii) your compensation arrangements as provided in this
agreement are decreased by the Company; (iii) your benefits under the employee
benefit plans and programs of the Company are, in the aggregate, materially
decreased; (iv) there is a material adverse change in your reporting rights
and/or obligations; or (v) the Company requires you to relocate to a location
more than sixty-five (65) miles from the location of your office immediately
prior to the execution of this agreement. A termination for Good Reason under
this agreement must occur within thirty (30) days after the event which first
provides a basis for such termination.

               The Company's obligation to make the payments provided for in
this agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against you or others. In the event that your employment with
the Company is terminated for any reason, other than for Cause, you shall be
under no obligation to seek other employment or take any other action by way of
mitigation of the amounts payable to you under any of the provisions of this
agreement.

               In the event that a claim for payment or benefits under this
agreement is disputed, or if the Company commences any proceedings in connection
with your employment, you shall be reimbursed for all attorney fees and expenses
incurred by you in pursuing such claim, provided that you are successful as to
at least part of the disputed claim by reason of litigation, arbitration or
settlement. While such claim or proceeding is pending, the Company will
reimburse you for such attorney fees and expenses on a regular, periodic basis,
within thirty days following receipt by the Company of statements of such
counsel. However, if you are not successful as to at least part of the disputed
claim by reason of litigation, arbitration or settlement, you agree to repay the
Company within 30 days of such determination, an amount equal to the total
amount that the Company has previously reimbursed you for legal fees and
expenses in connection with such claim or proceeding.

               The Company shall require any successor to all or substantially
all of its business and/or assets, whether direct or indirect, by purchase,
merger, consolidation, acquisition of stock, or otherwise, to expressly assume
and agree to perform this agreement in the same manner and to the same extent as
the Company would be required to perform if no such succession had taken place.
For purposes of this paragraph, "Company" shall mean both the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this agreement by operation of law
or otherwise.

               In the event that during the term of this agreement, your
employment with the Company is terminated by you for Good Reason or by the
Company for any reason other than for Cause, the Company shall pay you an amount
equal to the sum of (i) any excise tax pursuant to Section 4999 of the Internal
Revenue Code of 1988, as amended (the "Code"), incurred by you as a result of
the payment of any amounts under this agreement as a result of your termination
of employment and (ii) any additional federal, state or local income tax
liability (calculated at the highest effective rate applicable to individuals)
and excise tax liability (under Section 4999 of the Code) attributable to
payments made pursuant to this paragraph.

               The respective rights and obligations of the parties hereunder
shall survive any termination of this agreement for any reason to the extent
necessary to the intended provision of such rights and the intended performance
of such obligations.

               No provisions of this agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and the Company. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this agreement.
This agreement shall be governed by and construed in accordance with the laws of
the State of Texas.

               If the above terms and conditions meet with your approval, please
so indicate by countersigning this letter in the space provided below, returning
on copy to me. We would be extremely pleased and proud to have you continue as a
member of our TNP team.

 

Sincerely,

 

TNP ENTERPRISES, INC.
TEXAS-NEW MEXICO POWER COMPANY

             

By:  \s\ John A. Fanning                            

 

Agreed to and accepted this 6th day of April, 2000.

   \s\  Kevern R. Joyce                            

    Kevern R. Joyce