EL PASO ELECTRIC CO /TX/
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>dp05649e_ex10-2.htm
<TEXT>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><strong>EXHIBIT
      10.2</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><strong>EMPLOYMENT
      SEPARATION AGREEMENT AND RELEASE</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">This
      Employment Separation Agreement and Release ("Agreement") is a contract entered
      into between EI Paso Electric Company, a Texas corporation (the "Company"),
      and
      Gary&#160;R. Hedrick ("Officer"), and is effective as of May&#160;18, 2007 (the
&#8220;Effective Date&#8221;) unless revoked by Officer within seven (7) days following its
      execution by Officer.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">WHEREAS,
      Officer has been a valued employee of the Company for nearly 30&#160;years,
      including its President and Chief Executive Officer for the last six and
      one-half years, and continues to be recognized as a leading figure in the
      communities served by the Company; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">WHEREAS,
      the Company and Officer have reached an accord regarding the financial and
      other
      aspects of Officer&#8217;s separation from employment; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">WHEREAS,
      the Company and Officer desire to enter into this Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">NOW,
      THEREFORE, in consideration of the foregoing recitals, and the mutual promises
      and agreements hereinafter set forth, the Company and Officer agree as
      follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Separation</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      Officer
      agrees that his employment as President and Chief Executive Officer of the
      Company and, except as set forth in the next sentence, all other positions
      which
      Officer holds with the Company, its subsidiaries, and affiliates, ceased at
      5:00&#160;p.m. on the Effective Date. Officer will continue to serve on the
      Board of Directors but will resign from the Executive Committee, effective
      immediately. Except as provided in this Agreement, Officer agrees not to seek
      reemployment with the Company, its subsidiaries, and affiliates, and no payments
      made to Officer under the terms of this Agreement shall be construed as a
      continuation of Officer's employment with the Company. This provision does
      not
      prohibit Officer from working for the Company at the Company&#8217;s
      request.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Payments
      to Officer; Consulting Obligation</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      The
      Company agrees to make a one-time settlement payment of $1,791,224 as soon
      as
      practicable following the Effective Date and, in addition, will pay a severance
      to Officer as follows: (a)&#160;one payment of $11,739.13 on May&#160;31, 2007;
      (b)&#160;seven payments of $30,000 on the last business day of each month from
      June through December 2007; and (c)&#160;twenty-two payments of $20,852 on the
      last business day of each month from January 2008 through October 2009 (in
      each
      case, less deductions for applicable federal, state, and local taxes, all and
      in
      each instance in accordance with the payment practices of the Company);
      provided, however, that as conditions precedent to any entitlement to any
      payment under this Section&#160;2, Officer must (i)&#160;execute and deliver
      this Agreement to the Company, (ii)&#160;not revoke or otherwise withdraw his
      acceptance of this Agreement for a period of seven&#160;(7) days following such
      delivery of this Agreement, and (iii)&#160;not be in breach or default of any
      provision of this Agreement; and provided further, payments otherwise due under
      this </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Section&#160;2
      or Section&#160;3(b)(ii) within the six-month period following the Effective
      Date shall be paid in a lump sum cash payment within five&#160;(5) business days
      following the six-month anniversary of the Effective Date. As additional
      consideration for such payments, through October&#160;31, 2009, Officer agrees
      to be available at reasonable times (following adequate notice) as required
      to
      provide consulting services, including regulatory advice or meetings with
      regulators, testimony and/or service on civic and charitable boards, upon the
      Company's request, with respect to matters within the scope of Officer's duties
      and responsibilities during employment. Officer agrees that the payments
      pursuant to this Section&#160;2 are in lieu of fees payable to him for service
      on the Board, and he waives all Director fees (including any grants of options
      or restricted shares) otherwise payable through the term of this
      Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Other
      Benefits</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Officer
      is
      a participant in the Company&#8217;s Retirement Income Plan for Employees (&#8220;RIP&#8221;) and
      Excess Benefit Plan (&#8220;EBP&#8221;). Nothing in this Agreement shall affect Officer&#8217;s
      rights (as such exist immediately prior to 5:00&#160;p.m. on the Effective Date)
      under the RIP and EBP.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 13.05pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">The
      Company shall pay Officer on the Effective Date or as soon thereafter as
      practicable a cash lump sum of $199,665.22 for unused hours of &#8220;Current PTO,&#8221;
&#8220;New PTO&#8221; and &#8220;Old PTO&#8221;, which represent hours worked and &#8220;banked&#8221; in accordance
      with the Company&#8217;s policies, subject to deductions for applicable federal,
      state, and/or local taxes.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 13.05pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Officer
      may elect to continue, at the Company&#8217;s expense, health care, medical and 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&#160;4980B of the Internal Revenue Code (the
&#8220;Code&#8221;) through October&#160;31, 2009 (or, if Officer is no longer eligible for
      COBRA prior to such date other than because he becomes eligible under another
      employer&#8217;s health plan, Company will pay an amount equal to the premiums paid
      under COBRA through such date), and thereafter as permitted by applicable law
      and regulations, pursuant to the terms provided other retirees of the Company,
      at his own expense.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 13.05pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Officer
      is
      also entitled to all amounts, if any, accrued by and vested in Officer as of
      the
      Effective Date, under and in accordance with the El Paso Electric Company
      Savings Plan ("401(k) Plan").</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(iv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 13.05pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Company
      agrees to make available to Officer at no cost through November&#160;30, 2007 an
      office (at a location in El Paso acceptable to the Company) with secretarial
      assistance and telecommunications services.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(v)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 13.05pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Except
      as
      otherwise provided in this Agreement, Officer's participation in any and all
      other benefit and compensation plans and arrangements of the Company (including,
      without limitation, accident and disability insurance programs and life
</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      are deemed by both parties to have ceased on the Effective Date, other than
      such
      plans, if any, afforded to all other retirees of the Company.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Releases</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Officer
      agrees to and does fully and completely release, discharge and waive any and
      all
      claims, complaints, causes of action, demands of whatever kind or nature which
      Officer 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 "Officer Claims").
      Officer agrees that this Agreement specifically covers, but is not limited
      to,
      any and all Officer Claims which Officer has or may have against the Company
      relating in any way to compensation, or to any other terms, conditions, or
      circumstances of Officer's employment with the Company, and to the cessation
      of
      such employment, based on statutory or common law claims for employment
      discrimination, including claims under Title&#160;VII, the Age Discrimination in
      Employment Act, Americans with Disabilities Act, and any and all discrimination
      or retaliation claims under state or federal law, wrongful discharge, breach
      of
      contract, defamation, intentional infliction of emotional distress, breach
      of
      fiduciary duty, or any other theory whether legal or equitable; provided,
      however, that this release shall not affect Officer's rights under or with
      respect to any retirement plan which is subject to ERISA and is qualified under
      Section&#160;401(a) of the Code. Notwithstanding the foregoing, Officer does not
      waive any right he may have to enforce this Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">The
      Company agrees to release Officer from any and all claims, causes of action,
      or
      liabilities of the Company against Officer arising under and relating to
      Officer's acts or omissions occurring on or before the Effective Date in the
      course, scope and duties of Officer's employment with the Company; provided
      however, this release shall not apply to any claim, cause of action, or
      liability arising from any breach of fiduciary duty, gross negligence, willful
      misconduct or intentional tort by Officer or any act or omission which
      improperly benefited Officer personally. Notwithstanding the foregoing, the
      Company does not waive any right it may have to enforce this Agreement, and
      Officer does not waive any right he may have to indemnification by the Company
      as provided under the Company&#8217;s Bylaws or applicable law.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">This
      Agreement constitutes a general release and is not an admission of liability
      by
      either party. The Company and any other persons released have denied liability,
      and the Company has agreed to pay the consideration set forth herein merely
      to
      avoid disputes or litigation and in an effort to ease the economic impact of
      Officer's separation from employment. To the extent any claims against the
      Company have not been released by this Agreement, Officer assigns those claims
      to the Company. Notwithstanding the foregoing, Officer does not waive any right
      he may have to enforce this Agreement.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">5.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Confidentiality;
      No Disparagement; No Adverse Positions</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Officer
      agrees not to cause or participate in the publication of any information
      concerning the facts underlying the cessation of Officer's employment with
      the
      Company or the terms and conditions of this Agreement to any person or entity,
      except as required by law or legal process. This provision shall not prevent
      Officer from disclosing such information to Officer's immediate family or to
      Officer's legal counsel and accountants in order to obtain professional advice;
      provided that each are advised as to and agree to observe the confidentiality
      of
      such information. Officer acknowledges that he has reviewed a copy of the press
      release (and related SEC Form&#160;8-K) to be issued in connection with his
      separation from employment.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Officer
      agrees that he shall not make negative statements or representations, or
      otherwise communicate negatively, directly or indirectly, in writing, orally,
      or
      otherwise, or take any action which may, directly or indirectly, disparage
      or be
      damaging to the Company its subsidiaries, affiliates, successors or their
      respective officers, directors, employees, businesses or reputations. Officer
      does not waive any obligation to testify truthfully regarding matters involving
      the Company if required by law or legal process.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">The
      Company agrees that it shall not, and shall not authorize any officer, agent,
      employee, or other representative of the Company to make negative statements
      or
      representations, or otherwise communicate negatively, directly or indirectly,
      in
      writing, orally or otherwise, concerning Officer's performance of his duties
      while employed by the Company (other than the Company's employees with a need
      to
      know, legal counsel and accountants, or, if necessary, in any litigation
      involving the Company or by filing a copy of this Agreement pursuant to the
      requirements of the Securities Exchange Act of 1934, as amended, or as otherwise
      required by law), or in connection therewith take any action which may, directly
      or indirectly, in any way disparage or be damaging to Officer. The Company
      does
      not waive its obligation, or that of its employees and agents, to testify
      truthfully as required by law or legal process. Officer acknowledges that the
      Company will be required to file a copy of this Agreement with the SEC pursuant
      to the Securities Exchange Act of 1934.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(d)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Officer
      agrees that until October&#160;31, 2009, Officer shall not, without the prior
      written consent of the Board, directly or indirectly, and whether as an
      employee, officer, director, manager, partner, consultant, agent or otherwise,
      alone or in association with any other person or organization, do any of the
      following:</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">carry
      on a
      business in which the Company is engaged in its service area in Texas and New
      Mexico;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">interfere
      with the business of the Company or hold any position or accept any engagement
      that may require him to take a position adverse to that of the Company in any
      matter; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
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      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">induce
      any
      employee, customer or supplier of the Company to terminate its relationship
      with
      the Company;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">provided
                that nothing herein shall limit Officer&#8217;s right to hold a passive
                investment of not more than 1% of the equity securities of any corporation
                that is listed on a national securities
                exchange.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(e)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Officer
      specifically acknowledges and agrees that if he fails to comply with any of
      the
      covenants contained in this Section&#160;5, (i)&#160;he shall forfeit any
      amounts due under Section&#160;2 of this Agreement not previously paid, and
      (ii)&#160;he shall repay to the Company any amounts previously paid under
      Section&#160;2 and&#160;3 of this Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">6.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Taxes</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      Officer
      agrees to be solely and fully responsible for satisfying any federal, state,
      or
      local income tax liability that may be assessed against Officer as a result
      of
      any payments tendered by the Company pursuant to this Agreement or as a result
      of the exercise of Officer&#8217;s vested stock options or the termination of
      restrictions on the sale or transfer of any restricted shares. Officer
      acknowledges the Company has provided no legal or other advice to him concerning
      the tax consequences, if any, of the payments made under this
      Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">7.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Proprietary
      Information</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      Officer
      acknowledges that the Company's and its affiliates' trade secrets, information
      concerning legislation, regulation, tax, litigation, labor, securities,
      customers, employees, facilities, products and their development, technical
      information, marketing, investment, and sales activities and procedures,
      promotion and pricing techniques, credit and financial data, and other
      information concerning the Company or its affiliates and any information of
      third parties made available to the Company, its subsidiaries, or affiliates
      (the "Proprietary Information") are valuable, special, and unique assets of
      the
      Company and its affiliates, access to and knowledge of which have been gained
      by
      virtue of Officer's position and involvement with the Company and its
      affiliates. Officer agrees that all Proprietary Information obtained by Officer
      as a result of any such position or involvement shall be considered
      confidential. In recognition of such fact, Officer agrees that Officer will
      not
      disclose any such Proprietary Information to any person or other entity for
      any
      reason or purpose whatsoever, and that Officer will not make use of any
      Proprietary Information for his own purposes or for the benefit of any person
      or
      other entity.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">8.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Remedies</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      Officer
      agrees that, in addition to any other remedy at law or in equity that Company
      may have upon a material breach of this Agreement, Officer shall refund the
      amount of all payments received from Company under Section&#160;2 and shall
      forfeit his right to receive any future payments under Section&#160;2. In
      addition, Officer acknowledges and agrees that the Company's remedies at law
      for
      a breach or threatened breach of any of the provisions of Section&#160;7(b)
      would be inadequate and, in recognition of this fact, Officer agrees that,
      in
      the event of a breach or threatened breach, in addition to any remedies at
      law,
      the Company, without posting any bond, shall be entitled to obtain equitable
      relief in the form of specific performance, temporary restraining order,
      temporary or permanent injunction and any other equitable remedy which may
      then
      be available.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">9.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Entire
      Agreement, Amendment</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      This
      Agreement shall supercede any and all existing agreements between Officer and
      the Company or any of its affiliates relating to the terms of Officer's
      employment, and contains the entire understanding of the parties with respect
      to
      the termination of Officer's employment. It may not be altered, modified, or
      amended except by a written agreement signed by both parties
      hereto.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">10.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>No
      Waiver</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      The
      failure of a party to insist upon strict adherence to any term of this Agreement
      on any occasion shall not be considered a waiver of such party's rights or
      deprive such party of the right thereafter to insist upon strict adherence
      to
      that term or any other term of this Agreement</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">11.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Severability</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      In the
      event that any one or more of the provisions of this Agreement shall be or
      become invalid, illegal, or unenforceable in any respect, the validity, legality
      or enforceability of the remaining provisions of this Agreement shall not be
      affected thereby.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">12.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Benefits
      of Agreement</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      This
      Agreement shall inure to the benefit of and be binding upon the parties hereto
      and their respective heirs, representatives, successors, and
      assigns.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">13.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Attorneys'
      Fees</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      If legal
      or equitable action is filed to enforce the terms of this Agreement, the
      prevailing party shall be entitled to court costs, collection costs, and
      reasonable attorneys' fees in addition to any other relief to which the party
      may be entitled.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">14.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Acknowledgement</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      Officer
      acknowledges that Officer has carefully read this Agreement, fully understands
      and accepts all of its provisions. Officer further acknowledges that Officer
      has
      been provided a full opportunity to review and reflect on the terms of this
      Agreement, has been advised by Company to seek the advice of legal counsel
      of
      Officer's choice, and signs the Agreement voluntarily, of his own free will,
      and
      has signed an acknowledgement (Exhibit&#160;A, fully incorporated herein by this
      reference) to that effect.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">15.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Governing
      Law</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Texas without reference to its conflicts of law or choice of laws
      rules.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">16.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 16.2pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>Counterparts</u></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">.
      This
      Agreement may be signed in counterparts, each of which shall be an original,
      with the same effect as if the signatures thereto and hereto were upon the
      same
      instrument.</font></div><br>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
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      WITNESS
      WHEREOF, the parties hereto have duly executed this Agreement effective as
      of
      the date and year first above written.</font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>/s/
      Gary R.
      Hedrick&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</u></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Gary
      R.
      Hedrick</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>May
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      2007&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</u></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
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      of
      Execution</font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
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      PASO ELECTRIC COMPANY</strong></font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
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      Michael K.
      Parks&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</u></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
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      Chairman</font></div>
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      11,
      2007&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</u></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
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      of
      Execution</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br>&#160;</div>
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      <div id="FTR">
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        </div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">7</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
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      </div>
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        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.3pt" align="justify"><br></div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><strong>EXHIBIT
      A</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><strong><u>ACKNOWLEDGEMENT</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">I
      acknowledge that I am allowed twenty-one (21) days to review and consider the
      Employment Separation Agreement and Release ("Agreement") attached hereto.
      I
      have also been advised verbally and by this writing of my right to consult
      with
      an attorney prior to executing this Agreement. I understand that by signing
      the
      Agreement, I am voluntarily relinquishing, in exchange for the benefits and
      consideration listed in the Agreement, my past and present right to bring any
      claim, including those under the Civil Rights Act of 1964, 42&#160;U.S.C
&#167;2000(e) et seq., the Americans with Disabilities Act, the Age Discrimination
      in
      Employment Act, the Texas Labor Code, and any other equivalent federal or state
      laws or statutes, against El Paso Electric Company. I do not waive any claims
      that may arise after the Effective Date of the Agreement. I am further aware
      that even if I sign the Agreement, I may revoke the Agreement for a period
      of
      seven (7) days following the day I sign the Agreement, and the Agreement shall
      not be effective or enforceable until the revocation period has
      expired.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>/s/
      Gary R.
      Hedrick&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</u></font></div>
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      R.
      Hedrick</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><u>May
      11,
      2007&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Date
      of
      Receipt</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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