Incentive Compensation Award Agreement
                         for Short- and Long-Term Awards


         This  Agreement is dated and  effective  as of January 1, 1999,  and is
between  -----------------------------------  ("Participant"),  Texas-New Mexico
Power Company (the "Company") and TNP Enterprises, Inc. ("TNP").

                                    RECITALS

         A Committee  appointed by and having full authority to act on behalf of
the Board of Directors of the Company and TNP, respectively,  (collectively, the
"Compensation Committee") adopted the following incentive compensation plans:

     A.  Texas-New  Mexico Power Company  Management  Short-Term  Incentive Plan
          ("Management Plan"); and

     B.  TNP Enterprises, Inc. Equity Incentive Plan ("Equity Plan").

         On April 28, 1995, the Shareholders  approved the adoption by the Board
of Directors of the Equity Plan.

         The  Management  Plan  provides  for the  payment  of  cash if  certain
incentive goals are achieved. The Equity Plan provides for the delivery of stock
options,  stock, and performance units upon the achievement of certain incentive
goals which may be short-term and/or long-term goals.

         On February 15, 1999,  the  Compensation  Committee  (the  "Committee")
established  the  performance  goals to be achieved  in order to earn  incentive
compensation under the plans.

         The  Participant  has been  selected to receive  awards under each plan
subject to the terms of each applicable  plan and the  Participant  signing this
Award Agreement.

         The  Participant  and the Company  agree that this  Agreement  does not
affect Participant's status as an employee at will and further agree that either
party may terminate Participant's employment at any time with or without cause.

         The Committee reserves, in its sole discretion,  the right to interpret
the terms and  conditions  of any award and this  agreement  and to resolve  any
disagreements  or disputes  concerning  this Award Agreement and any decision is
binding upon all parties.

         In  consideration  of the Recitals and mutual  covenants and agreements
below,  the  Participant  and the  Company  desire  to and by  their  respective
signatures do hereby agree to the terms and conditions set forth below.

                                    AGREEMENT

                                SHORT-TERM AWARDS

         Short-Term  Cash Award:  Participant  is hereby  granted  -----% of the
control point for Participant's  salary range as established by the Compensation
Committee at the  beginning of each plan year.  The cash award is subject to the
1999  short-term  goals for the Management  Plan being met as such goals are set
forth on Exhibit A attached hereto and made a part hereof for all purposes. Such
award may be adjusted  between 50% and 150% on a straight  line basis  depending
upon  where  the  performance  related  to each  goal  occurs  within  the range
established for each goal. No award payment will be made for  performance  below
the  established  minimum  for each goal set forth in  Exhibit A. The cash award
shall be paid no later than March 15th following the end of the plan year.

         The  parties  agree that no portion of the cash award is due or payable
regardless of whether any Corporate Operational Goal or  Departmental/Individual
Goals are met unless the minimum Corporate  Financial Goal is met. Further,  the
Committee reserves the right to make year-end  adjustments which may account for
any unusual or unforeseen events that impact the attainability of any goal.

         Allocation of Awards:  Participant  agrees that the total amount of the
cash award will be  allocated  among the  Corporate  Financial  Goal,  Corporate
Operational Goals, and  Departmental/Individual  Performance Goals applicable to
such  Participant as is set forth in Exhibit B which is attached hereto and made
a part hereof for all purposes.

         Participant  agrees that to the extent any amount of the total award is
allocated to the Departmental/Individual  Performance Goals, such amount will be
due and  payable  only to the  extent the  performance  of the  Participant,  as
determined by the officer  executing  this Agreement on behalf of the Company in
such  officer's  sole  discretion  (or, if  Participant  is the Chief  Executive
Officer,  then as  determined by the  Committee in its sole  discretion),  falls
within the  Performance  Rating  range set forth in Exhibit C which is  attached
hereto and made a part hereof for all purposes.

                                 LONG-TERM AWARD

         Long-Term  Stock  Award:  Participant  is hereby  granted a stock award
equal  to ------%  of the  control  point  for  Participant's  salary  range  as
established by the  Compensation  Committee as of the beginning of the long-term
plan cycle. Such long-term plan cycle award opportunity  granted pursuant to the
Equity  Plan  being met is  subject to the goals set forth on Exhibit D which is
attached  hereto  and made a part  hereof  for all  purposes.  Such award may be
adjusted between 50% and 200% on a straight-line basis, depending upon where the
performance  related to each goal occurs within the range  established  for each
goal.  No award  payment  will be made for  performance  below  the  established
minimum  for each goal set forth in Exhibit D. Any stock award  earned  shall be
paid no later than  March  15th  following  the end of the 1999  long-term  plan
cycle.  The 1999  Plan year  cycle  will be a period  of three  years  beginning
January 1, 1999.

         Allocation of Award:  Participant  agrees that the total amount awarded
under the Equity Plan will be allocated 100% to the goal  established  for Total
Shareholder  Return in comparison to the Redwood  Small Cap Utility  index.  The
amounts  allocated  to each set of  goals  will be due and  payable  only to the
extent each such goal shall be met as set forth in Exhibit D.

                                  GENERAL TERMS

         Dividend  Equivalents:  Participant shall have the right to receive, at
the time any  stock  awards  are paid,  cash in an amount  equal in value to the
dividends  declared  on each  Share on each  record  date  occurring  during the
applicable  performance period established for each plan.  Dividend  equivalents
will not include any dividends on the dividend  equivalents  accrued  during the
applicable performance periods.

         Pro-Ration   of  Awards:   If  a  Participant   begins   employment  or
Participant's  employment is terminated due to retirement,  death, or disability
during a plan year or the 1999  long-term  performance  cycle,  any award earned
shall be prorated based on the number of months of participation within the plan
year or long-term plan cycle.  The prorated award will be based upon performance
determined  at year or cycle  end and will be paid at the same time as all other
awards are paid from each of the plans under which awards are made.

         Termination of  Employment:  If employment is terminated for any reason
other than retirement, death, or disability, any award opportunity granted under
either  plan shall be  forfeited,  provided  that the  Committee  may waive such
forfeiture upon the CEO's recommendation, provided that if the Change in Control
paragraph is applicable that paragraph shall control.

                  Change in Control:  In the event a Change in Control occurs as
that term is defined in the Executive Agreement for Severance Compensation, then
performance  under this Agreement will be deemed to have been at target.  To the
extent any  payment of an award  would have been in stock,  such award  shall be
deemed converted to a cash award in an amount equal to the value of the stock as
of the day the Change in Control event occurs.  Provided that Participant is not
terminated  for Cause,  as that term is defined in the  Executive  Agreement for
Severance compensation,  the Participant shall be entitled to receive payment of
the awards  granted  herein no later than the fifth  calendar day  following the
date of termination or 30 days following the Change in Control event,  whichever
first occurs.

         Valuation of Shares:  Shares  issued under the Equity Plan  pursuant to
having  been  earned  under  the plan and the terms of this  Agreement  shall be
valued by  averaging  the high and low prices of the stock on the first  trading
day of the plan performance period (the "Share Value"). The Share Value shall be
applied to the dollar value of the award to arrive at the  equivalent  number of
shares awarded. The awarded shares shall be adjusted for the average of the high
and low stock price on the last trading day of the plan year.

         Tax Treatment:  Payments are taxable to the  Participant in the year of
receipt. The Company will have the right to deduct any federal,  state, or local
taxes required by law to be withheld.  In regard to any award made hereunder,  a
Participant,  at  Participant's  option,  may elect to have the Company withhold
sufficient  stock,  to the  extent  payable,  to pay the taxes  then due on such
award.

         Provisions  Consistent  with Plan:  This  Agreement  shall be construed
consistent  with the provisions of the applicable plan under which any award may
be made.  Where  matters  are not  addressed  in this Award  Agreement,  but are
addressed in the  Management  Plan or Equity Plan,  then such terms are deemed a
part of this Award  Agreement  and shall  apply  equally  to all awards  granted
herein,  except for where such terms obviously apply solely to one of the plans.
If there is a conflict  between the  provisions of this Agreement and such plan,
the provisions of the applicable  plan control.  Unless  otherwise  noted to the
contrary, the definition of terms in each Plan also apply in this Agreement.

         Attorney  Fees:  In the event either party is required to bring a cause
of action  against the other to enforce the terms of this  Agreement,  then such
party, to the extent such party is successful in such action,  shall be entitled
to reasonable attorney fees.

     Governing Law: This Agreement shall be governed by the laws of the State of
Texas. Venue for any cause of action shall be Tarrant County, Texas.

Texas-New Mexico Power Company              Participant:

By:                                         By:  
  ---------------------------                  ----------------------
     Kevern R. Joyce
     President & Chief Executive Officer

TNP Enterprises, Inc.                       Participant

By:                                         By: 
   --------------------------                  ----------------------
     Kevern R. Joyce
     President & Chief Executive Officer

<PAGE>

                         TNP ENTERPRISES, INC.                        EXHIBIT A

                         TEXAS-NEW MEXICO POWER COMPANY
                     Short-Term Incentive Compensation Plans
                                   1999 Goals
<TABLE>
<CAPTION>

                                                                                                    1999 Goals
                                                                                    1998
        Measurement            Status                 Objectives                 Performance      Minimum     Target      Maximum
        -----------            ------                 ----------
                                                                               ---------------- ------------ ---------- ------------
<S>                            <C>             <C>                             <C>              <C>          <C>        <C>

Financial
---------
1. Cash Value Added             Same           Improve Financial Condition        $4.40           $3.86       $4.46       $5.06

2. Excess Earnings Transition    New           Focus on an important phase                         $.42        $.62        $.82
   Plan                                        of TNMP's transition plan 


Operational  TNMP
----------
1.   Customer Satisfaction      Same           Improve Customer Service              83              80          83          86
Rating

2.   Number of Recordable       Same           Reduce Employee Accidents             32              39          32          24
Accidents

3.   System Reliability         Same

     A)  Average Minute of                     Reduce Customer Outage Time           64              79          67          55
         Outage per
         customer

     B)  Average Number of                     Reduce no. of Customers              .97            1.18        1.04         .88
         Outage per                            Interrupted   
         Customer

</TABLE>
<PAGE>


<TABLE>
<CAPTION>
             SHORT-TERM MANAGEMENT INCENTIVE COMPENSATION             EXHIBIT B
                       WEIGHTING OF 1999 SHORT-TERM GOALS


                                                       Excess
                                                      Earnings        Corporate
                                          TNMP       Transition      Operational
Position                                   CVA          Plan            Goals*        Departmental     Individual      Total
--------------------------------------- ---------- --------------- ----------------- ---------------- -------------- -----------
<S>                                     <C>        <C>             <C>               <C>              <C>            <C>

-     CORPORATE EMPLOYEES

     Chairman, President CEO               50            20               10                                20           100%

     Sr. VP/CCO                            50            20               15                                15           100%

     Remaining Sr. VP's                    50            20                5                10              15           100%

     Other Officers                        50            15                5                20              10           100%

     Directors\Asst VPs                    50            15                5                20              10           100%

     Key Employees                         50            10                5                35                           100%

-     TNMP EMPLOYEES

     RCOs                                  50            10               15                15              10           100%

     Plant Manager                         50            10                5                25              10           100%

     Key Employees                         50            10                5                35                           100%



*Eliminate O&M/KWH Goal
</TABLE>

<PAGE>
                                                                    EXHIBIT C
<TABLE>
<CAPTION>

                DEPARTMENTAL/INDIVIDUAL PERFORMANCE TARGET GOALS

                                                                       Individual Performance as a % of
Performance Rating                                                                  Target Award
------------------                                                     --------------------------------
<S>                                                                                  <C>     

4 -- Greatly exceeded expectations for objective(s)                                   150%
     (maximum)

3 -- Exceeded expectations for objective(s)                                           125%

2 -- Achieved expectations for objective(s) (target)                                  100%

1 -- Almost achieved expectations for objective(s)                                     50%
     (minimum)

0 -- Improvement needed, failed to meet objective(s)                                    0%

</TABLE>


<PAGE>


                                                                    EXHIBIT D
<TABLE>
<CAPTION>


                           LONG-TERM STOCK AWARD GOALS


Total Shareholder Return              Payout on the basis of  matrix reflecting
                                      total shareholder  return in relation to
                                      the Redwood Small Cap Utility Index.


              TSR to Redwood Small Cap Utility Index (100% weighting)
              -------------------------------------------------------

Performance                  Ranking                 % of Target Shares Earned
------------            ------------------           -------------------------
<S>                     <C>                          <C>
Maximum                 Greater than or equal
                        to 100th percentile                     200%
                                              
                        Greater than or equal
Target                  to 62.5th percentile                    100%
                                             
                        Greater than or equal
Minimum                 to 35th percentile                       50%
                                               
                        
Below Minimum           Less than 35th percentile                 0%

</TABLE>
<PAGE>
                 1999 Recipients of Incentive Compensation Award


              Name                                 Position

1.  Kevern Joyce                  Chairman, President & CEO

2.  Jack Chambers                 SR VP & Chief Customer Officer

3.  Manjit Cheema                 SR VP & Chief Financial Officer
4.  John Edwards                  SR VP - Corporate Relations
5.  Ralph Johnson                 SR VP - Power Resources

6.  Mike Matte                    VP - Business Development

7.  Mike Blanchard                VP - General Counsel
8.  Dennis Cash                   VP - Regional Customer Officer
9.  Allan Davis                   VP - Regional Customer Officer
10. Melissa Davis                 VP - Human Resources
11. Larry Dillon                  VP - Regional Customer Officer
12. Doug Hobbs                    VP - Business Development
13. John Montgomery               VP - Marketing

14. Pat Bridges                   Treasurer
15. Scott Forbes                  Chief Information Officer

16. Robert Castillo               Assistant VP - New Mexico
17. Mike Ricketts                 Controller
18. Paul Talbot                   Corporate Secretary

19. Mark Coulson                  Assistant VP - Industrial Marketing
20. Larry Gunderson               Director - Regulatory  Affairs
21. Mark Wilson                   Director - Power Production