On March 28, 1994 you entered  into a final  version of a letter  agreement
which  provided  in  paragraph  4. a method to credit  you  additional  years of
service  should you work  until age 65 and set forth the manner for  calculating
the retirement  benefit.  Since the date of the letter agreement the Company has
amended its Pension Plan and the Excess Benefit Plan to institute a Cash Balance
Plan.  This plan  resulted  in a  significant  adverse  change  to the  benefits
available to you under the original letter  agreement.  In order to continue the
benefit as it existed at the time of the March 28 offer  letter the Company will
use the use the then  existing  pension  formula as the basis to determine  your
supplemental  retirement  benefits previously  discussed.  This formula is being
added to the  pension  formula  as  Supplement  A, a copy of  which is  attached
hereto.

     The  Company  therefore  offers to you the  following  benefit  in full and
complete  satisfaction of its commitment to you in its offer letter of March 28,
1994:

          In the event you are still  employed  by the  Company at age 65,  your
     retirement  benefits  payable  from  TNMP's  Excess  Benefit  Plan  will be
     calculated using the Supplement A formula.

          In the case of a "Change-in-Control",  you will become fully vested in
     this supplemental  pension benefit.  The benefit will be accrued and vested
     as of the date of the  change-in-control or the date at which the executive
     would have been age 62, whichever  benefit is greater.  "Change of Control"
     is defined as that term is defined in the Executive Severance  Compensation
     Agreement which you have executed previously with the Company .

If you agree with the foregoing please sign in the space provided below.


         /s/ John Fanning                                Dated February 16, 1998
John Fanning, Chairman - Compensation Committee
Texas-New Mexico Power Company



         /s/ Kevern R. Joyce                             Dated February 16, 1998
Kevern Joyce, Chairman, President & CEO
TNP Board of Directors

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SUPPLEMENT A

 
     In the event the  executive  is still  employed  by the  Company at age 65,
their  retirement  benefits payable from Texas-New Mexico Power Company's Excess
Benefit Plan will be calculated using the Supplement A formula.


FORMULA:

          1.3% of career average  compensation  times 30 years of service,  plus
          0.4% of the excess of career average compensation over one-half of the
          Social Security  maximum wage base in the year of retirement  times 30
          years of service.


     If the executive retires prior to age 65 (but not earlier than age 55 and 5
years of service) the 30 years of service used in the formula will be reduced by
one year for each year that the  retirement  precedes  age 65. If the  executive
retires before age 65 and requests a monthly benefit payment,  the amount of the
monthly  payment will be the actuarial  equivalent of the benefit payable at age
65. If the executive retires prior to age 55 and 5 years of service,  no benefit
would be provided under the terms of the employment contract (except in the case
of a change-in-control).

     This  benefit  will be reduced by the  benefits  that are  provided  by the
Texas-New  Mexico Power Company Pension Plan (qualified plan) and the retirement
benefits provided by previous  employers under their qualified and non-qualified
plans.