-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GIG1yvdmXweMOjtOzfAq9hCWrMBeu2fYjkvUjsSNOFClrbXAJITd24GAjMtQZThD nYrhEQf0UV3j6mt/W6yzuw== 0000912057-96-019061.txt : 19960829 0000912057-96-019061.hdr.sgml : 19960829 ACCESSION NUMBER: 0000912057-96-019061 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19960828 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TNP ENTERPRISES INC CENTRAL INDEX KEY: 0000741612 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 751907501 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-10957 FILM NUMBER: 96622269 BUSINESS ADDRESS: STREET 1: 4100 INTERNATIONAL PLZ STREET 2: PO BOX 2943 CITY: FORT WORTH STATE: TX ZIP: 76113 BUSINESS PHONE: 8177310099 S-3 1 FORM S-3 As filed with the Securities and Exchange Commission on August 28, 1996 Registration No. 333- _________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- TNP ENTERPRISES, INC. (Exact name of registrant as specified in its charter) TEXAS 75-1907501 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4100 INTERNATIONAL PLAZA P.O. BOX 2943 FORT WORTH, TEXAS 76113 (817) 731-0099 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ---------------- MICHAEL D. BLANCHARD CORPORATE SECRETARY AND GENERAL COUNSEL TNP ENTERPRISES, INC. 4100 INTERNATIONAL PLAZA P.O. BOX 2943 FORT WORTH, TEXAS 76113 (817) 731-0099 FAX: (817) 737-1333 (Name, address, including zip code, and telephone number, including area code, of agent for service) ---------------- COPIES TO: BRIAN D. BARNARD ROBERT B. WILLIAMS HAYNES AND BOONE, LLP MILBANK, TWEED, HADLEY & MCCLOY 1300 BURNETT PLAZA 1 CHASE MANHATTAN PLAZA 801 CHERRY STREET NEW YORK, NEW YORK 10005 FORT WORTH, TEXAS 76102-6866 (212) 530-5000 (817) 347-6600 FAX: (212) 530-5219 FAX: (817) 347-6650 ---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Proposed Proposed Maximum Maximum Title of Each Class Amount to be Offering Price Aggregate Amount of of Securities to be Registered Registered Per Share (1) Offering Price (1) Registration Fee - --------------------------------------------------------------------------------------------------------------- Common Stock, no par value 2,000,000 Shares $25.9375 $51,875,000 $17,887.93 - --------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------
(1) The proposed maximum aggregate offering price has been estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended (the "Securities Act"). The proposed maximum offering price per share will be determined from time to time by the registrant in connection with the issuance by the registrant of the securities registered hereunder. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED AUGUST 28, 1996 PROSPECTUS 1,750,000 SHARES TNP ENTERPRISES, INC. [LOGO] COMMON STOCK --------------------- All of the shares of Common Stock offered hereby are being sold by TNP Enterprises, Inc. The Common Stock of the Company is traded on the New York Stock Exchange under the symbol "TNP". The last reported sale price of the Common Stock on the New York Stock Exchange on August 26, 1996 was $25 3/4 per share (see "Common Stock Price Range and Dividends"). --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Underwriting Price to Discounts and Proceeds to Public Commissions(1) Company(2) - -------------------------------------------------------------------------------- Per Share $ $ $ - -------------------------------------------------------------------------------- Total (3) $ $ $ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) For information regarding indemnification of the Underwriters, see "Underwriting." (2) Before deducting expenses payable by the Company estimated at $ . (3) The Company has granted the Underwriters a 30-day option to purchase up to 250,000 additional shares solely to cover over-allotments, if any. See "Underwriting." If such option is exercised in full, the total Price to the Public, Underwriting Discounts and Commissions, and Proceeds to Company will be $ , $ and $ , respectively. --------------------- The shares of Common Stock are being offered by the several Underwriters named herein, subject to prior sale, when, as and if accepted by them and subject to certain conditions. It is expected that the certificates for the shares of Common Stock offered hereby will be available for delivery on or about _______________, 1996, at the office of Smith Barney Inc., 333 West 34th Street, New York, New York 10001. --------------------- SMITH BARNEY INC. EDWARD D. JONES & CO., L.P. LEGG MASON WOOD WALKER INCORPORATED _____________________, 1996 [Graphic/Image Material - The Prospectus includes an image depicting a map of the States of Texas and New Mexico and the Company's three regional operating divisions. The map also depicts the locations of the Company's headquarters, regional headquarters, and the Company's power plant.] 2 AVAILABLE INFORMATION TNP Enterprises, Inc. (the "Company") is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In accordance with the Exchange Act, the Company files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). The reports, proxy statements and other information can be inspected and copied at the public reference facilities that the Commission maintains at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at 7 World Trade Center, 13th Floor, New York, New York 10048, and Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of these materials can be obtained at prescribed rates from the Public Reference Section of the Commission at the principal offices of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, reports, proxy statements, and other information concerning the Company may be inspected at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. The Company has filed with the Commission a registration statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Common Stock. This Prospectus, which constitutes a part of the Registration Statement, does not contain all the information set forth in the Registration Statement, certain items of which are contained in schedules and exhibits to the Registration Statement as permitted by the rules and regulations of the Commission. Statements made in the Prospectus concerning the contents of any documents referred to herein are not necessarily complete. With respect to each such document filed with the Commission as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description, and each such statement shall be deemed qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, which have been filed by the Company with the Commission pursuant to the Exchange Act, are hereby incorporated by reference in this Prospectus: (i) Annual Report on Form 10-K for the year ended December 31, 1995; (ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 1996; (iii) Quarterly Report on Form 10-Q for the quarter ended June 30, 1996; and (iv) the description of the Common Stock included in the Company's Report on Form 8-B dated January 9, 1985. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of this offering shall be deemed to be incorporated by reference in this Prospectus from their respective dates of filing. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, on the written or oral request of any such person, a copy of any or all of the documents incorporated by reference (other than exhibits to such documents which are not specifically incorporated by reference in such documents). Written requests for such copies should be directed to the Company at 4100 International Plaza, P.O. Box 2943, Fort Worth, Texas 76113. Telephone requests may be directed to Michael D. Blanchard, Corporate Secretary and General Counsel of the Company, at (817) 731-0099. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 3 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. UNLESS OTHERWISE INDICATED, (i) ALL REFERENCES IN THIS PROSPECTUS TO THE COMPANY SHALL MEAN TNP ENTERPRISES, INC. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS, AND (ii) THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED. THE COMPANY TNP Enterprises, Inc., a non-utility holding company, is engaged in the generation, purchase, transmission, distribution, and sale of electricity to customers within the States of Texas and New Mexico through its wholly-owned subsidiary, Texas-New Mexico Power Company ("TNP"). The Company is exempt from regulation as a "registered holding company" as that term is defined in the Public Utility Holding Company Act of 1935. TNP provides electric service to approximately 216,000 customers in 85 municipalities and adjacent rural areas. TNP's service territory is divided into three regional divisions. TNP's largest region, the South-Western Region, includes the area along the Texas Gulf Coast, between the cities of Houston and Galveston. This region accounted for 57.4% of total operating revenues in 1995. The North-Central Region, TNP's second largest region, extends from Lewisville, Texas, which is north of Dallas-Fort Worth International Airport, to municipalities along the Red River and accounted for 28.3% of total operating revenues in 1995. The New Mexico Region includes areas in Southwest and South Central New Mexico and accounted for 14.3% of total operating revenues in 1995. The areas served by TNP contain a population of approximately 420,000. The electric utility industry in general has experienced a significant increase in the level of competition in the market for the generation and transmission of electricity as a result of certain recent regulatory changes and customer demands for lower energy costs. The Company believes that as the electric utility industry moves toward a more deregulated and competitive environment, customers will have more choice in the products and services available to them. The Company is seeking to enhance its competitive position and strengthen its financial position by pursuing a strategy to expand its customer base, lower its cost of power and cost of capital, provide additional customer services, and take advantage of new opportunities in unregulated energy management services. See "The Company -- Strategy." THE OFFERING Common Stock offered.......................... 1,750,000 shares (1) Common Stock to be outstanding after the offering........................... 12,731,275 shares (1)(2) Price Range of Common Stock (January 1, 1996 through August 26, 1996)................ $16 to $28 5/8 Closing Price on August 26, 1996.............. $25 3/4 Indicated Annual Dividend..................... $0.98 per share (3) Use of Proceeds............................... Capital contribution to TNP for repayment of certain indebtedness, to provide working capital and for other general corporate purposes. See "Use of Proceeds." New York Stock Exchange Symbol................ TNP ________________________ (1) Assuming Underwriters' over-allotment option is not exercised. See "Underwriting." (2) Common Stock to be outstanding after the offering is based on 10,981,275 shares of Common Stock outstanding as of August 23, 1996, and does not include shares that will be issued after such date pursuant to the Company's Dividend Reinvestment Plan, Equity Incentive Plan or Non-Employee Director's Stock Plan. (3) Based upon a quarterly dividend of $0.245 per share. The third quarter, 1996 dividend is payable on September 15, 1996 to shareholders of record on August 18, 1996. The shares of Common Stock offered hereby will not be eligible for the September 15, 1996 dividend. 4 SUMMARY CONSOLIDATED FINANCIAL INFORMATION (in thousands except per share amounts) Twelve Months Ended June 30, 1996 Year Ended December 31, ------------- --------------------------------- (Unaudited)(1) 1995 (1) 1994 (2) 1993 -------------- --------- -------- -------- INCOME STATEMENT DATA: Operating revenues . . . . . . . . $480,786 $485,823 $477,989 $474,242 Operating income: before income taxes . . . . . . . 112,719 108,912 76,753 82,534 after income taxes . . . . . . . 97,564 96,595 77,991 78,240 Net earnings (loss). . . . . . . . $ 37,643 $ 41,505 $(17,441) $ 11,605 -------- -------- -------- -------- -------- -------- -------- -------- Earnings (loss) applicable to Common Stock . . . . . . . . . . . 37,272 40,850 (18,231) 10,726 Earnings (loss) per share of Common Stock . . . . . . . . . . $ 3.40 $ 3.75 $ (1.70) $ 1.01 -------- -------- -------- -------- -------- -------- -------- -------- Earnings per share of Common Stock excluding one-time items . . . . . . . . . . . . . . . $ 2.26 $ 1.83 $ 0.74 $ 1.01 -------- -------- -------- -------- -------- -------- -------- -------- Dividends per share of Common Stock . . . . . . . . . . . . . . . 0.86 0.82 1.22 1.63 Weighted average number of shares of Common Stock outstanding . . . . 10,967 10,901 10,750 10,641
As of June 30, 1996 (Unaudited) ------------------------------- Actual As Adjusted (3) -------- ---------------- BALANCE SHEET DATA: Long-term debt (excluding current maturities) . . . . . $517,431 $575,551 Preferred stock . . . . . . . . . . . . . . . . . . . . 3,600 3,600 Common equity . . . . . . . . . . . . . . . . . . . . . 222,227 265,977 Total capitalization . . . . . . . . . . . . . . . . 743,258 845,128 Net utility plant . . . . . . . . . . . . . . . . . . . 938,594 938,594 Current maturities of long-term debt (4). . . . . . . . 101,870 0
________________________ (1) One-time items that increased earnings in 1995 included (i) a gain from the sale of the Company's properties in the Texas Panhandle ($9.48 million or $0.87 per share); (ii) the effect of the Company's change in the method of accounting for operating revenues from cycle billing to the accrual method ($8.45 million or $0.77 per share); and (iii) the recognition of deferred revenues ($3.02 million or $0.28 per share). Excluding the effects of these items in 1995, (i) net earnings (loss) would have been $20.56 million; and (ii) earnings (loss) applicable to Common Stock would have been $19.90 million. (2) One-time items that decreased earnings in 1994 included (i) the recognition of regulatory disallowances ($20.51 million or $1.91 per share); and (ii) reorganization costs ($5.72 million or $0.53 per share). Excluding the effects of these items in 1994, (i) net earnings (loss) would have been $8.79 million; and (ii) earnings (loss) applicable to Common Stock would have been $8.0 million. (3) Adjusted to give effect to the issuance and sale of 1,750,000 shares of Common Stock at an assumed net price of $25 per share and borrowings under the Company's bank line of credit. See "Use of Proceeds." (4) Represents primarily the $100,800,000 in aggregate principal amount due January 15, 1997 (the "Maturity Date"), on the Company's 11 1/4% First Mortgage Bonds, due 1997 (the "11 1/4% Bonds"). Assumes that the Company uses all of the net proceeds from the offering, together with sufficient borrowings from its bank line of credit, to repay the 11 1/4% Bonds on the Maturity Date. See "Use of Proceeds." 5 THE COMPANY OVERVIEW TNP Enterprises, Inc. (the "Company"), a non-utility holding company, is engaged in the generation, purchase, transmission, distribution, and sale of electricity to customers within the States of Texas and New Mexico through its wholly-owned subsidiary, Texas-New Mexico Power Company ("TNP"). The Company is exempt from regulation as a "registered holding company" as that term is defined in the Public Utility Holding Company Act of 1935, as amended (the "1935 Act"). TNP provides electric service to approximately 216,000 customers in 85 municipalities and adjacent rural areas through three operating regions. TNP owns one electric generating facility, TNP One, which is located in Robertson County, Texas. TNP One consists of two 150-megawatt units, each of which utilizes a lignite-fueled, circulating fluidized bed technology. The two units are supplying, on an annualized basis, approximately 25% of TNP's power requirements. The Company and its subsidiaries are all Texas corporations. Their executive offices are located at 4100 International Plaza, P.O. Box 2943, Fort Worth, Texas 76113 and their telephone number is (817) 731-0099. COMPETITION REGULATORY AND LEGISLATIVE DEVELOPMENTS Electric utilities have historically faced limited or no competition within the areas they serve. Recently, however, there has been substantial discussion within the electric utility industry throughout the United States concerning the potential for increased competition. Several states, including Texas and New Mexico, are examining the consequences and feasibility of various legislative options concerning competition. Each of the Texas Senate and House of Representatives has appointed an interim committee to report on the status of competition in the electric utility industry and recommend possible legislation. The Public Utility Regulatory Act of the State of Texas ("PURA") requires the Public Utility Commission of Texas ("PUCT") to prepare a report to the Texas legislature on the scope and impact of competition and possible industry restructuring on customers. The Senate interim committee has issued a report recommending that Texas maintain current regulations relating to wholesale and retail competition until such time as further legislative action on competition occurs in other states. Both the House interim committee and the PUCT are in the process of gathering information for their respective reports. However, neither has issued a report and the content of such reports is not yet known. The Company expects the introduction of legislation relating to competition to be presented in the next Texas legislative sessions, but cannot predict the outcome of such proceedings. The New Mexico legislature also has appointed an interim committee to examine the status of competition within the electric utility industry. Although this interim committee has previously issued a report stating that legislation concerning retail competition was not yet appropriate in New Mexico, the interim committee is continuing to study the issue. The New Mexico Public Utility Commission ("NMPUC") also has initiated a review of competition, industry restructuring as it relates to competition, and other related issues. The Company cannot predict what either the interim committee or the NMPUC may recommend at the conclusion of their respective proceedings. The Company believes that wholesale competition within the electric utility industry is likely to increase in the near future. Federal Energy Regulatory Commission ("FERC") Order 888 and PUCT Substantive Rule 23.67 require open access transmission on terms and conditions that will encourage and enhance the development of a competitive wholesale market. See "-- Regulation." EXISTING RETAIL COMPETITION The existing statutory and regulatory systems in Texas and New Mexico limit retail transmission and distribution competition. In Texas, retail competition currently exists only where the PUCT has certified more than one electric utility to serve a particular area. Currently, such areas contain approximately 15% of TNP's customers and comprise 10% of its total revenues attributable to Texas. Since the regulatory system in New Mexico generally does not result in more than one utility being authorized to serve a particular area, there is currently very limited retail competition in New Mexico. FERC is expressly prohibited by the Energy Policy Act of 1992 from ordering transmission and distribution of electric services to retail customers. WHOLESALE COMPETITION PURA provides for a competitive wholesale market and allows utilities to seek approval from the PUCT for flexible pricing that can be set between the utility's approved rate and its marginal cost. This flexible pricing can be used to attract or retain customers on a utility's system. THE COMPANY'S RESPONSE Competition in the electric utility industry could result in many companies, including TNP, not being able to recover potential "stranded costs," which represent the difference between the cost to a company of providing energy 6 and what a customer would be willing to pay for such energy in a competitive market. In order to address this significant uncertainty in the absence of legislation or regulatory guidance, the Company has filed applications with the PUCT and NMPUC for approval of its competitive retail electric service plan, Community Choice-SM-. Community Choice-SM- provides the Company an opportunity to recover from its customers a significant portion of the Company's estimate of its potential stranded costs during a reasonable transition period. There is no assurance that Community Choice-SM- will obtain regulatory approval or, if approved, that Community Choice-SM- will be successful. The Company's inability to recover a significant portion of its estimated potential stranded costs could have a materially adverse effect on the Company's financial condition. See "-- Strategy -- Community Choice-SM-." STRATEGY COMPONENTS OF THE COMPANY'S STRATEGY The Company believes that as the electric utility industry moves toward a more deregulated and competitive environment, customers will have more choice in the products and services available to them. The Company is seeking to enhance its competitive position and strengthen its financial position in this new environment by pursuing a strategy to expand its customer base, lower its cost of power and cost of capital, provide additional customer services, and take advantage of new opportunities in unregulated energy management services. The Company believes that this strategy, as described in more detail below, will allow TNP to continue positioning itself to be competitive in the increasingly deregulated utility industry. EXPAND CUSTOMER BASE. RESIDENTIAL AND COMMERCIAL CUSTOMERS. The Company principally focuses on providing personalized electric service to residential and commercial customers in small and medium-sized communities. The Company believes that its focus on providing local, personalized service will allow TNP to grow along with the communities it serves. This strategy differentiates the Company from other electric utilities that have withdrawn from small and medium-sized communities and become more centralized and focused on urban areas. The Company believes that by maintaining a local presence in the communities it serves, it will continue to be recognized as a valuable member of those communities. INDUSTRIAL CUSTOMERS. Industrial customers have more power supply options and are, consequently, more price sensitive. The Company will seek to expand its industrial customer base by providing flexible pricing and services. One method of pursuing this strategy is to match competitive purchased power resources with a particular customer's requirements. Another method is to provide self-generating customers with innovative power arrangements that may lower their costs and increase their operational efficiency. LOAD CONTROL AREA SERVICES. In July 1996, TNP began operating its own electrical control area to manage its resources in its South-Western Region. The implementation of the control area provides TNP with the flexibility to balance its generated power from TNP One and its purchased power requirements with its customers' needs. The increased efficiency provided by its new electrical control area also enables TNP to reduce its costs of standby power. TNP also will seek to market its control area services to other potential users. REDUCE COST OF POWER. PURCHASED POWER COSTS. Unlike many utilities that generate most of the power provided to their customers, TNP generates approximately 25% of its total power requirements and purchases the remainder from other electric utilities and third-party power providers. This allows TNP to take advantage of the current surplus of low-cost power available in the southwestern region of the United States by replacing expiring high cost purchase power contracts with lower cost contracts. This strategy provides the Company with the increased flexibility necessary to benefit from a competitive wholesale market. GENERATED POWER COSTS. The Company continues to seek ways to decrease the annual operation and maintenance costs of TNP One. As discussed above, the Company recently reduced the standby power costs of TNP One by installing new control area facilities in its South-Western Region. The Company also is seeking methods to reduce the work force at TNP One by up to 40 percent prior to the end of 1997. CAPITAL INVESTMENT COSTS. The Company is working towards achieving an investment grade credit rating over the next several years. Part of the Company's strategy is to use a significant amount of its annual free cash flows to retire outstanding indebtedness and reduce its cost of borrowed funds. Additionally, TNP currently internally generates all of its capital requirements. OPPORTUNITIES IN UNREGULATED BUSINESSES. Another part of the Company's strategy is to capitalize on unregulated business opportunities. Community Public Service Company ("CPS"), a wholly-owned subsidiary of the Company, is currently evaluating a variety of unregulated opportunities in energy management services. CPS's strategy is to provide energy-related services to small and to medium-sized communities in the Company's service areas, and, as this business expands, throughout the southwestern region of the United States. The Company believes that its ability to take advantage of these new 7 unregulated opportunities may play an important role in enhancing the Company's long-term financial performance as the electric utility industry moves toward increased competition. COMMUNITY CHOICE-SM- Community Choice-SM- is designed to provide economic benefits to the Company's customers and shareholders. During a four to five year transition period, the Company would have the opportunity to reduce its potential "stranded costs," and TNP would hold its rates constant at their 1995 level. At the end of the transition period, TNP proposes to aggregate its customers at the community level and permit these customer groups to choose their energy supplier and the types and nature of electric services they desire. TNP would continue to provide transmission and distribution services to its customers. There can be no assurance that Community Choice-SM- will obtain regulatory approval. If Community Choice-SM- is not approved but the retail electric service market eventually becomes deregulated, the Company intends to develop an alternative strategy that will provide the Company and its customers with many of the benefits of Community Choice-SM-. SERVICE TERRITORY TNP's service territory is divided into three regional divisions: the South-Western Region, the North-Central Region, and the New Mexico Region. SOUTH-WESTERN REGION The South-Western Region includes the area along the Texas Gulf Coast between Houston and Galveston. The oil and petrochemical industries, agricultural industry, and general commercial activity in the Houston area support the economy of this area. This region also includes the area in far west Texas between Midland and El Paso. The economy in this area is based primarily on oil and gas production, agriculture, and food processing. NORTH-CENTRAL REGION The North-Central Region extends from Lewisville, Texas, which is north of Dallas-Fort Worth International Airport, to municipalities along the Red River. TNP provides electric service to a variety of commercial, agricultural, and petroleum industry customers in this area. This region also includes municipalities and communities south and west of Fort Worth. This area's economy depends largely on agriculture and, to a lesser extent, tourism and oil production. NEW MEXICO REGION The New Mexico Region includes areas in southwest and south-central New Mexico. This region's economy is primarily dependent upon mining and agriculture. Copper mines are the major industrial customers in this region. TNP's sales in all regions are primarily to retail customers. Revenues contributed by each operating region and its percentage of total operating revenues in 1995, 1994, and 1993, respectively, are set forth in the following table. No single customer accounted for more than 10% of operating revenues during the years presented in the table. Operating Revenues (Dollars in thousands) Region 1995 1994 1993 - ------------- ------------------- ------------------ ------------------ South-Western $ 278,791 57.4% $ 269,194 56.3% $ 262,979 55.4% North-Central 137,521 28.3 132,595 27.8 131,725 27.8 New Mexico 69,511 14.3 76,200 15.9 79,538 16.8 --------- ------ --------- ------ --------- ------ Total $ 485,823 100.0% $ 477,989 100.0% $ 474,242 100.0% --------- ------ --------- ------ --------- ------ --------- ------ --------- ------ --------- ------
8 The following table provides certain information regarding the total revenues of the Company from the sale of electricity and average revenue per kilowatt hour by customer class during the years presented: 1995 1994 1993 ---- ---- ---- REVENUE FROM SALE OF ELECTRICITY (IN THOUSANDS): Residential . . . . . . . . . . . . . . . . . . $ 200,455 $ 194,933 $ 193,484 Commercial . . . . . . . . . . . . . . . . . . . 148,908 141,886 138,680 Industrial . . . . . . . . . . . . . . . . . . . 113,728 122,714 124,474 Other . . . . . . . . . . . . . . . . . . . . . 22,732 18,456 17,604 ---------- ---------- ---------- Total . . . . . . . . . . . . . . . . . . . $ 485,823 $ 477,989 $ 474,242 ---------- ---------- ---------- ---------- ---------- ---------- AVERAGE REVENUE PER KILOWATT HOUR (IN CENTS): Residential . . . . . . . . . . . . . . . . . . 9.4 9.3 9.5 Commercial . . . . . . . . . . . . . . . . . . . 8.9 8.8 8.8 Industrial . . . . . . . . . . . . . . . . . . . 4.2 4.6 4.8
The following table provides the number of customers of the Company by class at December 31 for each of the three years presented: 1995(1) 1994 1993 ------ ---- ---- Residential . . . . . . . . . . . . . . . . . . 183,863 185,364 181,298 Commercial . . . . . . . . . . . . . . . . . . . 29,361 30,624 30,235 Industrial . . . . . . . . . . . . . . . . . 136 142 142 Other . . . . . . . . . . . . . . . . . . . . . 244 237 237 ------- ------- ------- Total . . . . . . . . . . . . . . . . . . . . 213,604 216,367 211,911 ------- ------- ------- ------- ------- -------
- ---------------- (1) Excludes approximately 7,300 residential, commercial and industrial customers located within the Company's former service area in the Texas Panhandle. The Company sold its properties in this service area to Southwestern Public Service Co. in September 1995. SOURCES OF ENERGY TNP generates electricity at TNP One and purchases the remainder of its requirements of electricity from various suppliers with diversified fuel sources. TNP One, which has 300 megawatts of capacity, provided approximately 25% of TNP's total power requirements during 1995. Power generated at TNP One is transmitted over TNP's own transmission lines to other utilities' transmission systems for delivery to TNP's Texas service area systems. To maintain a reliable power supply for its customers and to coordinate interconnected operations, TNP is a member of the Electric Reliability Council of Texas ("ERCOT"), the Inland Power Pool, and the New Mexico Power Pool. The availability and cost of purchased energy to TNP may be affected by changes in supplier costs, regulations and laws, fuel costs, and other factors. TNP is pursuing various opportunities to reduce purchased power costs. See " -- Strategy -- Reduce Cost of Power." Management believes that current supply arrangements and the availability of electricity on the wholesale market are adequate to satisfy TNP's foreseeable power requirements. 9 The following table sets forth certain information concerning TNP's sources of electric energy in 1995 by state. YEAR PERCENT CONTRACT OF ENERGY TEXAS EXPIRES PROVIDED ----- --------- ---------- GENERATION TNP One . . . . . . . . . . . . . . . . -- 44% PURCHASED POWER Texas Utilities Electric Co. ("TU")(1) 1999 29% Clear Lake Cogeneration L.P. . . . . . 2004 19% Other . . . . . . . . . . . . . . . . . Various 8% ---- Total 100% ---- ---- NEW MEXICO ---------- PURCHASED POWER Tucson Electric Power Co. . . . . . . . 1996 35% Public Service Co. of New Mexico(2) . . 2006 26% El Paso Electric Co.(2) . . . . . . . . 2002 21% Southwestern Public Service Co.(2). . . 2001 11% Other . . . . . . . . . . . . . . . . . Various 7% ---- Total 100% ---- ---- - ---------------- (1) TNP has notified TU of its intent to cease purchasing its full requirements of power and energy effective January 1, 1999. (2) Supplier may not terminate service to TNP without FERC authorization. SEASONALITY OF BUSINESS TNP experiences increased sales and operating revenues during the summer months as a result of increased air conditioner usage in hot weather. In 1995, approximately 40% of annual revenues were recorded in June, July, August and September. REGULATION GENERAL The Company is a holding company as defined in the 1935 Act. However, the Company and its subsidiaries are exempt from the provisions of the 1935 Act, except Section 9(a)(2) thereof, which relates to the acquisition of securities of public utility companies. TNP is subject to regulation by the PUCT and the NMPUC, and certain of its activities in New Mexico are subject to the jurisdiction of FERC. In addition, each of the cities within TNP's Texas service areas that have not surrendered jurisdiction to the PUCT has original rate jurisdiction over the utilities that provide electricity to the city. The rate-related decisions of each of these cities are appealable to the PUCT on a DE NOVO basis. PUCT Amendments to PURA, the legal foundation of electric regulation in Texas, became effective on September 1, 1995. Among other things, the amendments deregulate the wholesale bulk power market in the ERCOT region, permit pricing flexibility for utilities facing competitive challenges, provide for a market-driven 10 integrated resource planning process and mandate open access transmission service comparable to the service a utility provides itself. PURA requires the PUCT to present to the Texas legislature prior to each of its regular sessions a report on the scope of competition in the electric markets within Texas as well as the impact of competition and industry restructuring on customers. The information necessary to present the report is currently being gathered by the PUCT in its Project No. 15000. The PUCT recently passed a wholesale transmission access rule that establishes a regional method of transmission pricing, terms and conditions. The purpose is to unbundle the price for transmission rate services within Texas and establish an Independent System Operator for the ERCOT transmission system. As a direct result, cost data from all Texas utilities have been filed with the PUCT. These filings will be used by the PUCT to set the transmission pricing rules for the ERCOT region. TNP's initial review of these rules indicates that implementation results in a greater reduction in its transmission expenses than the expected reduction in transmission related revenues. TNP believes it should benefit from the new rules as competition increases in the wholesale power market, thereby providing TNP with increased access to the ERCOT transmission system and resulting in reduced purchased power and transmission costs. TNP currently recovers its eligible fuel costs by means of a fixed fuel factor set by the PUCT. Eligible fuel costs may be reconciled at a utility's option every six months but must be reconciled on a three year basis or, if an over or under cost recovery greater than 4% occurs, then the utility must file a fuel reconciliation with the PUCT within six months after any such occurrence. The PUCT allows the current recovery of TNP's purchased power through a recovery factor that changes each month. TNP expects that its fuel factor will be reviewed this year by the PUCT. In the event Community Choice-SM- receives regulatory approval, both the fuel and purchased power factors will be fixed at their 1995 levels, and any recovery in excess of costs will be used to reduce TNP's potential stranded costs. NMPUC The NMPUC is presently engaged in work sessions to develop proposed rulemaking or legislation that will address the restructuring of the electric utility industry in New Mexico with respect to competition in retail utility service, including potential open access of transmission and distribution lines and customer choice of energy suppliers. In addition, the NMPUC has proposed new regulations that address the manner in which electric utilities may engage in non-utility activities, form affiliated entities and engage in transactions with affiliates. The Company cannot predict the outcome of the NMPUC's proposed rulemaking proceedings and work sessions or the impact that any permanent regulations or legislation that result from the NMPUC's efforts will have on TNP's operations in New Mexico. FERC In March 1995, FERC released a notice of proposed rulemaking (the "MegaNOPR") to solicit comments on pending policy changes aimed at increasing access to the nation's electric transmission lines. The proposed changes would require utilities with power transmission lines to grant access to those lines under the same terms and conditions as the utility itself uses the lines. The purpose of this initiative is to promote competition in bulk power markets. After receiving comments to the MegaNOPR, on April 24, 1996, FERC issued orders 888 and 889. Order 888 opens wholesale power sales to competition by requiring public utilities that own, control, or operate transmission facilities to file non-discriminatory open access tariffs offering other utilities the same transmission service they provide themselves. Order 888 also allows utilities, under certain conditions, to petition FERC for the full recovery of stranded costs for wholesale requirements agreements signed before July 11, 1994. After that date, the recovery of stranded costs must be specifically provided for in the service agreement. Order 889 provides for a real time information system known as OASIS (Open Access Same-time Information System). It also addresses standards of conduct to ensure that transmission owners and their affiliates do not have an unfair competitive advantage by using transmission to sell power. This rule requires that transmission utilities provide information about their transmission system for their own wholesale power transmissions and functionally separates the wholesale power marketing and transmission operation functions. Order 888 leaves pricing issues raised by the MegaNOPR to be resolved through subsequent litigation at the FERC on a case by case basis. Due to the uncertainty of this litigation, the Company is unable to estimate the potential impact of these orders on TNP's operations. ENVIRONMENTAL In addition to regulation as a utility, TNP's facilities are regulated by the Environmental Protection Agency and by Texas and New Mexico environmental agencies. TNP One uses environmentally efficient circulating fluidizing bed technology that eliminates the need for expensive scrubbers. TNP was allotted sufficient emission allowances to comply with the Clean Air Act of 1990 through the year 2000. During 1995, 1994 and 1993, TNP 11 incurred expenses related to air, water, and solid waste pollution abatement (including ash removal) of approximately $5.5 million, $5.9 million, and $4.3 million, respectively. USE OF PROCEEDS The net proceeds from the sale of 1,750,000 shares of Common Stock offered hereby are estimated to be $_______ million ($_______ million if the Underwriters' over-allotment is exercised) after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company intends to use such proceeds (i) to make contributions to the equity capital of TNP, (ii) to provide working capital, and (iii) for other general corporate purposes. TNP intends to utilize approximately $______ million of the net proceeds and borrowings in the amount of $________ from its bank line of credit to repay at maturity (January 15, 1997) the $100,800,000 outstanding principal amount of its 11 1/4% First Mortgage Bonds, due 1997. Pending application of the net proceeds for specific purposes, such proceeds may be used to reduce certain revolving bank indebtedness or may be invested in short-term or marketable securities. COMMON STOCK PRICE RANGE AND DIVIDENDS The Common Stock is listed on the New York Stock Exchange under the symbol "TNP." The following table sets forth on a per share basis the price range and cash dividends paid for the Common Stock as reported on the New York Stock Exchange for the periods indicated. DIVIDENDS PRICE RANGE PAID YEAR HIGH LOW PER SHARE ---- ---- --- --------- 1994 First Quarter . . . . . . . . . . . . . . $ 18 5/8 $ 16 5/8 $ 0.41 Second Quarter. . . . . . . . . . . . . . 17 3/8 14 5/8 0.41 Third Quarter . . . . . . . . . . . . . . 15 5/8 13 1/4 0.20 (1) Fourth Quarter. . . . . . . . . . . . . . 15 3/8 13 3/8 0.20 1995 First Quarter . . . . . . . . . . . . . . $ 16 $ 14 5/8 $ 0.20 Second Quarter. . . . . . . . . . . . . . 16 3/4 15 0.20 Third Quarter . . . . . . . . . . . . . . 17 3/4 16 0.20 Fourth Quarter. . . . . . . . . . . . . . 19 1/8 17 1/2 0.22 1996 First Quarter . . . . . . . . . . . . . . $ 23 1/4 $ 18 1/2 $ 0.22 Second Quarter. . . . . . . . . . . . . . 28 5/8 22 0.22 Third Quarter (through August 26, 1996) . 27 3/4 25 1/8 0.245(2) - ---------------- (1) The Board of Directors of the Company reduced the third quarter 1994 dividend due to the Company's financial condition during such period. (2) The third quarter 1996 dividend is payable on September 15, 1996, to shareholders of record on August 28, 1996. The shares of Common Stock offered hereby will not be eligible for the September 15, 1996 dividend. As of August 20, 1996, there were approximately 6,300 record holders of Common Stock. For a recent closing sales price of the Common Stock, see the cover page of this Prospectus. The Company has a dividend reinvestment plan ("DRP") that allows shareholders of record to purchase additional shares of Common Stock with cash dividends paid by the Company. Currently, a person must either already own shares of Common Stock or purchase shares through a broker prior to participating in the DRP. After a shareholder becomes a participant in the DRP, the shareholder may purchase, without brokerage fees, additional shares from the Company in an amount of not less than $25 or more than $5,000 per calendar quarter. Since October 1984, the Company has issued approximately 900,000 of the 1,200,000 shares of Common Stock authorized for the DRP. 12 DESCRIPTION OF COMMON STOCK The statements herein concerning the Common Stock and the Articles of Incorporation, as amended (the "Articles"), are merely a summary and do not purport to be complete. The relative rights, authorized amounts, descriptions, and preferences and limitations of the preferred stock, no par value ("Preferred Stock"), of the Company and the Common Stock are stated in full in the Articles and other instruments, which are exhibits to the Registration Statement. Presently, the Company has no outstanding shares of Preferred Stock. All outstanding shares of preferred stock set forth in the Company's consolidated financial statements incorporated herein by reference were issued by TNP and only affect the rights of the holders of the Common Stock with respect to the ownership rights in the assets of TNP as a wholly owned subsidiary of the Company. DIVIDEND RIGHTS AND LIMITATIONS The holders of the Common Stock are entitled to receive such dividends as may be declared by the Board of Directors, but no dividends may be declared or paid on the Common Stock (other than dividends payable solely in shares of the Common Stock) unless all past and current dividends on any issued and outstanding Preferred Stock of the Company have been paid or declared and set apart for payment and all requisite sinking or purchase fund obligations for the Preferred Stock have been fulfilled. Since TNP constitutes the Company's principal subsidiary, the ability of the Company to pay dividends may be dependent on the ability of TNP to pay dividends to the Company. A summary of the legal limitations on TNP's ability to pay dividends is set forth below and is qualified in its entirety by the documents referenced in such summary. Under TNP's Articles of Incorporation, the Company, as holder of the common stock of TNP, is entitled to receive such dividends as may be declared by the Board of Directors, but no dividends may be declared or paid on the common stock of TNP (other than dividends payable solely in shares of common stock of TNP) unless all past and current dividends on outstanding preferred stock of TNP have been paid or declared and set apart for payment and all requisite sinking or purchase fund obligations for the preferred stock of TNP have been fulfilled. Under TNP's Indenture of Mortgage and Deed of Trust dated as of November 1, 1944 (the "Mortgage"), as supplemented and modified, TNP may not pay cash dividends on its common stock to the Company (other than dividends payable solely in shares of its common stock), unless at the date of such declaration of dividends on its common stock, after giving effect thereto, the sum of $1,500,000 plus (or minus in case of a deficit) the Net Income of TNP from December 31, 1969, to and including the date of such common stock dividend declaration shall be greater than the aggregate amount of all such payments or distributions declared or authorized during such period on TNP's common stock plus the aggregate amount of all cash dividends on, and payment pursuant to any sinking, purchase or analogous fund for, preferred stock of TNP declared or made during such period. At June 30, 1996, the amount of restricted retained earnings of TNP was approximately $18.66 million. Under TNP's Credit Agreement dated as of November 3, 1995 (the "Credit Agreement"), TNP may not, without the consent of the holders of at least two-thirds of the indebtedness under the Credit Agreement declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its capital stock or directly or indirectly redeem, purchase, retire or otherwise acquire for value any shares of any class of its capital stock or set aside any amount for such purpose, subject to certain exceptions based upon TNP's compliance with debt and interest coverage ratios. Similar restrictions also are contained in separate credit agreements entered into by TGC and TGCII with third party creditors, pursuant to which TNP is subject to certain obligations and negative covenants. VOTING RIGHTS The holders of the Common Stock are entitled to one vote for each share held at all meetings of shareholders. Pursuant to the Company's Bylaws, the Board of Directors has been divided into three equal classes. At each Annual Meeting, directors are elected to succeed those in the class whose terms then expire for three-year terms so that the terms of one class of directors will expire each year. LIQUIDATION RIGHTS In the event of liquidation dissolution or winding up of the affairs of the Company, the holders of the Common Stock are entitled to receive pro rata all assets of the Company distributable to shareholders, but only after payment to the holders, if any, of the Preferred Stock of the Company of the full preferential amounts fixed for all series of the Company's Preferred Stock. 13 SHAREHOLDER RIGHTS PLAN The Company has a Shareholder Rights Plan (the "Rights Plan") that is designed to protect the Company's shareholders from coercive takeover tactics and inadequate or unfair takeover bids. The Rights Plan, adopted in 1988 and amended on November 13, 1990, by the Company's Board of Directors, provides for the distribution of one right for each share of Common Stock held of record as of the close of business on November 4, 1988 and for each share of Common Stock issued thereafter until November 4, 1998. Each right entitles the shareholder to elect to exercise the right in whole or in part to purchase, upon the occurrence of certain events, one share of Common Stock at an initial price of $45 per share or, under certain circumstances, shares of Common Stock at half the then-current market price, or with an election to exercise such rights without payment of cash, to receive the number of shares of the Common Stock or other securities having an aggregate value equal to the excess of (i) the value of the Common Stock or other securities on the date of the exercise of the rights over (ii) the cash payment that would have been payable upon the exercise of the rights if an election for cash payment had been made. Until certain triggering events occur, the rights will trade together with the Common Stock, separate rights certificates will not be issued, and the rights will have no voting or dividend rights. Among the triggering events are the acquisition by a person or group of persons of 10% or more of the outstanding Common Stock or the commencement of a tender or exchange offer which, upon consummation, would result in a person or group of persons owning 15% or more of the outstanding Common Stock. The rights expire November 4, 1998, unless earlier redeemed or exchanged by the Company, and the existence of the rights has had no effect on earnings per share. The stock certificates relating to the shares of Common Stock offered hereby will bear a legend referring to the rights. MISCELLANEOUS The Common Stock has no preemptive rights or cumulative voting rights and there are no redemption, sinking fund, or conversion provisions with respect to the Common Stock. The outstanding Common Stock is, and the shares offered hereby when issued will be, fully paid and nonassessable. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Common Stock is Society National Bank, in care of KeyCorp. Shareholder Services, Inc., 1201 Elm Street, Suite 5050, Dallas, Texas 75270. 14 UNDERWRITING Upon the terms and subject to the conditions stated in the Underwriting Agreement dated the date hereof, each Underwriter named below has severally agreed to purchase, and the Company has agreed to sell to such Underwriter, the number of shares of Common Stock set forth opposite the name of such Underwriter below: Underwriter Number of Shares Smith Barney Inc. . . . . . . . . . . . . . . . . Edward D. Jones & Co., L.P. . . . . . . . . . . . Legg Mason Wood Walker, Inc. . . . . . . . . . . . -------------- Total . . . . . . . . . . . . . . . . . . -------------- -------------- The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the shares of Common Stock are subject to approval of certain legal matters by counsel and to certain other conditions. The Underwriters are obligated to take and pay for all shares of Common Stock offered hereby (other than those covered by the over-allotment option described below) if any such shares are taken. The Underwriters, for whom Smith Barney Inc., Edward D. Jones & Co., L.P. and Legg Mason Wood Walker, Inc. are acting as the Representatives, propose to offer part of the shares of Common Stock directly to the public at the public offering price set forth on the cover page of this Prospectus and part of the shares to certain dealers at a price which represents a concession not in excess of $____________ per share under the public offering price. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $_____________ per share to certain other dealers. After the initial offering of the Common Stock, the public offering price and such concessions may be changed by the Underwriters. The Company has granted to the Underwriters an option, exercisable for thirty days from the date of this Prospectus, to purchase up to 250,000 additional shares of Common Stock at the price to public set forth on the cover page of this Prospectus minus the underwriting discounts and commissions. The Underwriters may exercise such option solely for the purpose of covering over-allotments, if any, in connection with the offering of the shares offered hereby. To the extent such option is exercised, each Underwriter will be obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares as the number of shares of Common Stock set forth opposite each Underwriter's name in the preceding table bears to the total number of shares listed in such table. The Company and the Underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act of 1933, as amended. Smith Barney Inc. has, from time to time, provided and may in the future provide certain investment banking services to the Company. LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Michael D. Blanchard, Corporate Secretary and General Counsel of the Company, and by Haynes and Boone, LLP, Fort Worth, Texas. Certain legal matters in connection with the offering will be passed upon for the Underwriters by Milbank, Tweed, Hadley & McCloy, New York, New York. All matters pertaining to local laws in connection with the issuance of the shares offered hereby will be passed upon only by Haynes and Boone, LLP as to Texas law, and Rubin, Katz, Salazar, Alley & Rouse, Santa Fe, New Mexico, as to New Mexico law. 15 EXPERTS The consolidated financial statements of TNP Enterprises, Inc. as of December 31, 1995 and 1994, and for each of the years in the three-year period ended December 31, 1995, included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995, have been incorporated by reference herein and in the registration statement in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP covering the Company's consolidated financial statements refers to a change in the method of accounting for operating revenues in 1995 and changes in the methods of accounting for income taxes and postretirement benefits in 1993. 16 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ No dealer, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus in connection with the offer contained herein, and, if given or made, such information or representations must not be relied upon as having been authorized by the Company or by any of the Underwriters. This Prospectus does not constitute an offer of any securities other than those to which it relates or an offer to sell, or a solicitation of an offer to buy, those to which it relates in any state to any person to whom it is not lawful to make such offer in such state. The delivery of this Prospectus at any time does not imply that the information herein is correct as of any time subsequent to its date. --------------------------- TABLE OF CONTENTS Page ---- Available Information................................................ 3 Incorporation of Certain Documents by Reference...................... 3 Prospectus Summary................................................... 4 The Company.......................................................... 6 Use of Proceeds...................................................... 12 Common Stock Price Range and Dividends............................... 12 Description of Common Stock.......................................... 13 Underwriting......................................................... 15 Legal Matters........................................................ 15 Experts.............................................................. 16 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ 1,750,000 Shares TNP ENTERPRISES, INC. Common Stock [LOGO] --------------------------- PROSPECTUS ______ __, 1996 --------------------------- SMITH BARNEY INC. EDWARD D. JONES & CO., L.P. LEGG MASON WOOD WALKER INCORPORATED - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Securities and Exchange Commission Registration Fee.......... $ 17,888 NASD Filing Fee.............................................. 5,687 Printing Expenses............................................ 17,500 Listing Fee of the New York Stock Exchange................... 7,000 Accounting Fees and Expenses................................. 40,000 Legal Fees and Expenses...................................... 100,000 Blue Sky Fees and Expenses................................... 7,500 Fees of Transfer Agent and Registrar......................... 1,000 Miscellaneous Expenses....................................... 3,425 -------- Total...................................................... $200,000 -------- -------- All of the above expenses except the Securities and Exchange Commission registration fee are estimated. All of such expenses will be borne by the Company. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Article 2.02-1 of the Texas Business Corporation Act provides that any director or officer of a Texas corporation may be indemnified against judgments, penalties, fines, settlements and reasonable expenses actually incurred by him in connection with or in defending any action, suit or proceeding in which he was, is or is threatened to be made a party by reason of his position. With respect to any proceeding arising from actions taken in his official capacity, as a director or officer, he may be indemnified so long as it shall be determined that he conducted himself in good faith and that he reasonably believed that such conduct was in the corporation's best interest. In cases not concerning conduct in his official capacity as a director or officer, a director or officer may be indemnified so long as it shall be determined that he conducted himself in good faith and that he reasonably believed that his conduct was not opposed to the corporation's best interest. In the case of any criminal proceeding, a director or officer may be indemnified if he had no reasonable cause to believe his conduct was unlawful. If a director or officer is found liable to the corporation on the basis that personal benefit was improperly received by him, the indemnification is limited to reasonable expenses actually incurred in connection with such proceeding. No indemnification may be made if such officer or director is found liable for willful or intentional misconduct in the performance of his duty to the corporation. If a director or officer is wholly successful, on the merits or otherwise, in connection with such a proceeding, such indemnification is mandatory. Section 5 of Article 7 of the Company's Bylaws requires the indemnification of officers and directors to the fullest extent permitted by the Texas Business Corporation Act or any other applicable Act. The Company also has policies insuring its officers and directors against certain liabilities for actions taken in such capacities, including liabilities under the Act. Article 7.06 of the Texas Miscellaneous Corporation Laws Act provides that the articles of incorporation of a corporation may provide that a director of the corporation shall not be liable, or shall be liable only to the extent provided in the articles of incorporation, to the corporation or its shareholders or members for monetary damages for an act or omission in the director's capacity as a director, except that this article does not authorize the elimination or limitation of the liability of a director to the extent the director is found liable for: (i) a breach of the director's duty of loyalty to the corporation or its shareholders or members; (ii) an act or omission not in good faith that constitutes a breach of duty of the director to the corporation or an act or omission that involves intentional misconduct or a knowing violation of the law; (iii) a transaction from which the director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office; (iv) an act or omission for which the liability of a director is expressly provided for by an applicable statute. Article X of the Company's Articles of Incorporation provides that, to the fullest extent allowed pursuant to the Texas Miscellaneous Corporation Laws Act, or any other applicable laws as presently or hereafter in effect, II-1 no director of the Company shall be personally liable to the Company or its shareholders for monetary damages for or with respect to any acts or omissions in his capacity as director of the Company. ITEM 16. EXHIBITS Exhibits filed with this report are denoted by "*." EXHIBIT NO. DESCRIPTION - ------- ----------- THE COMPANY INCORPORATES CERTAIN EXHIBITS LISTED BELOW BY REFERENCE TO THE EXHIBITS AND FILINGS NOTED IN PARENTHESIS. *1(a) - Form of Underwriting Agreement. 3(a) - Articles of Incorporation and Amendments through March 6, 1984 (Exhibit 3(a) to TNPE 1984 Form S-14, File No. 2-89800). 3(b) - Amendment to Articles of Incorporation filed September 25, 1984 (Exhibit 3(b) to TNPE 1984 Form 10-K, File No. 1-8847). 3(c) - Amendment to Articles of Incorporation filed August 29, 1985 (Exhibit 3(a) to TNPE 1985 Form 10-K, File No. 1-8847). 3(d) - Amendment to Articles of Incorporation filed June 2, 1986 (Exhibit 3(a) to TNPE 1986 Form 10-K, File No. 1-8847). 3(e) - Amendment to Articles of Incorporation filed May 10, 1988 (Exhibit 3(e) to TNPE 1988 Form 10-K, File No. 1-8847). 3(f) - Amendment to Articles of Incorporation filed May 10, 1988 (Exhibit 3(f) to TNPE 1988 Form 10-K, File No. 1-8847). 3(g) - Amendment to Articles of Incorporation filed December 27, 1988 (Exhibit 3(g) to TNPE 1988 Form 10-K, File No. 1-8847). 3(h) - Bylaws, as amended (Exhibit 3(h) to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230). 4(a) - Rights Agreement and Form of Right Certificate, as amended, effective November 13, 1990 (Exhibit 2.1 to TNPE Form 8-A, File No. 1-8847). * 5(a) - Opinion of Haynes and Boone, LLP as to the validity of the Common Stock. *23(a) - Consent of Haynes and Boone, LLP contained in the opinion filed as Exhibit 5(a). *23(b) - Consent of Rubin, Katz, Salazar, Alley & Rouse. *23(c) - Consent of KPMG Peat Marwick LLP, independent certified public accountants. *24(a) - Power of Attorney appears on the signature page hereof. ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes that, for the purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or II-2 proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fort Worth, State of Texas, on the 28th day of August, 1996. TNP ENTERPRISES, INC. By: /s/ Manjit S. Cheema ---------------------------------- Manjit S. Cheema VICE PRESIDENT AND CHIEF FINANCIAL OFFICER KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Manjit S. Cheema and Michael D. Blanchard, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign, execute and file with the Securities and Exchange Commission and any state securities regulatory board or commission any documents relating to the proposed issuance and registration of the securities offered pursuant to this Registration Statement on Form S-3 and any registration statement of the Company relating to Common Stock filed after the date hereof pursuant to Rule 462(b) under the Securities Act of 1933, including any amendment or amendments, including post-effective amendments, relating thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he or she might or could do if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-3 has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ Kevern R. Joyce Chairman, President and August 28, 1996 - -------------------------------- Chief Executive Officer Kevern R. Joyce /s/ Manjit S. Cheema Vice President and August 28, 1996 - -------------------------------- Chief Financial Officer Manjit S. Cheema /s/ Melissa D. Davis Chief Accounting Officer August 28, 1996 - -------------------------------- Melissa D. Davis /s/ R. Denny Alexander Director August 28, 1996 - -------------------------------- R. Denny Alexander /s/ John A. Fanning Director August 28, 1996 - -------------------------------- John A. Fanning /s/ Sidney M. Gutierrez Director August 28, 1996 - -------------------------------- Sidney M. Gutierrez /s/ Harris L. Kempner, Jr. Director August 28,1996 - -------------------------------- Harris L. Kempner, Jr. /s/ Dwight R. Spurlock Director August 28, 1996 - -------------------------------- Dwight R. Spurlock II-4 /s/ Dr. Carol D. Smith Surles Director August 28, 1996 - -------------------------------- Dr. Carol D. Smith Surles /s/ Dennis H. Withers Director August 28, 1996 - -------------------------------- Dennis H. Withers /s/ James R. Holland, Jr. Director August 28, 1996 - -------------------------------- James R. Holland, Jr. II-5 EXHIBIT INDEX Exhibits filed with this report are denoted by "*." EXHIBIT NO. DESCRIPTION - ------- ----------- THE COMPANY INCORPORATES CERTAIN EXHIBITS LISTED BELOW BY REFERENCE TO THE EXHIBITS AND FILINGS NOTED IN PARENTHESIS. *1(a) - Form of Underwriting Agreement. 3(a) - Articles of Incorporation and Amendments through March 6, 1984 (Exhibit 3(a) to TNPE 1984 Form S-14, File No. 2-89800). 3(b) - Amendment to Articles of Incorporation filed September 25, 1984 (Exhibit 3(b) to TNPE 1984 Form 10-K, File No. 1-8847). 3(c) - Amendment to Articles of Incorporation filed August 29, 1985 (Exhibit 3(a) to TNPE 1985 Form 10-K, File No. 1-8847). 3(d) - Amendment to Articles of Incorporation filed June 2, 1986 (Exhibit 3(a) to TNPE 1986 Form 10-K, File No. 1-8847). 3(e) - Amendment to Articles of Incorporation filed May 10, 1988 (Exhibit 3(e) to TNPE 1988 Form 10-K, File No. 1-8847). 3(f) - Amendment to Articles of Incorporation filed May 10, 1988 (Exhibit 3(f) to TNPE 1988 Form 10-K, File No. 1-8847). 3(g) - Amendment to Articles of Incorporation filed December 27, 1988 (Exhibit 3(g) to TNPE 1988 Form 10-K, File No. 1-8847). 3(h) - Bylaws, as amended (Exhibit 3(h) to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230). 4(a) - Rights Agreement and Form of Right Certificate, as amended, effective November 13, 1990 (Exhibit 2.1 to TNPE Form 8-A, File No. 1-8847). * 5(a) - Opinion of Haynes and Boone, LLP as to the validity of the Common Stock. *23(a) - Consent of Haynes and Boone, LLP contained in the opinion filed as Exhibit 5(a). *23(b) - Consent of Rubin, Katz, Salazar, Alley & Rouse. *23(c) - Consent of KPMG Peat Marwick LLP, independent certified public accountants. *24(a) - Power of Attorney appears on the signature page hereof. EX-1.(A) 2 EXHIBIT 1(A) EXHIBIT 1(a) _,000,000 Shares TNP ENTERPRISES, INC. Common Stock (No Par Value) UNDERWRITING AGREEMENT ________ __, 1996 SMITH BARNEY INC. EDWARD D. JONES & CO., L.P. LEGG MASON WOOD WALKER, INC. As Representatives of the Several Underwriters c/o SMITH BARNEY INC. 388 Greenwich Street New York, New York 10013 Dear Sirs: TNP Enterprises, Inc., a Texas corporation (the "Company"), proposes to issue and sell an aggregate of _,000,000 shares (the "Firm Shares") of its common stock, no par value (the "Common Stock"), to the several Underwriters named in SCHEDULE I hereto (the "Underwriters"). The Company also proposes to sell to the Underwriters, upon the terms and conditions set forth in Section 2 hereof, up to an additional _00,000 shares (the "Additional Shares") of Common Stock. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "Shares". The Company wishes to confirm as follows its agreement with you (the "Representatives") and the other several Underwriters on whose behalf you are acting, in connection with the several purchases of the Shares by the Underwriters. 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a registration statement on Form S-3 under the Act (the "registration statement"), including a prospectus subject to completion relating to the Shares. The term "Registration Statement" as used in this Agreement means the registration statement (including all financial schedules and exhibits), as amended at the time it becomes effective, or, if the registration statement became effective prior to the execution of this Agreement, as supplemented or amended prior to the execution of this Agreement. If it is contemplated, at the time this Agreement is executed, that a post-effective amendment to the registration statement will be filed and must be declared effective before the offering of the Shares may commence, the term "Registration Statement" as used in this Agreement means the registration statement as amended by said post-effective amendment. The term "Prospectus" as used in this Agreement means the prospectus in the form included in the Registration Statement, or, if the prospectus included in the Registration Statement omits information in reliance on Rule 430A under the Act and such information is included in a prospectus filed with the Commission pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this Agreement means the prospectus in the form included in the Registration Statement as supplemented by the addition of the Rule 430A information contained in the prospectus filed with the Commission pursuant to Rule 424(b). The term "Prepricing Prospectus" as used in this Agreement means the prospectus subject to completion in the form included in the registration statement at the time of the initial filing of the registration statement with the Commission, and as such prospectus shall have been amended from time to time prior to the date of the Prospectus. Any reference in this Agreement to the registration statement, the Registration Statement, any Prepricing Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of the registration statement, the Registration Statement, such Prepricing Prospectus or the Prospectus, as the case may be, and any reference to any amendment or supplement to the registration statement, the Registration Statement, any Prepricing Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended (the "Exchange Act") which, upon filing, are incorporated by reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used herein, the term "Incorporated Documents" means the documents which at the time are incorporated by reference in the registration statement, the Registration Statement, any Prepricing Prospectus, the Prospectus, or any amendment or supplement thereto. 2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees, subject to all the terms and conditions set forth herein, to issue and sell to each Underwriter and, upon the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions set forth herein, each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of $________ per Share (the "purchase price per share"), the number of Firm Shares set forth opposite the name of such Underwriter in SCHEDULE I hereto (or such number of Firm Shares increased as set forth in Section 10 hereof). The Company also agrees, subject to all the terms and conditions set forth herein, to sell to the Underwriters, and, upon the basis of the representations, warranties and agreements -2- of the Company herein contained and subject to all the terms and conditions set forth herein, the Underwriters shall have the right to purchase from the Company, at the purchase price per share, pursuant to an option (the "over-allotment option") which may be exercised at any time and from time to time prior to 9:00 P.M., New York City time, on the 30th day after the date of the Prospectus (or, if such 30th day shall be a Saturday or Sunday or a holiday, on the next business day thereafter when the New York Stock Exchange is open for trading), up to an aggregate of _00,000 Additional Shares. Additional Shares may be purchased only for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. Upon any exercise of the over-allotment option, each Underwriter, severally and not jointly, agrees to purchase from the Company the number of Additional Shares (subject to such adjustments as you may determine in order to avoid fractional shares) which bears the same proportion to the number of Additional Shares to be purchased by the Underwriters as the number of Firm Shares set forth opposite the name of such Underwriter in SCHEDULE I hereto (or such number of Firm Shares increased as set forth in Section 10 hereof) bears to the aggregate number of Firm Shares. 3. TERMS OF PUBLIC OFFERING. The Company has been advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable and initially to offer the Shares upon the terms set forth in the Prospectus. 4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Payment for the Firm Shares shall be made at the office of Milbank, Tweed, Hadley & McCloy, One Chase Manhattan Plaza, New York, NY 10005, at 10:00 A.M., New York City time, on ___________, 1996 (the "Closing Date") [against delivery of the certificates for the Firm Shares to you at the offices of the Depository Trust Company for the respective Accounts of the Underwriters]. The place of closing for the Firm Shares and the Closing Date may be varied by agreement between you and the Company. Delivery to the Underwriters of and payment for any Additional Shares to be purchased by the Underwriters shall be made at the same offices as the delivery of and payment for the Firm Shares at such time on such date (the "Option Closing Date"), which may be the same as the Closing Date but shall in no event be earlier than the Closing Date nor earlier than two nor later than ten business days after the giving of the notice hereinafter referred to, as shall be specified in a written notice from you on behalf of the Underwriters to the Company of the Underwriters' determination to purchase a number, specified in such notice, of Additional Shares. The place of closing for any Additional Shares and the Option Closing Date for such Shares may be varied by agreement between you and the Company. Certificates for the Firm Shares and for any Additional Shares to be purchased hereunder shall be registered in such -3- names and in such denominations as you shall request prior to 9:30 A.M., New York City time, on the second business day preceding the Closing Date or any Option Closing Date, as the case may be. Such certificates shall be made available to you in New York City for inspection and packaging not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date or the Option Closing Date, as the case may be. The certificates evidencing the Firm Shares and any Additional Shares to be purchased hereunder shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, against payment of the purchase price therefor by certified or official bank check or wire transfer payable in Federal (same day) funds to the order of the Company. 5. AGREEMENTS OF THE COMPANY. The Company agrees with the several Underwriters as follows: (a) If, at the time this Agreement is executed and delivered, it is necessary for the Registration Statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, the Company will endeavor to cause the Registration Statement or such post-effective amendment to become effective as soon as possible and will advise you promptly and, if requested by you, will confirm such advice in writing, when the Registration Statement or such post-effective amendment has become effective. (b) The Company will advise you promptly and, if requested by you, will confirm such advice in writing: (i) of any request by the Commission for amendment of or a supplement to the Registration Statement, any Prepricing Prospectus or the Prospectus or for additional information; (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Shares for offering or sale in any jurisdiction or the initiation of any proceeding for such purpose; and (iii) within the period of time referred to in paragraph (f) below, of any change in the Company's condition (financial or other), business, prospects, properties, net worth or results of operations, or of the happening of any event, which makes any statement of a material fact made in the Registration Statement or the Prospectus (as then amended or supplemented) untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus (as then amended or supplemented) in order to state a material fact required by the Act or the regulations thereunder to be stated therein or necessary in order to make the statements therein not misleading, or of the necessity to amend or supplement the Prospectus (as then amended or supplemented) to comply with the Act or any other law. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will make every reasonable effort to obtain the withdrawal of such order at the earliest possible time. -4- (c) The Company will furnish to you, without charge (i) four signed copies of the registration statement as originally filed with the Commission and of each amendment thereto, including financial statements and all exhibits to the registration statement, (ii) such number of conformed copies of the registration statement as originally filed and of each amendment thereto, but without exhibits, as you may request, (iii) such number of copies of the Incorporated Documents, without exhibits, as you may request, and (iv) four copies of the exhibits to the Incorporated Documents. (d) The Company will not file any amendment to the Registration Statement or make any amendment or supplement to the Prospectus or, prior to the end of the period of time referred to in the first sentence in subsection (f) below, file any document which, upon filing becomes an Incorporated Document, of which you shall not previously have been advised or to which, after you shall have received a copy of the document proposed to be filed, you shall reasonably object. (e) Prior to the execution and delivery of this Agreement, the Company has delivered to you, without charge, in such quantities as you have requested, copies of each form of the Prepricing Prospectus. The Company consents to the use, in accordance with the provisions of the Act and with the securities or Blue Sky laws of the jurisdictions in which the Shares are offered by the several Underwriters and by dealers, prior to the date of the Prospectus, of each Prepricing Prospectus so furnished by the Company. (f) As soon after the execution and delivery of this Agreement as possible and thereafter from time to time for such period as in the opinion of counsel for the Underwriters a prospectus is required by the Act to be delivered in connection with sales by any Underwriter or dealer, the Company will expeditiously deliver to each Underwriter and each dealer, without charge, as many copies of the Prospectus (and of any amendment or supplement thereto) as you may request. The Company consents to the use of the Prospectus (and of any amendment or supplement thereto) in accordance with the provisions of the Act and with the securities or Blue Sky laws of the jurisdictions in which the Shares are offered by the several Underwriters and by all dealers to whom Shares may be sold, both in connection with the offering and sale of the Shares and for such period of time thereafter as the Prospectus is required by the Act to be delivered in connection with sales by any Underwriter or dealer. If during such period of time any event shall occur that in the judgment of the Company or in the opinion of counsel for the Underwriters is required to be set forth in the Prospectus (as then amended or supplemented) or should be set forth therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Prospectus (or to file under the Exchange Act any document which, upon filing, becomes an Incorporated Document) in order to comply with the Act or any -5- other law, the Company will forthwith prepare and, subject to the provisions of paragraph (d) above, file with the Commission an appropriate supplement or amendment thereto (or to such document), and will expeditiously furnish to the Underwriters and dealers a reasonable number of copies thereof. In the event that the Company and you, as Representatives of the several Underwriters, agree that the Prospectus should be amended or supplemented, the Company, if requested by you, will promptly issue a press release announcing or disclosing the matters to be covered by the proposed amendment or supplement. (g) The Company will cooperate with you and with counsel for the Underwriters in connection with the registration or qualification of the Shares for offering and sale by the several Underwriters and by dealers under the securities or Blue Sky laws of such jurisdictions as you may designate and will file such consents to service of process or other documents necessary or appropriate in order to effect such registration or qualification; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to service of process in suits, other than those arising out of the offering or sale of the Shares, in any jurisdiction where it is not now so subject. (h) The Company will make generally available to its security holders a consolidated earnings statement, which need not be audited, covering a twelve-month period commencing after the effective date of the Registration Statement and ending not later than 15 months thereafter, as soon as practicable after the end of such period, which consolidated earnings statement shall satisfy the provisions of Section 11(a) of the Act. (i) During the period of five years hereafter, the Company will furnish to you (i) as soon as available, a copy of each report of the Company mailed to stockholders or filed with the Commission, and (ii) from time to time such other information concerning the Company as you may request. (j) If this Agreement shall terminate or shall be terminated after execution pursuant to any provisions hereof (otherwise than pursuant to the second paragraph of Section 10 hereof or by notice given by you terminating this Agreement pursuant to Section 10 or Section 11 hereof) or if this Agreement shall be terminated by the Underwriters because of any failure or refusal on the part of the Company to comply with the terms or fulfill any of the conditions of this Agreement, the Company agrees to reimburse the Representatives for all out-of-pocket expenses (including the reasonable fees and expenses of counsel for the Underwriters) incurred by you in connection herewith. (k) The Company will apply the net proceeds from the sale of the Shares substantially in accordance with the description set forth in the Prospectus. -6- (l) If Rule 430A of the Act is employed, the Company will timely file the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the time and manner of such filing. (m) Except as provided in this Agreement, the Company will not sell, contract to sell or otherwise dispose of any Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or grant any options or warrants to purchase Common Stock, for a period of 180 days after the date of the Prospectus, except for (i) rights issued pursuant to the Rights Plan described in the Prospectus, (ii) shares of Common Stock issued pursuant to the Plans, and (iii) issuances of Common Stock upon the exercise of outstanding options and warrants, without the prior written consent of Smith Barney Inc. (n) The Company has furnished or will furnish to you "lock-up" letters, in form and substance satisfactory to you, signed by each of its current officers and directors and each of its stockholders designated by you. (o) Except as stated in this Agreement and in the Prepricing Prospectus and Prospectus, the Company has not taken, nor will it take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares. (p) The Company will use its best efforts to have the shares of Common Stock which it agrees to sell under this Agreement listed, subject to notice of issuance, on the New York Stock Exchange on or before the Closing Date. 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each Underwriter that: (a) The Company meets the requirements for use of Form S-3; at the time the Registration Statement became or becomes effective, the Registration Statement and the Prospectus will fully comply in all material respects with the provisions of the Act, and the Registration Statement will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; PROVIDED, HOWEVER, that the Company makes no warranty or representation with respect to any statement contained in the Registration Statement or the Prospectus in reliance upon and in conformity with information concerning the Underwriters and furnished in writing by or on behalf of any Underwriter through you to the Company expressly for use in the Registration Statement or the Prospectus; the documents incorporated by reference -7- in the Prospectus, at the time they were filed with the Commission, complied in all material respects with the requirements of the Exchange Act, and at such time did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (b) The capitalization of the Company is, as of the date specified, as set forth under the heading entitled ["As Reported" in the section of the Registration Statement and the Prospectus entitled ["Capitalization (Unaudited)"]; all of the issued and outstanding shares of capital stock including Common Stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable and conform to the description thereof contained in the Prospectus; each of the Company and its direct or indirect subsidiaries (the "Subsidiaries") has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of its incorporation, with full power and authority to own its properties and conduct its business as described in the Registration Statement and the Prospectus, and, in the case of the Company, to execute and deliver this Agreement and to issue and sell the Shares as herein contemplated; the issuance of the Shares has been duly authorized and when issued and paid for by the Underwriters pursuant to this Agreement the Shares will be validly issued and fully paid and non-assessable and entitled to the rights set forth in the Company's Articles of Incorporation; (c) Each of the Company and its Subsidiaries is duly qualified or licensed by and is in good standing in each jurisdiction in which it conducts its business and in which the failure, individually or in the aggregate, to be so licensed or qualified could have a material adverse effect on the operations, business or condition of the Company and its Subsidiaries, taken as a whole; all of the outstanding shares of capital stock of each of the Subsidiaries of the Company have been duly authorized and validly issued and are fully paid and non-assessable and the common stock of each Subsidiary is owned directly or indirectly by the Company, free and clear from any lien, encumbrance or security interest except as otherwise disclosed in writing to the Underwriters prior to the date hereof and each of the Company and its Subsidiaries is in compliance in all material respects with the laws, orders, rules, regulations and directives issued or administered by such jurisdictions; (d) Neither the Company nor any of its Subsidiaries is in breach of, or in default under (nor has any event occurred which with notice, lapse of time, or both would constitute a breach of, or default under), its respective corporate charter or by-laws or in the performance or observance of any obligation, agreement, covenant or -8- condition contained in any indenture, mortgage, deed of trust, bank loan or credit agreement or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any of them is bound, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby and by the Prospectus will not conflict with, or result in any breach of or constitute a default under (nor constitute any event which with notice, lapse of time, or both would constitute a breach of, or default under), or result in the creation or imposition of any lien, charge, or encumbrance upon any of the assets of the Company or any of its Subsidiaries pursuant to, any provisions of the corporate charter or by-laws, of the Company or any of its Subsidiaries or under any provision of any license, indenture, mortgage, deed of trust, bank loan or credit agreement or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any of them or their respective properties may be bound or affected, or under any federal, state or local law, regulation or rule or any decree, judgment or order applicable to the Company or any of its Subsidiaries; (e) The filing of the Registration Statement and the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and by the Prospectus have been duly authorized by the Company; this Agreement has been duly authorized, executed and delivered by the Company; (f) The capital stock of the Company, including the Shares, conforms in all material respects to the description thereof contained in the Registration Statement and Prospectus and the certificates for the Shares are in due and proper form and the holders of the Shares will not be subject to personal liability by reason of being such holders; (g) No approval, authorization, consent or order of or filing with any federal, state or local governmental or regulatory commission, court, board, body, authority or agency is required in connection with the issuance and sale of the Shares as contemplated hereby other than registration of the Shares under the Act and any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Shares are being offered by the Underwriters; (h) No person has the right, contractual or otherwise, to cause the Company to issue to it, or register pursuant to the Act, any shares of capital stock of the Company upon the issue and sale of the Shares to the Underwriters hereunder, nor does any person have preemptive rights, rights of first refusal or other rights (excluding rights arising under the -9- Rights Plan described in the Prospectus) to purchase any of the Shares; (i) KPMG Peat Marwick LLP, whose reports on the consolidated financial statements of the Company and its Subsidiaries are filed with the Commission as part of the Registration Statement and Prospectus, are independent public accountants as required by the Act and the applicable published rules and regulations thereunder; (j) Each of the Company and its Subsidiaries has all necessary licenses, authorizations, consents and approvals and has made all necessary filings required under any federal, state or local law, regulation or rule, and has obtained all necessary authorizations, consents and approvals from other persons, in order to conduct its business; neither the Company nor any of its Subsidiaries is in violation of, or in default under, any such license, authorization, consent or approval or any federal, state or local law, regulation or rule or any decree, order or judgment applicable to the Company or any of its Subsidiaries the effect of which could have a material adverse effect on the Company and its Subsidiaries taken as a whole; (k) All legal or governmental proceedings, contracts or documents of a character required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement have been so described or filed as required; (l) Except as disclosed in the Registration Statement and the Prospectus, there are no actions, suits or proceedings pending or threatened against the Company or any of its Subsidiaries or any of their respective properties, at law or in equity, or before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency which could result in a judgment, decree or order having a material adverse effect on the business, condition, prospects or property of the Company and its Subsidiaries taken as a whole; (m) The financial statements included or incorporated by reference in the Registration Statement and the Prospectus present and (in the case of any amendment or supplement to any such document, or any material incorporated by reference in any such document, filed with the Commission after the date as of which this representation is being made) will present fairly, at all times during which a prospectus is required to be delivered under the Act, the consolidated financial position of the Company and its Subsidiaries as of the dates indicated and the consolidated results of operations, changes in shareholders' equity and changes in cash flows of the Company and its Subsidiaries for the periods specified; such -10- financial statements have been and (in the case of any amendment or supplement to any such document, or any material incorporated by reference in any such document, filed with the Commission after the date as of which this representation is being made) will be, at all times during which a prospectus is required to be delivered under the Act, prepared in conformity with generally accepted accounting principles; (n) Subsequent to the respective dates as of which information is given in the Registration Statement and Prospectus, and except as may be otherwise stated in the Registration Statement or Prospectus, there has not been (A) any material and unfavorable change, financial or otherwise, or any adverse development concerning the Company or any of its Subsidiaries which may reasonably be expected to involve a prospective material and unfavorable change, financial or otherwise, in the business, properties, regulatory environment, results of operations or condition (financial or otherwise), of the Company and its Subsidiaries taken as a whole, (B) any transaction, which is material to the Company and its Subsidiaries taken as a whole, contemplated or entered into by the Company or any of its Subsidiaries or (C) any obligation, contingent or otherwise, directly or indirectly incurred by the Company or any of its Subsidiaries which is material to the Company and its Subsidiaries taken as a whole; (o) Each of the Company and its Subsidiaries has good and marketable title to all properties and assets described in the Prospectus as owned by it, free and clear of all liens, security interests, claims, charges, encumbrances or restrictions, except such as are described in the Prospectus or are not material to the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries taken as a whole. Each of the Company and its Subsidiaries has valid, subsisting and enforceable leases for the properties described in the Prospectus as leased by it, with such exceptions as are not material to the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries taken as a whole and do not materially interfere with the use made and proposed to be made of such properties by the Company and its Subsidiaries; (p) Neither the Company nor any of its directors, officers or controlling persons has taken, directly or indirectly, any action intended, or which might reasonably be expected, to cause or result, under the Act or otherwise, in, or which has constituted, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares, it being understood that from time to time the Company issues shares of its Common Stock pursuant to its Dividend Reinvestment and Stock -11- Purchase Plan and its voluntary thrift plan (the "Plans"); and (q) Prior to the time of purchase, the Firm Shares, and prior to any additional time of purchase, any Additional Shares, will be duly authorized for listing by the New York Stock Exchange upon official notice of issuance. 7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify and hold harmless each of you and each other Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Prepricing Prospectus or in the Registration Statement or the Prospectus or in any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with the information relating to such Underwriter furnished in writing to the Company by or on behalf of any Underwriter through you expressly for use in connection therewith. The foregoing indemnity agreement shall be in addition to any liability which the Company may otherwise have. (b) If any action, suit or proceeding shall be brought against any Underwriter or any person controlling any Underwriter in respect of which indemnity may be sought against the Company, such Underwriter or such controlling person shall promptly notify the Company and the Company shall assume the defense thereof, including the employment of counsel and payment of all fees and expenses. Such Underwriter or any such controlling person shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless (i) the Company has agreed in writing to pay such fees and expenses, (ii) the Company has failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both such Underwriter or such controlling person and the Company and such Underwriter or such controlling person shall have been advised by its counsel that representation of such indemnified party and the Company by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the Company shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Underwriter -12- or such controlling person). It is understood, however, that the Company shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such Underwriters and controlling persons not having actual or potential differing interests with you or among themselves, which firm shall be designated in writing by Smith Barney Inc., and that all such fees and expenses shall be reimbursed as they are incurred. The Company shall not be liable for any settlement of any such action, suit or proceeding effected without its written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the Company agrees to indemnify and hold harmless any Underwriter, to the extent provided in the preceding paragraph, and any such controlling person from and against any loss, claim, damage, liability or expense by reason of such settlement or judgment. (c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement, and any person who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with respect to information relating to such Underwriter furnished in writing by or on behalf of such Underwriter through you expressly for use in the Registration Statement, the Prospectus or any Prepricing Prospectus, or any amendment or supplement thereto. If any action, suit or proceeding shall be brought against the Company, any of its directors, any such officer, or any such controlling person based on the Registration Statement, the Prospectus or any Prepricing Prospectus, or any amendment or supplement thereto, and in respect of which indemnity may be sought against any Underwriter pursuant to this paragraph (c), such Underwriter shall have the rights and duties given to the Company by paragraph (b) above (except that if the Company shall have assumed the defense thereof such Underwriter shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at such Underwriter's expense), and the Company, its directors, any such officer, and any such controlling person shall have the rights and duties given to the Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be in addition to any liability which the Underwriters may otherwise have. (d) If the indemnification provided for in this Section 7 is unavailable to an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result -13- of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by the Underwriters on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by a pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating any claim or defending any such action, suit or proceeding. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price of the Shares underwritten by it and distributed to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 7 are several in proportion to the respective numbers of Firm Shares set forth opposite their names in SCHEDULE I hereto (or such numbers of Firm Shares increased as set forth in Section 10 hereof) and not joint. -14- (f) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. (g) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 7 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 7 and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company, its directors or officers, or any person controlling the Company, (ii) acceptance of any Shares and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Underwriter or any person controlling any Underwriter, or to the Company, its directors or officers, or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 7. 8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the Underwriters to purchase the Firm Shares hereunder are subject to the following conditions: (a) If, at the time this Agreement is executed and delivered, it is necessary for the registration statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, the registration statement or such post-effective amendment shall have become effective not later than 5:30 P.M., New York City time, on the date hereof, or at such later date and time as shall be consented to in writing by you, and all filings, if any, required by Rules 424 and 430A under the Act shall have been timely made; no stop order suspending the effectiveness of the registration statement shall be in effect on the Closing Date or any Option Closing Date and no proceeding for that purpose shall have been instituted or, to the knowledge of the Company or any Underwriter, threatened by the Commission, and any request of the Commission for additional information (to be included in the registration statement or the prospectus or otherwise) shall have been complied with to your satisfaction. (b) Subsequent to the effective date of this Agreement, there shall not have occurred (i) any change, or any development involving a prospective change, in or affecting the condition (financial or other), business, properties, net worth, or results of operations of the Company or the Subsidiaries not -15- contemplated by the Prospectus, which in your opinion, as Representatives of the several Underwriters, would materially adversely affect the market for the Shares, or (ii) any event or development relating to or involving the Company or any officer or director of the Company which makes any statement made in the Prospectus untrue or which, in the opinion of the Company and its counsel or the Underwriters and their counsel, requires the making of any addition to or change in the Prospectus in order to state a material fact required by the Act or any other law to be stated therein or necessary in order to make the statements therein not misleading, if amending or supplementing the Prospectus to reflect such event or development would, in your opinion, as Representatives of the several Underwriters, materially adversely affect the market for the Shares. (c) You shall have received on the Closing Date and each Option Closing Date, an opinion of Haynes & Boone, counsel for the Company, dated the Closing Date or such option Closing Date, as applicable, and addressed to you, as Representatives of the several Underwriters, to the effect that: (i) The Company is a corporation duly incorporated and validly existing in good standing under the laws of the State of Texas with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement thereto), and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify does not have a material adverse effect on the condition (financial or other), business, properties, net worth or results of operations of the Company and the Subsidiaries taken as a whole; (ii) Each of the Subsidiaries is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its organization, with full corporate power and authority to own, lease, and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement thereto), and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify does not have a material adverse effect on the condition (financial or other), business, properties, net worth or results of operations of the Company and the Subsidiaries taken as a whole; and all the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, and are owned by the Company directly, or indirectly through one of the other Subsidiaries, free and clear of any perfected security interest, or, to the best knowledge of such counsel -16- after reasonable inquiry, any other security interest, lien, adverse claim, equity or other encumbrance; (iii) The authorized and outstanding capital stock of the Company is as set forth under the caption ["Capitalization"] in the Prospectus; and the authorized capital stock of the Company, including the Shares, conforms in all material respects as to legal matters to the description thereof contained in the Registration Statement and the Prospectus and the Company's Articles of Incorporation; (iv) All the shares of capital stock of the Company outstanding prior to the issuance of the Shares have been duly authorized and validly issued, and are fully paid and nonassessable; (v) The Shares have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free of any preemptive, or to the best knowledge of such counsel after reasonable inquiry, similar rights that entitle or will entitle any person to acquire any Shares upon the issuance thereof by the Company; (vi) The form of certificates for the Shares conforms to the requirements of the Texas Business Corporation Act; (vii) The Registration Statement and all post-effective amendments, if any, have become effective under the Act and, to the best knowledge of such counsel after reasonable inquiry, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending before or contemplated by the Commission; and any required filing of the Prospectus pursuant to Rule 424(b) has been made in accordance with Rule 424(b); (viii) The Company has corporate power and authority to enter into this Agreement and to issue, sell and deliver the Shares to the Underwriters as provided herein, and this Agreement has been duly authorized, executed and delivered by the Company and is a valid, legal and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as enforcement of rights to indemnity and contribution hereunder may be limited by Federal or state securities laws or principles of public policy and subject to the qualification that the enforceability of the Company's obligations hereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally, and by general equitable principles; (ix) Neither the Company nor any of the Subsidiaries is in violation of its respective certificate or articles of incorporation or bylaws, or other organizational documents, or to the best knowledge of such counsel after reasonable inquiry, is -17- in default in the performance of any material obligation, agreement or condition contained in any bond, debenture, note or other evidence of indebtedness, except as may be disclosed in the Prospectus; (x) Neither the offer, sale or delivery of the Shares, the execution, delivery or performance of this Agreement, compliance by the Company with the provisions hereof nor consummation by the Company of the transactions contemplated hereby conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate or articles of incorporation or bylaws, or other organizational documents, of the Company or any of the Subsidiaries or any agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties is bound that is an exhibit to the Registration Statement or to any Incorporated Document, or is known to such counsel after reasonable inquiry, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Subsidiaries, nor will any such action result in any violation of any existing law, regulation, ruling (assuming compliance with all applicable state securities and Blue Sky laws), judgment, injunction, order or decree known to such counsel after reasonable inquiry, applicable to the Company, the Subsidiaries or any of their respective properties; (xi) No consent, approval, authorization or other order of, or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency, or official is required on the part of the Company (except as have been obtained under the Act and the Exchange Act or such as may be required under state securities or Blue Sky laws governing the purchase and distribution of the Shares) for the valid issuance and sale of the Shares to the Underwriters as contemplated by this Agreement; (xii) The Registration Statement and the Prospectus and any supplements or amendments thereto (except for the financial statements and the notes thereto and the schedules and other financial and statistical data included therein, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the Act; and each of the Incorporated Documents, at the time it was filed (except for the financial statements and the notes thereto and the schedules and other financial and statistical data included therein, as to which counsel need not express any opinion), complied as to form in all material respects with the Exchange Act and the rules and regulations of the Commission thereunder; (xiii) To the best knowledge of such counsel after reasonable inquiry, (A) other than as described or contemplated in the Prospectus (or any supplement thereto), there are no legal or governmental proceedings pending or threatened against the Company or any of the Subsidiaries, or to which the Company or -18- any of the Subsidiaries, or any of their property, is subject, which might result in any material adverse change in the business, properties, financial condition, results of operations of the Company or any of the Subsidiaries or which might affect the subject matter of this Agreement or which are required to be described in the Registration Statement or Prospectus (or any amendment or supplement thereto) and (B) there are no agreements, contracts, indentures, leases or other instruments, that are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement thereto) or to be filed as an exhibit to the Registration Statement or any Incorporated Document that are not described or filed as required, as the case may be; (xiv) To the best knowledge of such counsel after reasonable inquiry, neither the Company nor any of the Subsidiaries is in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or any of the Subsidiaries or of any decree of any court or governmental agency or body having jurisdiction over the Company or any of the Subsidiaries; (xv) The statements in the Registration Statement and Prospectus, insofar as they are descriptions of contracts, agreements or other legal documents, or refer to statements of law or legal conclusions, are accurate and present fairly the information required to be shown; and (xvi) Although counsel has not undertaken, except as otherwise indicated in their opinion, to determine independently, and does not assume any responsibility for, the accuracy or completeness of the statements in the Registration Statement, such counsel has participated in the preparation of the Registration Statement and the Prospectus, including review and discussion of the contents thereof (including review and discussion of the contents of all Incorporated Documents), and nothing has come to the attention of such counsel that has caused them to believe that the Registration Statement (including the Incorporated Documents) at the time the Registration Statement became effective, or the Prospectus, as of its date and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that any amendment or supplement to the Prospectus, as of its respective date, and as of the Closing Date or the Option Closing Date, as the case may be, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and the notes thereto and the schedules and other financial and statistical data included in the Registration Statement or the Prospectus or any Incorporated Document). -19- In rendering their opinion as aforesaid, counsel may rely upon an opinion or opinions, each dated the Closing Date, of other counsel retained by them or the Company as to laws of any jurisdiction other than the United States or the State of Texas, provided that (1) each such local counsel is acceptable to the Representatives, (2) such reliance is expressly authorized by each opinion so relied upon and a copy of each such opinion is delivered to the Representatives and is, in form and substance satisfactory to them and their counsel, and (3) counsel shall state in their opinion that they believe that they and the Underwriters are justified in relying thereon. (d) You shall have received on the Closing Date, an opinion of Michael D. Blanchard Esq., Corporate Secretary & General Counsel for the Company, dated the Closing Date and addressed to you, as Representatives of the several Underwriters, to the effect that: (i) The Company and each of the Subsidiaries has full corporate power and authority, and all necessary governmental authorizations, approvals, orders, licenses, certificates, franchises and permits of and from all governmental regulatory officials and bodies (except where the failure so to have any such authorizations, approvals, orders, licenses, certificates, franchises or permits, individually or in the aggregate, would not have a material adverse effect on the business, properties, operations or financial condition of the Company and the Subsidiaries taken as a whole), to own their respective properties and to conduct their respective businesses as now being conducted, as described in the Prospectus; (ii) Except as disclosed in the Prospectus, the Company owns of record, directly or indirectly, all the outstanding shares of capital stock of each of the Subsidiaries free and clear of any lien, adverse claim, security interest, equity, or other encumbrance; (iii) Other than as described or contemplated in the Prospectus (or any supplement thereto), there are no legal or governmental proceedings pending or threatened against the Company or any of the Subsidiaries, or to which the Company or any of the Subsidiaries, or any of their property, is subject, which are required to be described in the Registration Statement or Prospectus (or any amendment or supplement thereto); (iv) There are no agreements, contracts, indentures, leases or other instruments, that are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement thereto) or to be filed as an exhibit to the Registration Statement or any Incorporated Document that are not described or filed as required, as the case may be; (v) The Company and the Subsidiaries own all patents, trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, licenses, inventions, -20- trade secrets and rights described in the Prospectus as being owned by them or any of them or necessary for the conduct of their respective businesses, and such counsel is not aware of any claim to the contrary or any challenge by any other person to the rights of the Company and the Subsidiaries with respect to the foregoing; (vi) Neither the Company nor any of the Subsidiaries is in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or any of the Subsidiaries or of any decree of any court or governmental agency or body having jurisdiction over the Company or any of the Subsidiaries; (vii) Except as described in the Prospectus, there are no outstanding options, warrants or other rights calling for the issuance of, and such counsel does not know of any commitment, plan or arrangement to issue, any shares of capital stock of the Company or any security convertible into or exchangeable or exercisable for capital stock of the Company; and (viii) Except as described in the Prospectus, there is no holder of any security of the Company or any other person who has the right, contractual or otherwise, to cause the Company to sell or otherwise issue to them, or to permit them to underwrite the sale of, the Shares or the right to have any Common Stock or other securities of the Company included in the registration statement or the right, as a result of the filing of the registration statement, to require registration under the Act of any shares of Common Stock or other securities of the Company. (e) You shall have received on the Closing Date an opinion of Milbank, Tweed, Hadley & McCloy, counsel for the Underwriters, dated the Closing Date and addressed to you, as Representatives of the several Underwriters, with respect to the matters referred to in clauses (v), (vii), (viii), (xii) and (xvi) of the foregoing paragraph (c) and such other related matters as you may request. (f) You shall have received letters addressed to you, as Representatives of the several Underwriters, and dated the date hereof and the Closing Date from KPMG Peat Marwick LLP, independent certified public accountants, substantially in the forms heretofore approved by you. (g)(i) No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been taken or, to the knowledge of the Company, shall be contemplated by the Commission at or prior to the Closing Date; (ii) there shall not have been any change in the capital stock of the Company nor any material increase in the short-term or long-term debt of the Company (other than in the ordinary course of business) from that set forth or contemplated in the Registration Statement or the Prospectus (or any amendment or Supplement thereto); (iii) there shall not have been, since -21- the respective dates as of which information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), except as may otherwise be stated in the Registration Statement and Prospectus (or any amendment or supplement thereto), any material adverse change in the condition (financial or other), business, prospects, properties, net worth or results of operations of the Company and the Subsidiaries taken as a whole; (iv) the Company and the Subsidiaries shall not have any liabilities or obligations, direct or contingent (whether or not in the ordinary course of business), that are material to the Company and the Subsidiaries, taken as a whole, other than those reflected in the Registration Statement or the Prospectus (or any amendment or supplement thereto); and (v) all the representations and warranties of the Company contained in this Agreement shall be true and correct on and as of the date hereof and on and as of the Closing Date as if made on and as of the Closing Date, and you shall have received a certificate, dated the Closing Date and signed by the chief executive officer and the chief financial officer of the Company (or such other officers as are acceptable to you), to the effect set forth in this Section 8(g) and in Section 8(h) hereof. (h) The Company shall not have failed at or prior to the Closing Date to have performed or complied with any of its agreements herein contained and required to be performed or complied with by it hereunder at or prior to the Closing Date. (i) Prior to the Closing Date the Shares shall have been listed, subject to notice of issuance, on the New York Stock Exchange. (j) The Company shall have furnished or caused to be furnished to you such further certificates and documents as you shall have requested. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are satisfactory in form and substance to you and your counsel. Any certificate or document signed by any officer of the Company and delivered to you, as Representatives of the Underwriters, or to counsel for the Underwriters, shall be deemed a representation and warranty by the Company to each Underwriter as to the statements made therein. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the satisfaction on and as of any Option Closing Date of the conditions set forth in this Section 8, except that, if any Option Closing Date is other than the Closing Date, the certificates, opinions and letters referred to in paragraphs (c) through (g) shall be dated the Option Closing Date in question and the opinions called for by paragraphs (c), (d) and (e) shall be revised to reflect the sale of Additional Shares. -22- 9. EXPENSES. The Company agrees to pay the following costs and expenses and all other costs and expenses incident to the performance by it of its obligations hereunder: (i) the preparation, printing or reproduction, and filing with the Commission of the registration statement (including financial statements and exhibits thereto), each Prepricing Prospectus, the Prospectus, and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the registration statement, each Prepricing Prospectus, the Prospectus, the Incorporated Documents, and all amendments or supplements to any of them, as may be reasonably requested for use in connection with the offering and sale of the Shares; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Shares, including any stamp taxes in connection with the original issuance and sale of the Shares; (iv) the printing (or reproduction) and delivery of this Agreement, the preliminary and supplemental Blue Sky Memoranda and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Shares; (v) the listing of the Shares on the New York Stock Exchange; (vi) the registration or qualification of the Shares for offer and sale under the securities or Blue Sky laws of the several states as provided in Section 5(g) hereof (including the reasonable fees, expenses and disbursements of counsel for the Underwriters relating to the preparation, printing or reproduction, and delivery of the preliminary and supplemental Blue Sky Memoranda and such registration and qualification); (vii) the filing fees and the fees and expenses of counsel for the Underwriters in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; (viii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Shares; and (ix) the fees and expenses of the Company's accountants and the fees and expenses of counsel (including local and special counsel) for the Company. 10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective: (i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at the time this Agreement is executed and delivered, it is necessary for the registration statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, when notification of the effectiveness of the registration statement or such post-effective amendment has been released by the Commission. Until such time as this Agreement shall have become effective, it may be terminated by the Company, by notifying you, or by you, as Representatives of the several Underwriters, by notifying the Company. If any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they are obligated to purchase hereunder on the Closing Date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters are -23- obligated but fail or refuse to purchase is not more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date, each non-defaulting Underwriter shall be obligated, severally, in the proportion which the number of Firm Shares set forth opposite its name in SCHEDULE I hereto bears to the aggregate number of Firm Shares set forth opposite the names of all non-defaulting Underwriters or in such other proportion as you may specify in accordance with Section 20 of the Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares which such defaulting Underwriter or Underwriters are obligated, but fail or refuse, to purchase. If any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they are obligated to purchase on the Closing Date and the aggregate number of Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date and arrangements satisfactory to you and the Company for the purchase of such Shares by one or more non-defaulting Underwriters or other party or parties approved by you and the Company are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case which does not result in termination of this Agreement, either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any such default of any such Underwriter under this Agreement. The term "Underwriter" as used in this Agreement includes, for all purposes of this Agreement, any party not listed in SCHEDULE I hereto who, with your approval and the approval of the Company, purchases Shares which a defaulting Underwriter is obligated, but fails or refuses, to purchase. Any notice under this Section 10 may be given by telegram, telecopy or telephone but shall be subsequently confirmed by letter. 11. TERMINATION OF AGREEMENT. This Agreement shall be subject to termination in your absolute discretion, without liability on the part of any Underwriter to the Company by notice to the Company, if prior to the Closing Date or any Option Closing Date (if different from the Closing Date and then only as to the Additional Shares), as the case may be, (i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market shall have been suspended or materially limited, (ii) a general moratorium on commercial banking activities in New York or Texas shall have been declared by either federal or state authorities, or (iii) there shall have occurred any outbreak or escalation of hostilities or other international or domestic calamity, crisis or change in political, financial or economic conditions, the -24- effect of which on the financial markets of the United States is such as to make it, in your judgment, impracticable or inadvisable to commence or continue the offering of the Shares at the offering price to the public set forth on the cover page of the Prospectus or to enforce contracts for the resale of the Shares by the Underwriters. Notice of such termination may be given to the Company by telegram, telecopy or telephone and shall be subsequently confirmed by letter. 12. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth in the last paragraph on the cover page, the stabilization legend on the inside front cover, and the statements in the first and third paragraphs under the caption "Underwriting" in any Prepricing Prospectus and in the Prospectus, constitute the only information furnished by or on behalf of the Underwriters through you as such information is referred to in Sections 6(b) and 7 hereof. 13. MISCELLANEOUS. Except as otherwise provided in Sections 5, 10 and 11 hereof, notice given pursuant to any provision of this Agreement shall be in writing and shall be delivered (i) if to the Company, at the office of the Company at 1400 International Plaza, Fort Worth, Texas 76109, Attention: [insert name and title]; or (ii) if to you, as Representatives of the several Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, Attention: Manager, Investment Banking Division. This Agreement has been and is made solely for the benefit of the several Underwriters, the Company, its directors and officers, and the other controlling persons referred to in Section 7 hereof and their respective successors and assigns, to the extent provided herein, and no other person shall acquire or have any right under or by virtue of this Agreement. Neither the term "successor" nor the term "successors and assigns" as used in this Agreement shall include a purchaser from any Underwriter of any of the Shares in his status as such purchaser. 14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York. This Agreement may be signed in various counterparts which together constitute one and the same instrument. If signed in counterparts, this Agreement shall not become effective unless at least one counterpart hereof shall have been executed and delivered on behalf of each party hereto. -25- Please confirm that the foregoing correctly sets forth the agreement between the Company and the several Underwriters. Very truly yours, TNP ENTERPRISES, INC. By ------------------------------------ Chairman of the Board Confirmed as of the date first above mentioned on behalf of themselves and the other several Underwriters named in Schedule I hereto. SMITH BARNEY INC. EDWARD D. JONES & CO., L.P. LEGG MASON WOOD WALKER, INC. As Representatives of the Several Underwriters By SMITH BARNEY INC. By ----------------------------------- Managing Director -26- SCHEDULE I TNP ENTERPRISES, INC. NUMBER OF UNDERWRITER FIRM SHARES ----------- ----------- Smith Barney Inc. Edward D. Jones & Co., L.P. Legg Mason Wood Walker, Inc. ----------- Total ----------- ----------- -27- EX-5.(A) 3 EXHIBIT 5(A) EXHIBIT 5(a) [LETTERHEAD] August 28, 1996 TNP Enterprises, Inc. 4100 International Plaza P.O. Box 2943 Fort Worth, Texas 76113 Re: Registration of 2,000,000 shares of Common Stock of TNP Enterprises, Inc. Ladies and Gentlemen: We have acted as counsel to TNP Enterprises, Inc., a Texas corporation (the "Company"), in connection with the preparation of the Company's Registration Statement on Form S-3 and the amendments thereto (as amended, the "Registration Statement") originally filed on August 28, 1996, with the Securities and Exchange Commission under the Securities Act of 1933, as amended. The Registration Statement relates to the offer and sale by the Company of 2,000,000 shares (the "Shares") of its Common Stock, no par value ("Common Stock"), assuming the full exercise of the Underwriters' over-allotment option. In connection therewith, we have examined and relied upon originals, or copies certified to our satisfaction, of (i) the Articles of Incorporation of the Company and the Bylaws of the Company; (ii) the minutes and records of the corporate proceedings of the Company with respect to the issuance by the Company of the Shares; (iii) the Registration Statement and all exhibits thereto; (iv) the form of Underwriting Agreement to be entered into by and among the Company and Smith Barney Inc., Edward D. Jones & Co., L.P. and Legg Mason Wood Walker, Inc., as representatives (the "Representatives") of the various Underwriters named therein, as contemplated by the Registration Statement (the "Underwriting Agreement"); and (v) such other documents and instruments as we have deemed necessary for the expression of the opinions contained herein. The laws covered by the opinions expressed herein are limited to the federal laws of the United States and the laws of the State of Texas. No opinions are expressed herein with respect to the effect of any laws, rules or regulations relating to electric utility regulatory matters. In making the foregoing examinations, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us as certified or photostatic copies thereof. As to various questions of fact material to this opinion, where such facts have not been independently established, and as to the content and form of certain minutes, records, resolutions and other [LETTERHEAD] TNP Enterprises, Inc. August 28, 1996 Page 2 documents or writings of the Company, we have relied, to the extent we have deemed reasonably appropriate, upon representations or certificates of officers of the Company and its subsidiaries or governmental officials. We also have assumed that the Underwriting Agreement will be duly executed by the parties thereto. Based upon the foregoing, and having due regard for such legal considerations as we deem relevant, we are of the opinion that the Shares have been duly authorized for issuance and, when issued in accordance with the terms of the Underwriting Agreement and upon passage of pricing resolutions by the Financing Committee of the Company's Board of Directors, will be validly issued, fully paid and non-assessable. We hereby consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement and to the reference to this firm under "Legal Matters" in the Prospectus forming a part of such Registration Statement. Very truly yours, /s/ Haynes and Boone, LLP Haynes and Boone, LLP EX-23.(B) 4 EXHIBIT 23(B) EXHIBIT 23(b) August 27, 1996 TNP Enterprises, Inc. 4100 International Plaza P.O. Box 2943 Fort Worth, Texas 76113 Re: Registration of 2,000,000 shares of Common Stock of TNP Enterprises, Inc. Ladies and Gentlemen: We have acted as special counsel to TNP Enterprises, Inc., a Texas corporation (the "Company"), in connection with the preparation of the Company's Registration Statement on Form S-3 and the amendments thereto (as amended, the "Registration Statement") originally filed on August 28, 1996, with the Securities and Exchange Commission under the Securities Act of 1933, as amended. The Registration Statement relates to the offer and sale by the Company of 2,000,000 shares of its Common Stock, no par value, assuming the full exercise of the Underwriters' over-allotment option. We hereby consent to the filing of this consent with the Securities and Exchange Commission as an exhibit to the Registration Statement and to the reference to this firm under "Legal Matters" in the Prospectus forming a part of such Registration Statement. Very truly yours, /s/ Rubin, Katz, Salazar, Alley & Rouse Rubin, Katz, Salazar, Alley & Rouse, A Professional Corporation EX-23.(C) 5 EXHIBIT 23(C) EXHIBIT 23(c) INDEPENDENT AUDITORS' CONSENT The Board of Directors TNP Enterprises, Inc.: We consent to the use of our report incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. Our report refers to a change in the method of accounting for operating revenues in 1995 and changes in the methods of accounting for income taxes and postretirement benefits in 1993. /s/ KPMG PEAT MARWICK LLP KPMG Peat Marwick LLP Fort Worth, Texas August 28, 1996 -----END PRIVACY-ENHANCED MESSAGE-----