Document:

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                                                                     EXHIBIT 4.1

            STATEMENT OF RESOLUTION DECREASING SERIES A REDEEMABLE
          PREFERRED STOCK, ELIMINATING SERIES B REDEEMABLE PREFERRED
                STOCK AND ESTABLISHING TWO NEW SERIES OF SHARES

To:  The Secretary of State
     of the State of Texas

          Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of (i) decreasing its Series A Redeemable Preferred Stock, (ii)
eliminating its Series B Redeemable Preferred Stock, and (iii) establishing and
designating as two new series of shares its 14 1/2% Senior Redeemable Preferred
Stock, Series C, $1,000.00 liquidation preference per share (the "Series C
Redeemable Preferred Stock"), and its 14 1/2% Senior Redeemable Preferred Stock,
Series D, $1,000.00 liquidation preference per share (the "Series D Redeemable
Preferred Stock"), and fixing and determining the preferences, limitations and
relative rights of the new Series C and D Redeemable Preferred Stock:

          1.   The name of the corporation is TNP Enterprises, Inc. (the
"Company").
--------

          2.   The following resolution decreasing the Company's Series A
Redeemable Preferred Stock was duly adopted by all necessary action of the
Company on May 23, 2000.

          "NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority vested
     in the Board by the Restated Articles and Section 2.13.B of the Texas
     Business Corporation Act, the Board does hereby decrease the number of
     shares of Series A Redeemable Preferred Stock by 900,000 from 1,000,000 to
     100,000 which 900,000 shares shall be restored to the status of authorized
     but unissued shares of preferred stock; and"

          3.   The following resolution eliminating the Company's Series B
Redeemable Preferred Stock was duly adopted by all necessary action of the
Company on May 23, 2000:

          "RESOLVED FURTHER, that pursuant to the authority vested in the Board
     by the Restated Articles and Section 2.13.C of the Texas Business
     Corporation Act, the Board hereby eliminates all 1,000,000 shares of Series
     B Redeemable Preferred Stock which 1,000,000 shares shall be restored to
     the status of authorized but unissued shares of preferred stock; and"
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                                      -2-

          4.   The following resolution establishing and designating the
Company's Series C and D Redeemable Preferred Stock and fixing and determining
the designations, preferences, limitations and relative rights with respect
thereto was duly adopted by all necessary action of the Company on May 23, 2000:

          "RESOLVED FURTHER, that of the 1,900,000 shares that have been
restored to the status of authorized but unissued shares of preferred stock
through the foregoing decrease and elimination of the Series A and Series B
Redeemable Preferred Stock, respectively, the Board does hereby establish a new
series of senior redeemable preferred stock designated 14 1/2% Senior Redeemable
Preferred Stock, Series C, $1,000 liquidation preference per share (the "Series
C Redeemable Preferred Stock"), consisting of 1,000,000 shares, and a new series
of senior redeemable preferred stock designated 14 1/2% Senior Redeemable
Preferred Stock, Series D, $1,000 liquidation preference per share (the "Series
D Redeemable Preferred Stock"), consisting of 900,000 shares, which shall have
the designations, powers, preferences, rights, qualifications, limitations and
restrictions (in addition to the designations, powers, preferences, rights,
qualifications, limitations and restrictions set forth in the Restated Articles)
as follows:"

          (a)  Designation.  There is hereby created out of the authorized and
               -----------
unissued shares of Preferred Stock of the Company a class of Preferred Stock
designated as the "14 1/2% Senior Redeemable Preferred Stock."  The number of
shares constituting such class shall initially be 1,900,000 and are referred to
herein as the "Senior Preferred Stock."  The number of shares of Senior
               ----------------------
Preferred Stock shall increase to 2,000,000 pursuant to paragraph 5 hereof.
1,000,000 shares of Senior Preferred Stock shall be designated as the "14 1/2%
Senior Redeemable Preferred Stock, Series C," and initially 900,000 shares of
the Senior Preferred Stock shall be designated as the "14 1/2% Senior Redeemable
Preferred Stock, Series D."  The liquidation preference of the Senior Preferred
Stock shall be $1,000.00 per share.

          One Hundred Thousand (100,000) shares of the Series C Senior Preferred
Stock shall be initially issued, with an additional 900,000 shares of Series C
Senior Preferred Stock reserved for issuance in accordance with paragraph (c)(i)
hereof.  The Company shall issue the shares of the Series D Senior Preferred
Stock to the Holders of the Series C Senior Preferred Stock as is necessary to
comply with the registration and exchange provisions of the Registration Rights
Agreement and for issuance in accordance with paragraph (c)(i) hereof following
such exchange.

          (b)  Rank.  The Senior Preferred Stock shall, with respect to dividend
               ----
distributions and distributions upon the liquidation, winding-up and dissolution
of the Company, rank (i) senior to the extent set forth herein to all classes of
common stock of the Company ("Common Stock"), and to each other class of capital
                              ------------
stock or series of Preferred Stock
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                                      -3-

hereafter established by the Board of Directors of the Company the terms of
which do not expressly provide that it ranks senior to or on a parity with the
Senior Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up or dissolution of the Company (collectively referred to
with the Common Stock of the Company as "Junior Securities"); (ii) equally with
                                         -----------------
any class of capital stock or series of Preferred Stock issued by the Company
hereafter established by the Board of Directors of the Company the terms of
which expressly provide that such class will rank equally with the Senior
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up or dissolution of the Company (collectively referred to
as "Parity Securities"), provided that any such Parity Securities that were not
    -----------------    --------
approved by the Holders in accordance with paragraph (f)(ii)(A) hereof (to the
extent such approval is required) shall be deemed to be Junior Securities and
not Parity Securities; and (iii) junior to each other class of capital stock or
series of Preferred Stock issued by the Company hereafter established by the
Board of Directors of the Company the terms of which expressly provide that such
class or series will rank senior to the Senior Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up or dissolution
of the Company (collectively, referred to as "Senior Securities"), provided that
                                              -----------------    --------
any such Senior Securities that were not approved by the Holders in accordance
with paragraph (f)(ii)(B) hereof shall be deemed to be Junior Securities and not
Senior Securities.

          The Senior Preferred Stock will be subject to the issuance of series
of Junior Securities, Parity Securities and Senior Securities; provided that the
                                                               --------
Company may not issue any new class of Parity Securities (other than the
issuance of additional shares of Senior Preferred Stock to satisfy dividend
payments on outstanding shares of Senior Preferred Stock) or Senior Securities
(or amend the provisions of any existing class of capital stock to make such
class of capital stock Parity Securities or Senior Securities) without the
approval of the Holders in accordance with paragraph (f)(ii) hereof.

          No full dividends may be declared or paid on any Parity Securities for
any period unless full cumulative dividends shall have been or contemporaneously
are declared and paid (or are deemed declared and paid) in full, or declared
and, if payable in cash, a sum in cash sufficient for such payment set apart for
such payment on the Senior Preferred Stock.  If full dividends are not paid, the
Senior Preferred Stock will share dividends pro rata with the Parity Securities.
                                            --- ----
No dividends may be paid on any Junior Securities (except dividends on Junior
Securities payable in additional shares of Junior Securities) and no Junior
Securities may be repurchased, redeemed or otherwise retired (except in exchange
for Junior Securities) if full cumulative dividends have not been paid in full
(or deemed paid) on the Senior Preferred Stock for all full semi-annual Dividend
Periods ended prior to the date of such payment in respect of Junior Securities
as may be further restricted as provided under paragraph (k)(ii).
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                                      -4-

          (c)  Dividends.
               ---------

               (i)   From the Issue Date, Holders of the Senior Preferred Stock
will be entitled to receive, when, as and if declared by the Board of Directors
of the Company, out of funds legally available therefor, dividends on the Senior
Preferred Stock at a rate per annum equal to 14 1/2% of the liquidation
                          ---------
preference per share of Senior Preferred Stock, payable semi-annually. All
dividends will accumulate on a daily basis whether or not earned or declared
from the Issue Date and will be payable semi-annually in arrears on April 1 and
October 1 of each year (each, a "Dividend Payment Date"), commencing on October
                                 ---------------------
1, 2000, to holders of record on March 15 and September 15 immediately preceding
the relevant Dividend Payment Date. All unpaid dividends will compound on a
semi-annual basis. Dividends will be paid by the issuance of additional shares
of Senior Preferred Stock (including fractional shares) having an aggregate
liquidation preference equal to the amount of such dividends on any Dividend
Payment Date occurring on or prior to April 1, 2005. Thereafter, dividends may
be paid, at the Company's option, on any Dividend Payment Date either in cash or
by the issuance of additional shares of Senior Preferred Stock (including
fractional shares) having an aggregate liquidation preference equal to the
amount of such dividends. If, at any time, any of the Voting Rights Triggering
Events described in clauses (1) or (2) of paragraph (f)(iv) shall have occurred,
the per annum dividend rate will be increased by 2% during the continuance of
    ---------
any such Voting Rights Triggering Event. After the date on which such Voting
Rights Triggering Event ceases to exist, the dividend rate will revert to the
rate originally borne by the Senior Preferred Stock.

               (ii)  All dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
                                                           --- ----
Holders entitled thereto.

               (iii) Dividends accumulating after April 1, 2005 on the Senior
Preferred Stock for any past Dividend Period and dividends in connection with
any optional redemption pursuant to paragraph (e)(i) may be declared and paid at
any time, without reference to any Dividend Payment Date, to Holders of record
on such date, not more than sixty (60) days prior to the payment thereof, as may
be fixed by the Board of Directors.

               (iv)  (A) No full dividends shall be declared by the Board of
Directors or paid or set apart for payment by the Company on any Parity
Securities for any period unless full cumulative dividends have been or
contemporaneously are declared and paid in full and, if payable in cash, a sum
in cash set apart sufficient for such payment on the Senior Preferred Stock for
all Dividend Periods terminating on or prior to the date of payment of such full
dividends on such Parity Securities. If any dividends are not so paid, all
dividends declared upon shares of the Senior Preferred
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                                      -5-

Stock and any other Parity Securities shall be declared pro rata so that the
                                                        --- ----
amount of dividends declared per share on the Senior Preferred Stock and such
Parity Securities shall in all cases bear to each other the same ratio that
accumulated dividends per share on the Senior Preferred Stock and such Parity
Securities bear to each other.

          (B) So long as any share of the Senior Preferred Stock is outstanding,
the Company shall not declare, pay or set apart for payment any dividend on any
of the Junior Securities (other than dividends in Junior Securities to the
holders of Junior Securities), or make any payment on account of, or set apart
for payment money for a sinking or other similar fund for, the purchase,
redemption or other retirement of, any of the Junior Securities or any warrants,
rights, calls or options exercisable for or convertible into any of the Junior
Securities whether in cash, obligations or shares of the Company or other
property (other than in exchange for Junior Securities), and shall not permit
any corporation or other entity directly or indirectly controlled by the Company
to purchase or redeem any of the Junior Securities or any such warrants, rights,
calls or options (other than in exchange for Junior Securities) unless full
cumulative dividends determined in accordance herewith on the Senior Preferred
Stock have been paid in full for all full semi-annual Dividend Periods ended
prior to the date of such payment in respect of Junior Securities.

          (C) So long as any share of the Senior Preferred Stock is outstanding,
the Company shall not (except with respect to dividends as permitted by
paragraph (c)(iv)(A)) make any payment on account of, or set apart for payment
money for a sinking or other similar fund for, the purchase, redemption or other
retirement of, any of the Parity Securities or any warrants, rights, calls or
options exercisable for or convertible into any of the Parity Securities whether
in cash, obligations or shares of the Company or other property, and shall not
permit any corporation or other entity directly or indirectly controlled by the
Company to purchase or redeem any of the Parity Securities or any such warrants,
rights, calls or options unless full cumulative dividends determined in
accordance herewith on the Senior Preferred Stock have been or contemporaneously
are paid in full.

          (v)  Dividends payable on the Senior Preferred Stock for any period
less than a year shall be computed on the basis of a 360-day year of twelve 30-
day months and, for periods not involving a full calendar month, the actual
number of days elapsed (not to exceed 30 days).

          (vi) Additional Dividends shall become due and payable in cash with
respect to the Senior Preferred Stock as set forth in the Registration Rights
Agreement.
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                                      -6-

          (d)  Liquidation Preference.
               ----------------------

               (i)  In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Company, the Holders of shares
of Senior Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Company available for distribution to its stockholders an
amount in cash equal to the liquidation preference for each share outstanding,
plus, without duplication, an amount in cash equal to accumulated and unpaid
dividends thereon to the date fixed for liquidation, dissolution or winding-up
(including an amount equal to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for liquidation, dissolution or winding-
up) before any distribution shall be made or any assets distributed in respect
of Junior Securities to the holders of any Junior Securities including, without
limitation, Common Stock of the Company. If upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the amounts payable with
respect to the Senior Preferred Stock and all other Parity Securities are not
paid in full, the Holders of the Senior Preferred Stock and the Parity
Securities will share equally and ratably in any distribution of assets of the
Company first in proportion to the full liquidation preference to which each is
entitled until such preferences are paid in full, and then in proportion to
their respective amounts of accumulated but unpaid dividends.

               (ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
entities shall be deemed to be a liquidation, dissolution or winding-up of the
affairs of the Company.

          (e)  Redemption.
               ----------

               (i) Optional Redemption.  (A)  The Company may redeem the Senior
                   -------------------
Preferred Stock at its option, in whole at any time or in part from time to
time, on or after April 1, 2005, subject to contractual and other restrictions
with respect thereto, from any source of funds legally available therefor, in
the manner provided for in paragraph (e)(iii) hereof, at the redemption prices
in cash (expressed as a percentage of the liquidation preference) set forth
below, plus, without duplication, an amount in cash equal to all accumulated and
unpaid dividends (whether or not declared), including Additional Dividends, if
any (including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Redemption Date to the
Redemption Date), if redeemed during the 12-month period beginning on April 1 of
each the year listed below:

          2005.............................................   110.000%
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                                      -7-

          2006.............................................   107.500%
          2007.............................................   105.000%
          2008.............................................   102.500%
          2009 and thereafter..............................   100.000%

          (B)  In addition to the foregoing paragraph (e)(i)(A), the Company may
at its option redeem for cash all but not less than all of the outstanding
shares of Senior Preferred Stock at any time prior to April 1, 2003 from the Net
Proceeds of any Public Equity Offering in the manner provided in paragraph
(e)(iii) hereof, at a redemption price equal to 114.500% of the liquidation
preference thereof, plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends (whether or not declared), including an amount
in cash equal to a prorated dividend for the period from the Dividend Payment
Date immediately prior to the Redemption Date to the Redemption Date; provided,
                                                                      --------
that any such redemption occurs within 90 days following the closing of any such
Public Equity Offering.

          (C)  In addition to the foregoing paragraphs (e)(i)(A) and (e)(i)(B),
at any time prior to April 1, 2005, the Company may at its option redeem all but
not less than all of the outstanding shares of Senior Preferred Stock upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
liquidation preference thereof plus the Applicable Premium, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends
(whether or not declared), including Additional Dividends, if any (including an
amount in cash equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Redemption Date to the Redemption Date),
on the Senior Preferred Stock for all Dividend Periods terminating on or prior
to the Redemption Date.

          (D)  In the event of a redemption pursuant to paragraph (e)(i)(A)
hereof of only a portion of the then outstanding shares of Senior Preferred
Stock, the Company shall effect such redemption on a pro rata basis according to
                                                     --- ----
the number of shares held by each Holder of Senior Preferred Stock, except that
the Company may redeem such shares held by Holders of fewer than ten shares (or
shares held by Holders who would hold less than ten shares as a result of such
redemption), as may be determined by the Company.

          (ii)  Mandatory Redemption. On April 1, 2011, the Company shall redeem
                --------------------
to the extent of funds legally available therefor, in the manner provided for in
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                                      -8-

paragraph (e)(iii) hereof, all of the shares of Senior Preferred Stock then
outstanding at a redemption price equal to 100% of the liquidation preference
per share, plus, without duplication, an amount in cash equal to all accumulated
and unpaid dividends (whether or not declared), including Additional Dividends,
if any, per share (including an amount equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the Redemption Date
to the Redemption Date) (the "Mandatory Redemption Price").
                              --------------------------

          (iii) Procedures for Redemption.  (A) At least 30 days and not more
                -------------------------
than 60 days prior to the date fixed for any redemption of the Senior Preferred
Stock, written notice (the "Redemption Notice") shall be given by first-class
                            -----------------
mail, postage prepaid, to each Holder of record on the record date fixed for
such redemption of the Senior Preferred Stock at such Holder's address as it
appears in the register maintained by the Transfer Agent for the Senior
Preferred Stock, provided that no failure to give such notice nor any deficiency
                 --------
therein shall affect the validity of the procedure for the redemption of any
shares of Senior Preferred Stock to be redeemed except as to the Holder or
Holders to whom the Company has failed to give said notice or except as to the
Holder or Holders whose notice was defective. The Redemption Notice shall state:

                (1)  whether the redemption is pursuant to paragraph (e)(i)(A),
          (B) or (C) hereof;

                (2)  the redemption price;

                (3)  whether all or less than all the outstanding shares of
          Senior Preferred Stock are to be redeemed and the total number of
          shares of Senior Preferred Stock being redeemed;

                (4)  the Redemption Date;

                (5)  that the Holder is to surrender to the Company, in the
          manner, at the place or places and at the price designated, his
          certificate or certificates representing the shares of Senior
          Preferred Stock to be redeemed; and

                (6)  that dividends on the shares of Senior Preferred Stock to
          be redeemed shall cease to accumulate on such Redemption Date unless
          the Company defaults in the payment of the redemption price.

                (B)  Each Holder of Senior Preferred Stock shall surrender the
certificate or certificates representing such shares of Senior Preferred Stock
to the Company,
<PAGE>

                                      -9-

duly endorsed (or otherwise in proper form for transfer, as determined by the
Company), in the manner and at the place designated in the Redemption Notice,
and on the Redemption Date the full redemption price for such shares shall be
payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. In the event that less than all of the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.

                    (C)  On and after the Redemption Date, unless the Company
defaults in the payment in full of the applicable redemption price, dividends on
Senior Preferred Stock called for redemption shall cease to accumulate on the
Redemption Date, and all rights of the Holders of redeemed shares shall
terminate with respect thereto on the Redemption Date, other than the right to
receive the redemption price; provided, however, that if a notice of redemption
                              --------  -------
shall have been given as provided in paragraph (iii)(A) above and the funds
necessary for redemption (including an amount in cash in respect of all
dividends that will accumulate to the Redemption Date) shall have been
irrevocably deposited in trust for the equal and ratable benefit for the Holders
of the shares of senior Preferred Stock to be redeemed, then, at the close of
business on the Business Day on which such funds are segregated and set aside,
the Holders of the shares to be redeemed shall cease to be stockholders of the
Company and shall be entitled only to receive the redemption price.

          (f)  Voting Rights.
               -------------

               (i)  The Holders of Senior Preferred Stock, except as otherwise
     required under Texas law or as set forth in paragraphs (ii), (iii) and (iv)
     below, shall not be entitled or permitted to vote on any matter required or
     permitted to be voted upon by the stockholders of the Company.

               (ii) (A) So long as any shares of  Senior Preferred Stock are
     outstanding, the Company shall not authorize or issue any class of Parity
     Securities without the affirmative vote or consent of Holders of at least
     66-2/3% of the then outstanding shares of Senior Preferred Stock, voting or
     consenting, as the case may be, as one class, given in person or by proxy,
     either in writing or by resolution adopted at an annual or special meeting;
     provided, however, that no such vote or consent shall be necessary in
     --------  -------
     connection with the issuance of additional shares of Senior Preferred Stock
     pursuant to the provisions of paragraph (c) of this Statement of
     Resolution.

               (B) So long as any shares of Senior Preferred Stock are
     outstanding, the Company shall not authorize or issue any class of Senior
     Securities without the affirmative vote or consent of Holders of at least
     66-2/3% of the then outstanding shares of Senior Preferred Stock, voting or
     consenting, as the case may be, as one
<PAGE>

                                      -10-

     class, given in person or by proxy, either in writing or by resolution
     adopted at an annual or special meeting.

          (C)  So long as any shares of Senior Preferred Stock are outstanding,
     the Company shall not amend this Statement of Resolution or its Articles of
     Incorporation so as to affect adversely the specified rights, preferences,
     privileges or voting rights of Holders of shares of Senior Preferred Stock
     without the affirmative vote or consent of Holders of at least a majority
     of the issued and outstanding shares of Senior Preferred Stock, voting or
     consenting, as the case may be, as one class, given in person or by proxy,
     either in writing or by resolution adopted at an annual or special meeting.

          (iii) Without the affirmative vote or consent of Holders of a majority
     of the issued and outstanding shares of Senior Preferred Stock, voting or
     consenting, as the case may be, as a separate class, given in person or by
     proxy, either in writing or by resolution adopted at an annual or special
     meeting, the Company shall not, in a single transaction or series of
     related transactions, consolidate with or merge with or into, or sell,
     assign, transfer, lease, convey or otherwise dispose of all or
     substantially all of its assets to, another Person unless:  (A) either (1)
     the Company is the continuing Person or (2) the Person (if other than the
     Company) formed by such consolidation or into which the Company is merged
     or to which the properties and assets of the Company are sold, assigned,
     transferred, leased, conveyed or otherwise disposed of shall be a
     corporation organized and existing under the laws of the United States or
     any State thereof or the District of Columbia and shall expressly assume
     all of the obligations of the Company under this Statement of Resolution
     and the obligations hereunder shall remain in full force and effect; (B) if
     the Company is not the surviving Person, the Senior Preferred Stock shall
     be converted into or exchanged for and shall become shares of such
     successor, transferee or resulting Person, having in respect of such
     successor, transferee or resulting Person the same powers, preferences and
     relative, participating, optional or other special rights and the
     qualifications, limitations or restrictions thereon, that the Senior
     Preferred Stock had immediately prior to such transaction; (C) immediately
     after giving effect to such transaction on a pro forma basis the Company or
                                                  --- -----
     such Person could incur at least $1.00 of additional Indebtedness (other
     than Permitted Indebtedness) in compliance with paragraph (k)(i); and (D)
     immediately after giving effect to such transaction (including any
     Indebtedness incurred or anticipated to be incurred in connection with the
     transaction), no Voting Rights Triggering Event shall have occurred or be
     continuing.

                For purposes of the foregoing, the transfer (by lease,
     assignment, sale or otherwise, in a single transaction or series of related
     transactions) of all or sub-
<PAGE>

                                      -11-

     stantially all of the properties or assets of one or more Restricted
     Subsidiaries of the Company, the Capital Stock of which constitutes all or
     substantially all of the properties and assets of the Company shall be
     deemed to be the transfer of all or substantially all of the properties and
     assets of the Company.

          (iv) (A) If (1) the Company fails to redeem all of the then
     outstanding shares of Senior Preferred Stock on or before April 1, 2011 or
     otherwise fails to discharge any redemption obligation with respect to the
     Senior Preferred Stock; (2) the Company fails to make a Change of Control
     Offer following a Change of Control if such Change of Control Offer is
     required by paragraph (g) hereof or fails to purchase shares of Senior
     Preferred Stock from Holders who elect to have such shares purchased
     pursuant to the Change of Control Offer; or (3) the Company breaches or
     violates one of the provisions set forth in paragraph (k) or paragraph
     (f)(iii) hereof and the breach or violation continues for a period of 60
     days or more after the Company receives notice thereof specifying the
     default from the Holders of at least 25% of the shares of Senior Preferred
     Stock then outstanding, then in the case of any of clauses (1) through (3)
     (each of such clauses (1) through (3) a "Voting Rights Triggering Event"),
                                              ------------------------------
     the number of directors constituting the Board of Directors shall be
     adjusted by the number, if any, necessary to permit the Holders of the
     Senior Preferred Stock, voting separately and as one class, to elect the
     lesser of two directors or that number of directors constituting at least
     25% of the Board of Directors; provided, that, in the event more than one
                                    --------
     of the above defaults occurs, at the same or at different times, the
     maximum number of directors that such Holders shall be entitled to elect is
     the lesser of two directors and that number of directors constituting 25%
     of the Board of Directors. Holders of a majority of the issued and
     outstanding shares of Senior Preferred Stock, voting separately and as one
     class, shall have the exclusive right to elect the lesser of two directors
     or 25% of the members of the Board of Directors at a meeting therefor
     called upon occurrence of such Voting Rights Triggering Event, and at every
     subsequent meeting at which the terms of office of the directors so elected
     by the Holders of Senior Preferred stock expire (other than as described in
     (f)(iv)(B) below). The voting rights provided herein shall be the exclusive
     remedy at law or in equity of the Holders of the Senior Preferred Stock for
     any Voting Rights Triggering Event.

          (B)  The right of the Holders of the Senior Preferred Stock voting
     together as a separate class to elect members of the Board of Directors as
     set forth in subparagraph (f)(iv)(A) above shall continue until such time
     as the failure, breach or default giving rise to such Voting Rights
     Triggering Event is remedied, cured or waived by the Holders of at least a
     majority of the shares of Senior Preferred Stock then outstanding and
     entitled to vote thereon, at which time (1) the special right of the
     Hold-
<PAGE>

                                      -12-

     ers of Senior Preferred Stock so to vote as a class for the election of
     directors and (2) the term of office of the directors elected by the
     Holders of Senior Preferred Stock shall each terminate and the directors
     elected by the holders of Common Stock or Capital Stock (other than the
     Senior Preferred Stock) shall constitute the entire Board of Directors. At
     any time after voting power to elect directors shall have become vested and
     be continuing in the Holders of Senior Preferred Stock pursuant to
     paragraph (f)(iv) hereof, or if vacancies shall exist in the offices of
     directors elected by the Holders of Senior Preferred Stock, a proper
     officer of the Company may, and upon the written request of the Holders of
     record of at least 25% of the shares of Senior Preferred Stock then
     outstanding addressed to the secretary of the Company shall, call a special
     meeting of the Holders of Senior Preferred Stock, for the purpose of
     electing the directors which such Holders are entitled to elect. If such
     meeting shall not be called by a proper officer of the Company within 20
     days after personal service of said written request upon the secretary of
     the Company, or within 20 days after mailing the same within the United
     States by certified mail, addressed to the secretary of the Company at its
     principal executive offices, then the Holders of record of at least 25% of
     the outstanding shares of Senior Preferred Stock may designate in writing
     one Holder to call such meeting at the expense of the Company, and such
     meeting may be called by the Person so designated upon the notice required
     for the annual meetings of stockholders of the Company and shall be held at
     the place for holding the annual meetings of stockholders. Any Holder of
     Senior Preferred Stock so designated shall have, and the Company shall
     provide, access to the lists of stockholders to be called pursuant to the
     provisions hereof.

          (C)  At any meeting held for the purpose of electing directors at
     which the Holders of Senior Preferred Stock shall have the right, voting
     together as a separate class, to elect directors as aforesaid, the presence
     in person or by proxy of the Holders of at least a majority of the
     outstanding shares of Senior Preferred Stock entitled to vote thereat shall
     be required to constitute a quorum of the Senior Preferred Stock.

          (D)  Any vacancy occurring in the office of a director elected by the
     Holders of the Senior Preferred Stock may be filled by the remaining
     director elected by the Holders of the Senior Preferred Stock unless and
     until such vacancy shall be filled by the Holders of the Senior Preferred
     Stock.

          (v) In any case in which the Holders of the Senior Preferred Stock
     shall be entitled to vote pursuant to this paragraph (f) or pursuant to
     Texas law, each Holder of Senior Preferred Stock entitled to vote with
     respect to such matter shall be entitled to one vote for each share of
     Senior Preferred Stock held.
<PAGE>

                                      -13-

          (g)  Change of Control.
               -----------------

               (i)  Upon the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), unless the Company has elected
                      ----------------------
to redeem the Senior Preferred Stock pursuant to paragraph (e)(i)(C) in
connection with such Change of Control, the Company shall make an offer to
purchase (the "Change of Control Offer") the outstanding shares of Senior
               -----------------------
Preferred Stock at a purchase price equal to 110% of the liquidation preference
thereof plus, without duplication, an amount in cash equal to all accumulated
and unpaid dividends (including Additional Dividends, if any) thereon (including
an amount in cash equal to a prorated dividend for the period from the
immediately preceding Dividend Payment Date to the Change of Control Payment
Date).

               (ii) Within 30 days of the occurrence of a Change of Control, the
Company also shall (i) cause a notice of the Change of Control to be sent at
least once to the Dow Jones News Service or similar business news service in the
United States and (ii) send by first-class mail, postage prepaid, to each Holder
of Senior Preferred Stock, at the address appearing in the register maintained
by the Transfer Agent for the Senior Preferred Stock, a notice stating:

                    (1) that the Change of Control Offer is being made pursuant
          to this paragraph (g) and that all of the Senior Preferred Stock
          tendered will be accepted for payment, and otherwise subject to the
          terms and conditions set forth herein;

                    (2) the Change of Control Purchase Price and the purchase
          date (which shall be a Business Day no earlier than 30 Business Days
          nor later than 60 Business Days from the date such notice is mailed
          (the "Change of Control Payment Date"));
                ------------------------------

                    (3) that any of the Senior Preferred Stock not tendered will
          continue to accumulate dividends;

                    (4) that, unless the Company defaults in the payment of the
          Change of Control Purchase Price, any of the Senior Preferred Stock
          accepted for payment pursuant to the Change of Control Offer shall
          cease to accumulate dividends after the Change of Control Payment
          Date;

                    (5) that Holders accepting the offer to have their Senior
          Preferred Stock purchased pursuant to a Change of Control Offer will
          be required to surrender their certificates representing the Senior
          Preferred Stock to the Company, properly endorsed for transfer
          together with such customary
<PAGE>

                                      -14-

          documents as the Company and the Transfer Agent may reasonably
          require, in the manner and at the address specified in the notice
          prior to the close of business on the Business Day preceding the
          Change of Control Payment Date;

                 (6) that Holders will be entitled to withdraw their acceptance
          if the Company receives, not later than the close of business on the
          third Business Day preceding the Change of Control Payment Date, a
          telegram, telex, facsimile transmission or letter setting forth the
          name of the Holder, the number of shares of Senior Preferred Stock
          delivered for purchase, and a statement that such Holder is
          withdrawing his election to have such Senior Preferred Stock
          purchased;

                 (7) that Holders whose Senior Preferred Stock are being
          purchased only in part will be issued new certificates representing
          the number of shares of Senior Preferred Stock equal to the
          unpurchased portion of the certificates surrendered; and

                 (8) any other procedures that a Holder must follow to accept a
          Change of Control Offer or effect withdrawal of such acceptance.

          (iii)  The Company will comply with any securities laws and
     regulations, to the extent such laws and regulations are applicable to the
     redemption of the Senior Preferred Stock in connection with a Change of
     Control Offer.

          (iv)   On the Change of Control Payment Date, the Company shall (A)
     accept for payment the shares of Senior Preferred Stock validly tendered
     pursuant to the Change of Control Offer, (B) promptly mail to the Holders
     of shares so accepted the Change of Control Purchase Price therefor in cash
     and (C) cancel and retire each surrendered certificate and execute a new
     certificate representing that number of shares of Senior Preferred Stock
     equal to any unpurchased shares represented by a certificate surrendered.
     Unless the Company defaults in the payment for the shares of Senior
     Preferred Stock tendered pursuant to the Change of Control Offer, dividends
     shall cease to accumulate with respect to the shares of Senior Preferred
     Stock tendered and all rights of Holders of such tendered shares shall
     terminate, except for the right to receive payment therefor, on the Change
     of Control Payment Date.

          (v)    If the repurchase of the Senior Preferred Stock would violate
     or constitute a default or be otherwise prohibited under any Indebtedness
     of the Company then outstanding, then, notwithstanding anything to the
     contrary contained above, prior to complying with the foregoing provisions,
     but in any event within 30 days following the date the Change of Control
     occurs, the Company shall, to the extent
<PAGE>

                                      -15-

     required to permit the repurchase of the Senior Preferred Stock required by
     this paragraph (g), either (A) repay in full all such Indebtedness (and
     terminate all commitments) or (B) obtain the requisite consents, if any,
     under such Indebtedness required to permit the repurchase of the Senior
     Preferred Stock required by this paragraph (g). The Company must first
     comply with the covenant described in the preceding sentence before it
     shall be required to purchase shares of Senior Preferred Stock in the event
     of a Change of Control; provided that the Company's failure to consummate a
                             --------
     Change of Control Offer in accordance with the provisions of this covenant
     due to the covenant described in the immediately preceding sentence shall
     constitute a Voting Rights Triggering Event described in clause (3) of the
     definition of "Voting Rights Triggering Event" if not cured within 30 days
     of the last date on which the Company would have been required to
     consummate the Change of Control Offer without giving effect to the
     covenant described in the immediately preceding sentence.

          (h)  Conversion or Exchange. The Holders of shares of Senior Preferred
               ----------------------
Stock shall not have any rights hereunder to convert such shares into or
exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Company other than as
provided in the Registration Rights Agreement.

          (i)  Reissuance of Senior Preferred Stock. Shares of Senior Preferred
               ------------------------------------
Stock that have been issued and reacquired in any manner, including shares
purchased or redeemed or exchanged, shall (upon compliance with any applicable
provisions of the laws of Texas) have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may be redesignated and
reissued as part of any series of Preferred Stock; provided that shares of
                                                   --------
Senior Preferred Stock reacquired pursuant to the exchange offer contemplated by
the Registration Rights Agreement shall be reissued as Senior Preferred Stock
with the series designation referred to in paragraph (a) hereof; and provided,
                                                                     --------
further, that any issuance of such shares of Preferred Stock must be in
-------
compliance with the terms hereof.

          (j)  Business Day.  If any payment, redemption or exchange shall be
               ------------
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.

          (k)  Certain Covenants. During any period of time that (i) the ratings
               -----------------
assigned to the Notes (or, if the Notes are no longer outstanding, a similar
debt issuance of the Company) by both of the Rating Agencies are Investment
Grade Ratings and (ii) no Voting Rights Triggering Event has occurred and is
continuing, the Company and its Restricted Subsidiaries will not be subject to
the provisions described below under paragraphs (k)(i), (k)(ii), (k)(iii) and
clause (C) of paragraph (f)(iii) (collectively, the "Suspended
                                                     ---------
<PAGE>

                                      -16-

Covenants"). In the event that the Company and its Restricted Subsidiaries are
---------
not subject to the Suspended Covenants with respect to the Senior Preferred
Stock for any period of time as a result of the preceding sentence and,
subsequently, one or both Rating Agencies withdraw their ratings or downgrade
the ratings assigned to the Notes below the required Investment Grade Ratings,
then the Company and each of its Restricted Subsidiaries (except to the extent
that any such Restricted Subsidiary is not subject to such covenant pursuant to
the terms thereof) will thereafter again be subject to the Suspended Covenants
for the benefit of such Senior Preferred Stock and compliance with the Suspended
Covenants with respect to Restricted Payments made after the time of such
withdrawal or downgrade will be calculated in accordance with the terms of the
covenant described below under paragraph (k)(ii) as if such covenant had been in
effect during the entire period of time from May 26, 2000.

          (i)  Limitation on Additional Indebtedness. The Company shall not, and
               -------------------------------------
shall not permit any of its Restricted Subsidiaries (other than any Regulated
Restricted Subsidiary) to, directly or indirectly, incur (as defined) any
Indebtedness (including Acquired Indebtedness); provided that if no Voting
                                                --------
Rights Triggering Event has occurred and is continuing at the time or as a
consequence of the incurrence of such Indebtedness, the Company or any of its
Restricted Subsidiaries may incur Indebtedness (including Acquired Indebtedness)
if after giving effect to the incurrence of such Indebtedness and the receipt
and application of the proceeds thereof, the Company's Consolidated Fixed Charge
Coverage Ratio is at least 2.0 to 1 if the Indebtedness is incurred on or prior
to December 31, 2001 and 2.25 to 1 if the Indebtedness is incurred thereafter.

          Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may incur Permitted Indebtedness.

          For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness which the Company and any Restricted Subsidiary are
permitted to issue, the Company and such Restricted Subsidiary, as the case may
be, will have the right, in the Company's sole discretion, to classify such item
of Indebtedness at the time of its issuance and from time to time thereafter and
will only be required to include the amount and type of such Indebtedness under
the clause permitting the Indebtedness as so classified.

          (ii) Limitation on Restricted Payments. The Company shall not make,
               ---------------------------------
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, make, any Restricted Payment, unless:

         (1)   no Voting Rights Triggering Event has occurred and is continuing
   at the time of or immediately after giving effect to such Restricted Payment;
<PAGE>

                                      -17-

         (2)   immediately after giving pro forma effect to such Restricted
                                        --- -----
   Payment, the Company could incur $1.00 of additional Indebtedness (other than
   Permitted Indebtedness) under paragraph (k)(i); and

         (3)   immediately after giving effect to such Restricted Payment, the
   aggregate of all Restricted Payments made after the Issue Date does not
   exceed the sum of

               (a)  50% of the Company's Cumulative Consolidated Net Income (or
         minus 100% of any cumulative deficit in Consolidated Net Income during
         such period);

               (b)  100% of the aggregate Net Proceeds and the fair market value
         of any property or securities received by the Company from the issue or
         sale after the Issue Date of Capital Stock (other than Disqualified
         Capital Stock or Capital Stock of the Company issued to any Subsidiary
         of the Company) of the Company or any Indebtedness or other securities
         of the Company convertible into or exercisable or exchangeable for
         Capital Stock (other than Disqualified Capital Stock) of the Company
         which have been so converted, exercised or exchanged, as the case may
         be;

               (c)  without duplication of any amounts included in clause (3)(b)
         above, 100% of the aggregate Net Proceeds received by the Company from
         any equity contribution from a holder of the Company's Capital Stock,
         excluding any Net Proceeds from a Public Equity Offering to the extent
         used to redeem the Notes; and

               (d)  without duplication, the sum of:

                    (i)  the aggregate amount returned in cash on or with
               respect to an Investment (other than a Permitted Investment) in
               any Person made subsequent to the Issue Date whether through
               interest payments, principal payments, dividends or other
               distributions; and

                    (ii) the net cash proceeds received by the Company or any of
               its Restricted Subsidiaries from the disposition (other than to
               the Company or a Subsidiary of the Company), retirement or
               redemption of all or any portion of an Investment described in
               clause (3)(d)(i);

         provided, however, that, with respect to an Investment in any Person,
         --------  -------
         the sum of clauses (i) and (ii) above with respect to the Investment in
         such Per-
<PAGE>

                                      -18-

          son may not exceed the aggregate amount of all Investments made in
          such Person subsequent to the Issue Date; and

               (e)  $5.0 million.

          For purposes of determining under clause (3) above, the amount
expended for Restricted Payments, cash distributed shall be valued at the face
amount thereof and Property other than cash shall be valued at its fair market
value.

          The provisions of this covenant shall not prohibit

          (1)  the payment of any distribution within 60 days after the date of
     declaration thereof, if at such date of declaration such payment would
     comply with the provisions of this Statement of Resolution;

          (2)  the repurchase, redemption or other acquisition or retirement of
     any shares of Capital Stock of the Company by conversion into, or by or in
     exchange for, shares of Capital Stock of the Company (other than
     Disqualified Capital Stock), or out of the Net Proceeds of the
     substantially concurrent sale (other than to a Subsidiary of the Company)
     of other shares of Capital Stock of the Company (other than Disqualified
     Capital Stock);

          (3)  distributions to SW Acquisition, L.P. by the Company for the
     purpose of (a) enabling the partners of SW Acquisition, L.P. to pay their
     tax liabilities and (b) enabling SW Acquisition, L.P. to pay management,
     consulting and financial advisory fees and reimburse expenses in an amount
     in the case of this clause (b) not to exceed $2.0 million in the aggregate
     in any fiscal year;

          (4)  the repurchase, redemption or other acquisition or retirement of
     any shares of Disqualified Capital Stock out of the Net Proceeds of the
     substantially concurrent sale (other than to a Subsidiary of the Company)
     of other shares of Disqualified Capital Stock; provided, however, that the
                                                    --------  -------
     amounts of the redemption obligations of the Disqualified Capital Stock
     being issued shall not exceed the amounts of the redemption obligations of,
     and such Disqualified Capital Stock shall have redemption obligations no
     earlier than those required by, the Disqualified Capital Stock being
     refinanced;

          (5)  the repurchase, redemption, retirement or acquisition of Capital
     Stock of the Company from employees or directors of the Company upon such
     employees' or directors' death, retirement or termination of employment or
     otherwise in accordance with any employment agreement, employee or director
     stock option plan or agreement or employee or director equity subscription
     agreement, in an aggregate
<PAGE>

                                      -19-

     amount not to exceed $2.0 million in any calendar year, plus the aggregate
     cash proceeds received by the Company during such calendar year from any
     issuance of such Capital Stock to employees or directors of the Company,
     plus the portion of such $2.0 million which remains unused at the end of
     the prior calendar year, but in no event to exceed $3.0 million in any
     calendar year; provided, that the cancellation of Indebtedness owing to the
                    --------
     Company from employees or directors in connection with a repurchase of
     Capital Stock of the Company will not be deemed to constitute a Restricted
     Payment; and

          (6)   investments constituting Restricted Payments made as a result
     of the receipt of non-cash consideration from any Asset Sale.

          In calculating the aggregate amount of Restricted Payments made
subsequent to the Issue Date for purposes of clause (3) of the first paragraph
above, amounts expended pursuant to clauses (1), (2) and (5) of the immediately
preceding paragraph will be included in such calculation.

          (iii) Limitation on Transactions with Affiliates. The Company shall
                ------------------------------------------
not, and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or lease of assets,
Property or services) with or for the benefit of any Affiliate (each an
"Affiliate Transaction") or extend, renew, waive or otherwise amend or modify
 ---------------------
the terms of any Affiliate Transaction entered into prior to the Issue Date
unless

          (1)   such Affiliate Transaction is between or among the Company and
     one or more of its Wholly Owned Subsidiaries; or

          (2)   the terms of such Affiliate Transaction are at least as
     favorable as the terms which could be obtained by the Company or such
     Restricted Subsidiary, as the case may be, in a comparable transaction made
     on an arm's-length basis between unaffiliated parties.

          In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $2.0 million which is not permitted
under clause (1) above, the Company must obtain a board resolution of the Board
of Directors of the Company (and approved by at least a majority of the
disinterested directors) certifying that such Affiliate Transaction complies
with clause (2) above. In any Affiliate Transaction (or any series of related
Affiliate Transactions which are similar or part of a common plan) involving an
amount or having a fair market value in excess of $5.0 million which is not
permitted under clause (1) above, the Company must obtain a favorable written
opinion as to the fairness of such transaction or transactions, as the case may
be, from an Independent Financial Advisor.
<PAGE>

                                      -20-

          The foregoing provisions shall not apply to

          (1)   any Restricted Payment that is not prohibited by the provisions
     described under paragraph (k)(ii);

          (2)   fees and compensation paid to, indemnity provided on behalf of,
     and employee benefit arrangements for, officers, directors or employees of
     the Company or any Restricted Subsidiary of the Company, as determined in
     good faith by the Company's Board of Directors or senior management;

          (3)   any transactions with and any fees paid to Laurel Hill Capital
     Partners, LLC and its Affiliates and CIBC World Markets Corp. and its
     Affiliates relating to advisory, banking and investment banking services
     provided to the Company or any Restricted Subsidiary of the Company;

          (4)   distributions to SW Acquisition, L.P. by the Company for the
     purpose of (a) enabling the partners of SW Acquisition, L.P. to pay their
     tax liabilities and (b) enabling SW Acquisition, L.P. to pay management,
     consulting and financial advisory fees and reimburse expenses in an amount
     in the case of this clause (b) not to exceed $2.0 million in the aggregate
     in any fiscal year;

          (5)   loans or advances to employees of the Company or any Restricted
     Subsidiary in the ordinary course of business, but in any event not to
     exceed $2.0 million in the aggregate outstanding at any time;

          (6)   any employment agreement entered into by the Company or any of
     its Restricted Subsidiaries in the ordinary course of business approved in
     good faith by the Company's Board of Directors; or

          (7)   any agreement as in effect as of the Issue Date or any amendment
     thereto or any transaction contemplated thereby (including pursuant to any
     amendment thereto) in any replacement agreement thereto so long as any such
     amendment or replacement agreement is not more disadvantageous to the
     holders in any material respect than the original agreement as in effect on
     the Issue Date.

              (iv) Limitation on Preferred Stock of Restricted Subsidiaries. The
                   --------------------------------------------------------
Company shall not permit any of its Restricted Subsidiaries (other than any
Regulated Restricted Subsidiary) to issue any Preferred Stock (except Preferred
Stock issued to the Company or a Wholly Owned Subsidiary of the Company) or
permit any Person (other than the Company or a Wholly Owned Subsidiary of the
Company) to hold any such Preferred Stock unless such Restricted Subsidiary
would be entitled to incur or assume Indebtedness (other
<PAGE>

                                      -21-

than Permitted Indebtedness) in compliance with paragraph (k)(i) in the
aggregate principal amount equal to the aggregate liquidation value of the
Preferred Stock to be issued.

              (v)  Payments for Consent. The Company shall not, and shall not
                   --------------------
permit any of its Subsidiaries to, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
holder of Senior Preferred Stock for or as an inducement to any consent, waiver
or amendment of any of the terms or provisions of the Statement of Resolution or
the Senior Preferred Stock unless such consideration is offered to be paid or
agreed to be paid to all holders of Senior Preferred Stock that so consent,
waive or agree to amend in the time frame set forth in solicitation documents
relating to such consent, waiver or amendment.

              (vi) Reports. Whether or not required by the SEC, so long as any
                    -------
shares of Senior Preferred Stock are outstanding, the Company shall furnish to
the holders of Senior Preferred Stock, within 15 days of the time periods
specified in the SEC's rules and regulations:

          (1)  all quarterly and annual financial information that would be
     required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
     the Company were required to file such Forms, including a "Management's
     Discussion and Analysis of Financial Condition and Results of Operations"
     and, with respect to the annual information only, a report on the annual
     financial statements by the Company's certified independent accountants;
     and

          (2)  all current reports that would be required to be filed with the
     SEC on Form 8-K if the Company were required to file such reports.

          If the Company has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in a
management's discussion and analysis of financial condition and results of
operations, of the financial condition and results of operations of the Company
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Company.

          In addition, whether or not required by the SEC, the Company shall
file a copy of all of the information and reports referred to in clauses (1) and
(2) above with the SEC for public availability within 15 days of the time
periods specified in the SEC's rules and regulations (unless the SEC will not
accept such a filing) and make such information available to prospective
investors upon request.  The Company shall also furnish to holders of Senior
Preferred Stock and prospective investors upon request the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
<PAGE>

                                      -22-

          (l)  Transfer Agent.  The Bank of New York is the transfer agent (the
               --------------
"Transfer Agent") for the Senior Preferred Stock.
 --------------

          (m)  Form of Share Certificates.  The share certificates for the
               --------------------------
Senior Preferred Stock (the "Share Certificates") will initially be issued
                             ------------------
either in global form as 144A Global Shares or Regulation S Global Shares
(collectively, the "Global Shares"), substantially in the form of Exhibit A
                    -------------                                 ---------
hereto, or in registered form as definitive share certificates (the "Definitive
                                                                     ----------
Shares") substantially in the form of Exhibit A attached hereto.  Any Global
------                                ---------
Shares to be delivered pursuant to this Statement of Resolution shall bear the
legend set forth in Exhibit B attached hereto.  Such Global Shares shall
                    ---------
represent such of the outstanding shares of Senior Preferred Stock as shall be
specified therein and each shall provide that it shall represent the aggregate
amount of outstanding shares of Senior Preferred Stock from time to time
endorsed thereon and that the aggregate amount of outstanding shares of Senior
Preferred Stock represented thereby may from time to time be reduced or
increased, as appropriate.  Any endorsement of a Global Share to reflect the
amount of any increase or decrease in the amount of outstanding shares of Senior
Preferred Stock represented thereby shall be made by the Transfer Agent and the
Depository in accordance with instructions given by the holder thereof.  The
Depository Trust Company shall act as the Depository with respect to the Global
Shares, if issued, until a successor shall be appointed by the Company and the
Transfer Agent.  Upon written request, a holder of record of shares of Senior
Preferred Stock may receive from the Transfer Agent or the Depository Definitive
Shares as set forth in paragraph (r).

          (n)  Execution of Share Certificates.  The Share Certificates shall
               -------------------------------
be executed on behalf of the Company by the chairman of the Board of Directors,
the president, the chief financial officer or any vice president of the Company
and attested by its secretary or assistant secretary.  Such signatures may be
the manual or facsimile signatures of such persons.  Typographical and other
minor errors or defects in any such reproduction of any such signature shall not
affect the validity or enforceability of any Share Certificate that has been
duly countersigned and delivered by the Transfer Agent.

          In case the chairman of the Board of Directors, the president, the
chief financial officer or any vice president of the Company or its secretary or
assistant secretary who shall have signed any of the Share Certificates shall
cease to be such officer of the Company before the Share Certificate so signed
shall be countersigned and delivered by the Transfer Agent or disposed of by the
Company, such Share Certificate nevertheless may be countersigned and delivered
or disposed of as though the person who signed such Share Certificate had not
ceased to be the such officer of the Company; and any Share Certificate may be
signed on behalf of the Company by such persons as, at the actual date of the
execution of such Share Certificate, shall be the proper officers of the Company
although at the date of the execution and delivery of this Statement of
Resolution any such person was not such proper officer of the Company.
<PAGE>

                                      -23-

          (o)  Authentication and Delivery.  Subject to the immediately
               ---------------------------
following paragraph, Share Certificates shall be authenticated by manual or
facsimile signature and dated the date of authentication by the Transfer Agent
and shall not be valid for any purpose unless so authenticated and dated.  The
Share Certificates shall be numbered and shall be registered in the Share
Register.

          Upon the receipt by the Transfer Agent of a written order of the
Company, which order shall be signed by the chairman of the Board of Directors,
the president, the chief financial officer or any vice president of the Company
and attested by its secretary or assistant secretary, and shall specify the
amount of shares of Senior Preferred Stock to be authenticated, whether the
shares of Senior Preferred Stock are to be Global Shares or Definitive Shares,
the date of such shares of Senior Preferred Stock and such other information as
the Transfer Agent may reasonably request, without any further action by the
Company, the Transfer Agent is authorized, upon receipt from the Company at any
time and from time to time of the Share Certificates, duly executed as provided
in paragraph (n) hereof, to authenticate the Share Certificates and upon the
holder's request deliver them.  Such authentication shall be by a duly
authorized signatory of the Transfer Agent (although it shall not be necessary
for the same signatory to sign all Share Certificates).

          In case any authorized signatory of the Transfer Agent who shall have
authenticated any of the Share Certificates shall cease to be such authorized
signatory before the Share Certificate shall be disposed of by the Company or
the Transfer Agent, such Share Certificate nevertheless may be delivered or
disposed of as though the person who authenticated such Share Certificate had
not ceased to be such authorized signatory of the Transfer Agent; and any Share
Certificate may be authenticated on behalf of the Transfer Agent by such persons
as, at the actual time of authentication of such Share Certificates, shall be
the duly authorized signatories of the Transfer Agent, although at the time of
the execution and delivery of this Agreement any such person is not such an
authorized signatory.

          The Transfer Agent's authentication on all Share Certificates shall be
in substantially the form set forth in Exhibit A hereto.
                                       ---------

          (p)  Temporary Share Certificates.  Pending the preparation of
               ----------------------------
definitive Share Certificates, the Company may execute, and the Transfer Agent
shall authenticate and deliver, temporary Share Certificates, which are printed,
lithographed, typewritten or otherwise produced, substantially of the tenor of
the definitive Share Certificates in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Share Certificates may determine, as evidenced by their
execution of such Share Certificates.

          If temporary Share Certificates are issued, the Company will cause
definitive Share Certificates to be prepared without unreasonable delay.  After
the preparation of defini-
<PAGE>

                                      -24-

tive Share Certificates, the temporary Share Certificates shall be exchangeable
for definitive Share Certificates upon surrender of the temporary Share
Certificates at any office or agency maintained by the Company for that purpose
pursuant to paragraph (t) hereof. Such exchange shall be without charge to the
holder. Upon surrender for cancellation of any one or more temporary Share
Certificates, the Company shall execute, and the Transfer Agent shall
authenticate and deliver in exchange therefor, one or more definitive Share
Certificates representing in the aggregate a like number of shares of Senior
Preferred Stock. Until so exchanged, the holder of a temporary Share Certificate
shall in all respects be entitled to the same benefits under this Agreement as a
holder of a definitive Share Certificate.

          (q)  Registration.  The Company will keep, at the office or agency
               ------------
maintained by the Company for such purpose, a register or registers in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of, and registration of transfer and exchange of,
shares of Senior Preferred Stock as provided in this Article.  Each person
designated by the Company from time to time as a person authorized to register
the transfer and exchange of the shares of Senior Preferred Stock is hereinafter
called, individually and collectively, the "Registrar."  The Company hereby
                                            ---------
initially appoints the Transfer Agent as Registrar.  Upon written notice to the
Transfer Agent and any acting Registrar, the Company may appoint a successor
Registrar for such purposes.

          The Company will at all times designate one person (who may be the
Company and who need not be a Registrar) to act  as repository of a master list
of names and addresses of the holders of shares of Senior Preferred Stock (the
"Share Register").  The Transfer Agent will act as such repository unless and
 --------------
until some other person is, by written notice from the Company to the Transfer
Agent and the Registrar, designated by the Company to act as such.  The Company
shall cause each Registrar to furnish to such repository, on a current basis,
such information as to all registrations of transfer and exchanges effected by
such Registrar, as may be necessary to enable such repository to maintain the
Share Register on as current a basis as is practicable.

          (r)  Registration of Transfers or Exchanges.
               --------------------------------------

             (i)  Transfer or Exchange of Definitive Shares. When Definitive
                  -----------------------------------------
    Shares are presented to the Transfer Agent with a request from the holder:

                  (A)   to register the transfer of the Definitive Shares; or

                  (B)   to exchange such Definitive Shares for an equal number
          of Definitive Shares of other authorized denominations,

the Transfer Agent shall register the transfer or make the exchange as requested
if the requirements under this Statement of Resolution as set forth in this
paragraph (r) hereof for such
<PAGE>

                                      -25-

transactions are met; provided, however, that the Definitive Shares presented or
                      --------  -------
surrendered by a holder for registration of transfer or exchange:

     (x)  shall be duly endorsed or accompanied by a written instruction of
          transfer or exchange in form satisfactory to the Company and the
          Transfer Agent, duly executed by such holder or by his attorney, duly
          authorized in writing; and

     (y)  in the case of shares of Senior Preferred Stock the offer and sale of
          which have not been registered under the Securities Act and are
          presented for transfer or exchange prior to (X) the date which is two
          years (or such shorter period as may be prescribed by Rule 144(k) (or
          any successor provision thereto)) after the later of the date of
          original issuance of the shares of Senior Preferred Stock and the last
          date on which the Company or any affiliate of the Company was the
          owner of such shares of Senior Preferred Stock, or any  predecessor
          thereto, and (Y) such later date, if any, as may be required by any
          subsequent change in applicable law (the "Resale Restriction
                                                    ------------------
          Termination Date"), such shares of Senior Preferred Stock shall be
          ----------------
          accompanied by the following additional information and documents, as
          applicable:

          (1)  if such shares of Senior Preferred Stock are being delivered to
     the Transfer Agent by a holder for registration in the name of such holder,
     without transfer, a certification from such holder to that effect (in
     substantially the form of Exhibit C hereto); or
                               ---------

          (2)  if such shares of Senior Preferred Stock are being transferred to
     a qualified institutional buyer (as defined in Rule 144A under the
     Securities Act) (a "QIB") in accordance with Rule 144A under the Securities
                         ---
     Act, a certification from the transferor to that effect (in substantially
     the form of Exhibit C hereto); or
                 ---------

          (3)  if such shares of Senior Preferred Stock are being transferred to
     an institutional "accredited investor" within the meaning of subparagraphs
     (a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501 under the Securities Act (an
     "Institutional Accredited Investor"), delivery by the transferor of a
      ---------------------------------
     certification to that effect (in substantially the form of Exhibit C
                                                                ---------
     hereto), and delivery by the proposed transferee of a Transferee
     Certificate for Institutional Accredited Investors (in substantially the
     form of Exhibit D hereto); or
             ---------

          (4)  if such shares of Senior Preferred Stock are being transferred in
     reliance on Regulation S under the Securities Act, delivery by the
     transferor of a certification to that effect (in substantially the form of
     Exhibit C hereto), and a Certificate for Regulation S Transfers in the form
     ---------
     of Exhibit E hereto; or
        ---------

<PAGE>

                                      -26-

          (5)  if such shares of Senior Preferred Stock are being transferred in
     reliance on Rule 144 under the Securities Act, delivery by the transferor
     of (i) a certification from the transferor to that effect (in substantially
     the form of Exhibit C hereto), and (ii) an opinion of counsel reasonably
                 ---------
     satisfactory to the Company to the effect that such transfer is in
     compliance with the Securities Act; or

          (6)  if such shares of Senior Preferred Stock are being transferred in
     reliance on another exemption from the registration requirements of the
     Securities Act, a certification from the transferor to that effect (in
     substantially the form of Exhibit C hereto) and an opinion of counsel
                               ---------
     reasonably satisfactory to the Company to the effect that such transfer is
     in compliance with the Securities Act; provided that the Company may, based
                                            --------
     upon the views of its own counsel, instruct the Transfer Agent not to
     register such transfer in any case where the proposed transferee is not a
     QIB, Non-U.S. Person or Institutional Accredited Investor.

          (ii) Restrictions on Transfer of a Definitive Share for a Beneficial
               ---------------------------------------------------------------
     Interest in a Global Share.  A Definitive Share may not be transferred by a
     --------------------------
     holder for a beneficial interest in a Global Share except upon satisfaction
     of the requirements set forth below.  Upon receipt by the Transfer Agent of
     a Definitive Share, duly endorsed or accompanied by appropriate instruments
     of transfer, in form satisfactory to the Transfer Agent, together with:

               (A)   certification from such holder (in substantially the form
          of Exhibit C hereto) that such Definitive Share is being transferred
             ---------
          to (I) a QIB in accordance with Rule 144A under the Securities Act,
          (II) to an Institutional Accredited Investor or (III) in an offshore
          transaction in reliance on Regulation S and, with respect to (II) or
          (III), at the option of the Company or the Transfer Agent, an Opinion
          of Counsel reasonably acceptable to the Company to the effect that
          such transfer is in compliance with the Securities Act; and

               (B)   written instructions directing the Transfer Agent to make,
          or to direct the Depository to make, an endorsement on the applicable
          Global Share to reflect an increase in the aggregate amount of the
          shares of Senior Preferred Stock represented by the Global Share,

then the Transfer Agent shall cancel such Definitive Share and cause, or direct
the Depository to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Transfer Agent, the number of
Company Interests represented by the applicable Global Share to be increased
accordingly.  If no 144A Global Share or Regulation S Global Share is then
outstanding, the Company shall issue and the Transfer Agent shall upon written
instructions from the Company authenticate a new Global Share in the appropriate
amount.
<PAGE>

                                      -27-

          (iii)  Transfer or Exchange of Global Shares. The transfer or exchange
                 -------------------------------------
     of Global Shares or beneficial interests therein shall be effected through
     the Depository, in accordance with this paragraph (r), the Private
     Placement Legend, this Agreement (including the restrictions on transfer
     set forth herein) and the procedures of the Depository therefor. Upon
     receipt by the Registrar or Co-Registrar of written instructions, or such
     other instruction as is customary for the Depository, from the Depository
     or its nominee, requesting the registration of transfer of an interest in a
     144A Global Share, a Regulation S Global Share, as the case may be, to
     another type of Global Share, together with the applicable Global Shares
     (or, if the applicable type of Global Share required to represent the
     interest as requested to be obtained is not then outstanding, only the
     Global Share representing the interest being transferred), the Registrar or
     Co-Registrar shall reflect on its books and records (and the applicable
     Global Share) the applicable increase and decrease of the principal amount
     of shares of Senior Preferred Stock represented by such types of Global
     Shares, giving effect to such transfer. If the applicable type of Global
     Share required to represent the interest as requested to be obtained is not
     outstanding at the time of such request, the Company shall issue and the
     Transfer Agent shall, upon written instructions from the Company in
     accordance with paragraph (r), authenticate a new Global Share of such type
     in principal amount equal to the principal amount of the interest requested
     to be transferred.

          (iv)   Transfer or Exchange of a Beneficial Interest in a Global Share
                 ---------------------------------------------------------------
     for a Definitive Share.
     ----------------------

          (1)    Any person having a beneficial interest in a Global Share may
   transfer or exchange such beneficial interest for a Definitive Share;
   provided, however, that prior to the Registration, a transferee that is a QIB
   --------  -------
   or Institutional Accredited Investor may not exchange a beneficial interest
   in a Global Share for a Definitive Share until receipt by the Transfer Agent
   of written instructions or such other form of instructions as is customary
   for the Depository from the Depository or its nominee on behalf of any person
   having a beneficial interest in a Global Share, including a written order
   containing registration instructions and, in the case of any such transfer or
   exchange of a beneficial interest in shares of Senior Preferred Stock the
   offer and sale of which have not been registered under the Securities Act,
   the following additional information and documents:

               (a)  if such beneficial interest is being transferred to the
          person designated by the Depository as being the beneficial owner, a
          certification from such person to that effect (in substantially the
          form of Exhibit C hereto); or
                  ---------
<PAGE>

                                      -28-

               (b)  if such beneficial interest is being transferred in
          reliance on Regulation S under the Securities Act, delivery by the
          transferor of (i) a certification to that effect (in substantially the
          form of Exhibit C hereto), and (ii) a Certificate for Regulation S
                  ---------
          Transfers in the form of Exhibit E hereto; or
                                   ---------

               (c)  if such beneficial interest is being transferred in
          reliance on Rule 144 under the Securities Act, delivery by the
          transferor of (i) a certification to that effect (in substantially the
          form of Exhibit C hereto) and (ii) an opinion of counsel reasonably
                  ---------
          satisfactory to the Company to the effect that such transfer is in
          compliance with the Securities Act; or

               (d)  if such beneficial interest is being transferred in
          reliance on another exemption from the registration requirements of
          the Securities Act, a certification from the transferor to that effect
          (in substantially the form of Exhibit C hereto) and an opinion of
                                        ---------
          counsel reasonably satisfactory to the Company to the effect that such
          transfer is in compliance with the Securities Act; provided that the
                                                             --------
          Company may instruct the Transfer Agent not to register such transfer
          in any case where the proposed transferee is not a QIB, Non-U.S.
          Person or Institutional Accredited Investor.

          then the Transfer Agent will cause, in accordance with the standing
          instructions and procedures existing between the Depository and the
          Transfer Agent, the aggregate amount of the Global Share to be reduced
          and, following such reduction, the Company will execute and, upon
          receipt of an authentication order in the form of an officers'
          certificate (a certificate signed by two officers of the Company, one
          of whom must be the principal executive officer, principal financial
          officer or principal accounting officer) (an "Officers' Certificate"),
                                                        ---------------------
          the Transfer Agent will authenticate and deliver to the transferee a
          Definitive Share.  The Transfer Agent shall not be deemed to have
          knowledge of any registration under the Securities Act unless it
          receives an Officers' Certificate specifying such registration.

          (2)  Definitive Shares issued in exchange for a beneficial interest in
   a Global Share pursuant to this paragraph (r)(iv) shall be registered in such
   names and in such authorized denominations as the Depository, shall instruct
   the Transfer Agent in writing. The Transfer Agent shall deliver such
   Definitive Shares to the persons in whose names such shares of Senior
   Preferred Stock are so registered and adjust the Global Share pursuant to
   paragraph (r)(vii).

          (v)  Restrictions on Transfer or Exchange of Global Shares.
               -----------------------------------------------------
   Notwithstanding any other provisions of this Agreement (other than the
   provisions set forth in paragraph (r)(vi), a Global Share may not be
   transferred or exchanged as a whole ex-
<PAGE>

                                      -29-

   cept by the Depository to a nominee of the Depository or by a nominee of the
   Depository to the Depository or another nominee of the Depository or by the
   Depository or any such nominee to a successor Depository or a nominee of such
   successor Depository.

          (vi)  Authentication of Definitive Shares in Absence of Depository. If
     at any time:

          (1)   the Depository for the Global Shares notifies the Company and
   the Transfer Agent that the Depository is unwilling or unable to continue as
   Depository for the Global Shares and a successor Depository for the Global
   Shares is not appointed by the Company within 90 days after delivery of such
   notice; or

          (2)   The Company, at its sole discretion, notifies the Transfer Agent
   in writing that it elects to cause the issuance of Definitive Shares for all
   Global Shares under this Agreement,

then the Company will execute, and the Transfer Agent will, upon receipt of an
Officers' Certificate requesting the authentication and delivery of Definitive
Shares, authenticate and deliver Definitive Shares, in an aggregate number equal
to the aggregate number of warrants represented by the Global Share, in exchange
for such Global Share.

          (vii) Private Placement Legend.  Upon the registration of transfer,
                ------------------------
     exchange or replacement of Share Certificates not bearing the legend set
     forth in the first paragraph of Exhibit A attached hereto (the "Private
                                     ---------                       -------
     Placement Legend"), the Transfer Agent shall deliver Share Certificates
     ----------------
     that do not  bear the Private Placement Legend.  Upon the registration of
     transfer, exchange or replacement of Share Certificates bearing the Private
     Placement Legend, the Transfer Agent shall deliver Share Certificates that
     bear the Private Placement Legend unless, and the Transfer Agent is hereby
     authorized to deliver Share Certificates without the Private Placement
     Legend if, (i) the requested transfer is not prior to the date which is two
     years (or such shorter period as may be prescribed by Rule 144(k) (or any
     successor provision thereto) under the Securities Act or any successor
     provision thereunder) after the later of the Issue Date or the last day on
     which the Company or any of its Affiliates was the owner of the Senior
     Preferred Stock or any predecessor security, (ii) there is delivered to the
     Transfer Agent an opinion of counsel reasonably satisfactory to the Company
     and the Transfer Agent to the effect that neither such legend nor the
     related restrictions on transfer are required in order to maintain
     compliance with the provisions of the Securities Act or (iii) the shares of
     Senior Preferred Stock to be transferred or exchanged represented by such
     Share Certificates are being transferred or exchanged pursuant to an
     effective registration statement under the Securities Act.
<PAGE>

                                      -30-

          (viii) Cancellation or Adjustment of a Global Share.  At such time as
                 --------------------------------------------
     all beneficial interests in a Global Share have either been exchanged for
     Definitive Shares, redeemed, repurchased or canceled, such Global Share
     shall be returned to the Company or, upon written order to the Transfer
     Agent in the form of an Officers' Certificate from the Company, retained
     and canceled by the Transfer Agent.  At any time prior to such
     cancellation, if any beneficial interest in a Global Share is exchanged for
     Definitive Shares, redeemed, repurchased or canceled, the number of shares
     of Senior Preferred Stock represented by such Global Share shall be reduced
     and an endorsement shall be made on such Global Share by the Transfer Agent
     to reflect such reduction.

          (ix)   Obligations with Respect to Transfers or Exchanges of
                 -----------------------------------------------------
     Definitive Shares.
     -----------------

          (1)    To permit registrations of transfers or exchanges, the Company
   shall execute, at the Transfer Agent's request, and the Transfer Agent shall
   authenticate Definitive Shares and Global Shares.

          (2)    All Definitive Shares and Global Shares issued upon any
   registration, transfer or exchange of Definitive Shares or Global Shares
   shall be the valid obligations of the Company, entitled to the same benefits
   under this Statement of Resolution as the Definitive Shares or Global Shares
   surrendered upon the registration of transfer or exchange.

          (3)    Prior to due presentment for registration of transfer of any
   Senior Preferred Stock, the Transfer Agent and the Company may deem and treat
   the person in whose name any Senior Preferred Stock is registered as the
   absolute owner of such Senior Preferred Stock, and neither the Transfer Agent
   nor the Company shall be affected by notice to the contrary.

          (s)    Lost, Stolen, Destroyed, Defaced or Mutilated Share
                 ---------------------------------------------------
Certificates.  Upon receipt by the Company and the Transfer Agent (or any agent
------------
of the Company or the Transfer Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Share Certificate and of an indemnity bond satisfactory to them and, in
the case of mutilation or defacement, upon surrender thereof to the Transfer
Agent for cancellation, then, in the absence of notice to the Company or the
Transfer Agent that such Share Certificate has been acquired by a bona fide
                                                                  ---- ----
purchaser or holder in due course, the Company shall execute, and an authorized
signatory of the Transfer Agent shall manually authenticate and deliver, in
exchange for or in lieu of the lost, stolen, destroyed, defaced or mutilated
Share Certificate, a new Share Certificate representing a like number of shares
of Senior Preferred Stock, bearing a number or other distinguishing symbol not
contemporaneously outstanding.  The Company or the Transfer Agent may require an
indemnity
<PAGE>

                                      -31-

bond that is sufficient in the judgment of the Company and the Transfer Agent to
protect the Company and the Transfer Agent from any loss which any of them may
suffer if a Share Certificate is replaced. Upon the issuance of any new Share
Certificate under this paragraph (s) in a name other than the prior registered
holder of the lost, stolen, destroyed, defaced or mutilated Share Certificate,
the Company may require the payment from the holder of such Share Certificate of
a sum sufficient to cover any tax, stamp tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Transfer Agent and the Registrar) in connection therewith.
Every substitute Share Certificate executed and delivered pursuant to this
paragraph (s) in lieu of any lost, stolen or destroyed Share Certificate shall
constitute an additional contractual obligation of the Company, whether or not
the lost, stolen or destroyed Share Certificate shall be at any time enforceable
by anyone, and shall be entitled to the benefits of (but shall be subject to all
the limitations of rights set forth in) this Agreement equally and
proportionately with any and all other Share Certificates duly executed and
delivered hereunder. The provisions of this paragraph (s) are exclusive with
respect to the replacement of lost, stolen, destroyed, defaced or mutilated
Share Certificates and shall preclude (to the extent lawful) any and all other
rights or remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Share Certificates.

          The Transfer Agent is hereby authorized to authenticate in accordance
with the provisions of this Agreement, and deliver the new Share Certificates
required pursuant to the provisions of this paragraph (s).

          (t)  Offices.  So long as any of the shares of Senior Preferred Stock
               -------
remain outstanding, the Company will designate and maintain in the Borough of
Manhattan, The City of New York:  (a) an office or agency where the Share
Certificates may be presented for registration of transfer and for exchange
(including the exchange of temporary Share Certificates for definitive Share
Certificates pursuant to paragraph (p), and (b) an office or agency where
notices and demands to or upon the Company in respect of the shares of Senior
Preferred Stock or of this Agreement may be served.  The Company may from time
to time change or rescind such designation, as it may deem desirable or
expedient; provided, however, that an office or agency shall at all times be
           --------  -------
maintained in the Borough of Manhattan, The City of New York, as provided in the
first sentence of this paragraph (t).  In addition to such office or offices or
agency or agencies, the Company may from time to time designate and maintain one
or more additional offices or agencies within or outside The City of New York,
where Share Certificates may be presented for registration of transfer or for
exchange, and the Company may from time to time change or rescind such
designation, as it may deem desirable or expedient.  The Company will give to
the Transfer Agent written notice of the location of any such office or agency
and of any change of location thereof.  The Company hereby designates the
Transfer Agent at its corporate trust office identified at 101 Barclay Street,
Floor 21 West, New York, New York 10286, Attention:  Corporate Trust Trustee
Administration (the "Trans-
                     ------
<PAGE>

                                      -32-

fer Agent Office"), as the initial agency maintained for each such purpose. In
----------------
case the Company shall fail to maintain any such office or agency or shall fail
to give such notice of the location or of any change in the location thereof,
presentations and demands may be made and notice may be served at the Transfer
Agent Office and the Company appoints the Transfer Agent as its agent to receive
all such presentations, surrenders, notices and demands.

          (u)  Book-Entry Provisions for Global Shares.
               ---------------------------------------

               (i)   The Global Shares, if issued, initially shall (i) be
     registered in the name of the Depository or the nominee of such Depository,
     (ii) be delivered to the Transfer Agent as custodian for such Depository
     and (iii) bear legends as set forth in Exhibit B. Members of, or
                                            ---------
     participants in, the Depository ("Participants") shall have no rights under
                                       ------------
     this Statement of Resolution with respect to any Global Share held on their
     behalf by the Depository, or the Transfer Agent as its custodian, or under
     the Global Share, and the Depository may be treated by the Company, the
     Transfer Agent and any agent of the Company or the Transfer Agent as the
     absolute owner of the Global Share for all purposes whatsoever.
     Notwithstanding the foregoing, nothing herein shall prevent the Company,
     the Transfer Agent or any agent of the Company or the Transfer Agent from
     giving effect to any written certification, proxy or other authorization
     furnished by the Depository or impair, as between the Depository and
     Participants, the operation of customary practices governing the exercise
     of the rights of a beneficial owner in a Global Share.

               (ii)  Transfers of Global Shares shall be limited to transfers in
     whole, but not in part, to the Depository, its successors or their
     respective nominees. Interests of beneficial owners in the Global Shares
     may be transferred or exchanged for Definitive Shares in accordance with
     the rules and procedures of the Depository and the provisions of paragraph
     (r); provided, however, that Definitive Shares shall be transferred to all
          --------  -------
     beneficial owners in exchange for their beneficial interests in Global
     Shares if (i) the Depository notifies the Company that it is unwilling or
     unable to continue as Depository for any Global Share and a successor
     Depository is not appointed by the Company within 90 days of such notice or
     (ii) the Company, at its option, notifies the Transfer Agent in writing
     that it elects to cause the issuance of the shares of Senior Preferred
     Stock as Definitive Shares.

               (iii) In connection with any transfer or exchange of a portion of
     the beneficial interest in a Global Share to beneficial owners pursuant to
     paragraph (b), the Registrar shall (if one or more Definitive Shares are to
     be issued) reflect on its books and records the date and a decrease in the
     principal amount of such Global Share in an amount equal to the principal
     amount of the beneficial interest in the Global Share to
<PAGE>

                                      -33-

     be transferred, and the Company shall execute, and the Transfer Agent shall
     authenticate and deliver, one or more Definitive Shares of like tenor and
     amount.

               (iv) In connection with the transfer of Global Shares as an
     entirety to beneficial owners pursuant to paragraph (u)(ii), the Global
     Shares shall be deemed to be surrendered to the Transfer Agent for
     cancellation, and the Company shall execute, and the Transfer Agent shall
     upon written instructions from the Company authenticate and deliver, to
     each beneficial owner identified by the Depository in exchange for its
     beneficial interest in the Global Shares, an equal aggregate principal
     amount of Definitive Shares of authorized denominations.

               (v)  Any Definitive Shares constituting a "restricted security"
     (within the meaning of Rule 144(a)(3) under the Securities Act) delivered
     in exchange for an interest in a Global Share pursuant to paragraph
     (u)(iii) shall, except as otherwise provided by paragraph (r), bear the
     Private Placement Legend.

               (vi) The Holder of any Global Share may grant proxies and
     otherwise authorize any Person, including Participants and Persons that may
     hold interests through Participants, to take any action which a Holder is
     entitled to take under this Statement of Resolution or the shares of Senior
     Preferred Stock and the Transfer Agent is entitled to rely upon any
     electronic instructions from beneficial owners to the Holder of any Global
     Share.

               (v)  No Personal Liability of Officers, Directors and
                    ------------------------------------------------
Stockholders. No officer, employee, director or stockholder of the Company or
------------
any Subsidiary of the Company shall have any liability for any obligations of
the Company or any Subsidiary of the Company under the Senior Preferred Stock or
the Articles of Incorporation, or for any claim based on or in respect of, or by
reason of, such obligations or the creation or any such obligation. Each holder
of the Senior Preferred Stock by accepting a share of Senior Preferred Stock
waives and releases all such liability, and such waiver and release is part of
the consideration for the issuance of the Senior Preferred Stock.

               (w)  Definitions.  As used in this Statement of Resolution, the
                    -----------
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:

               "144A Global Share" means a permanent global security in
                -----------------
registered form representing the aggregate principal amount of shares of Senior
Preferred Stock sold in reliance on Rule 144A.
<PAGE>

                                      -34-

          "Acquired Indebtedness" means Indebtedness of a Person (including an
           ---------------------
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or is merged into or consolidated with any other Person or which is
assumed in connection with the acquisition of assets from such Person and, in
each case, whether or not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
or such merger, consolidation or acquisition.

          "Additional Dividends" has the meaning set forth in the Registration
           --------------------
Rights Agreement.

          "Affiliate" means, with respect to any specific Person, any other
           ---------
Person that directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. For
the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by," and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that, for purposes of the covenant described
                        --------
under paragraph (k)(iii) beneficial ownership of at least 10% of the voting
securities of a Person, either directly or indirectly, will be deemed to be
control.

          "Applicable Premium" means, with respect to any Senior Preferred Stock
           ------------------
on its redemption date, the greater of

          (1)  10% of the liquidation preference of such Senior Preferred Stock
               and

          (2)  the excess of

               (a)  the present value at such redemption date of

                    (i)  the redemption price of such Senior Preferred Stock at
               April 1, 2005 (such redemption price being set forth in paragraph
               (e)(i)) plus

                    (ii) all required dividend payments on the Senior Preferred
               Stock (whether payable in cash or in-kind) through April 1, 2005
               computed using a discount rate equal to the Treasury Rate plus 50
               basis points over

               (b)  the liquidation preference of such Senior Preferred Stock if
          greater.
<PAGE>

                                      -35-

          "Articles of Incorporation" means the Amended and Restated Articles of
           -------------------------
Incorporation of the Company.

          "Asset Acquisition" means
           -----------------

          (1)  an Investment by the Company or any Restricted Subsidiary of the
     Company in any other Person pursuant to which such Person becomes a
     Restricted Subsidiary of the Company or is merged with or into the Company
     or any Restricted Subsidiary of the Company; or

          (2)  the acquisition by the Company or any Restricted Subsidiary of
     the Company of the assets of any Person (other than a Restricted Subsidiary
     of the Company) which constitute all or substantially all of the assets of
     such Person or comprise any division or line of business of such Person or
     any other properties or assets of such Person other than in the ordinary
     course of business.

          "Asset Sale" means any direct or indirect sale, issuance, conveyance,
           ----------
assignment, transfer, lease or other disposition (including any sale and lease-
back transaction), other than to the Company or any of its Wholly Owned
Subsidiaries, in any single transaction or series of related transactions of

          (1)  any Capital Stock of or other equity interest in any Restricted
     Subsidiary of the Company; or

          (2)  any other property or assets of the Company or of any Restricted
     Subsidiary thereof;

provided that Asset Sales do not include
--------

          (1)  a transaction or series of related transactions that involves
     assets having a fair market value or for which the Company or its
     Restricted Subsidiaries receive aggregate consideration of less than $1.0
     million;

          (2)  sales of inventory and vehicles in the ordinary course of
     business and consistent with past practices;

          (3)  the sale, lease, conveyance, disposition or other transfer of all
     or substantially all of the assets of the Company as permitted under
     paragraph (f)(iii);

          (4)  a disposition of obsolete, worn-out, damaged or otherwise
     unsuitable or unnecessary equipment or other obsolete assets;
<PAGE>

                                      -36-

          (5)  dispositions with respect to sales of excess energy, capacity and
     rights of use in the Company's distribution network in the ordinary course
     of the electricity transmission and distribution business and the
     electricity generation business;

          (6)  a sale-leaseback of assets within one year of the acquisition of
     such assets; an d

          (7)  a transaction or series of transactions that results in a Change
     of Control.

          "Attributable Indebtedness" in respect of a Sale and Lease-Back
           -------------------------
Transaction means, as at the time of determination, the present value
(discounted at the rate of interest implicit in such transaction, determined in
accordance with GAAP) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale and Lease-Back
Transaction (including any period for which such lease has been extended).

          "Board of Directors" means, as to any Person, the board of directors
           ------------------
of such Person (or, if such Person is a partnership, the board of directors or
other governing body of the general partner (or, if there is more than one
general partner of such person, the general partner or general partners which
may take the applicable action pursuant to the partnership agreement of such
Person) of such Person or, if such Person is a limited liability company, the
board of managers of such company) or similar governing body or any duly
authorized committee thereof.

          "Business Day" means a day that is not a Legal Holiday. A "Legal
           ------------                                              -----
Holiday" is a Saturday, a Sunday or other day on which (i) commercial banks in
-------
The City of New York are authorized or required by law to close or (ii) the New
York Stock Exchange is not open for trading.

          "Capital Stock" means, with respect to any Person, any and all shares,
           -------------
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, partnership or limited liability company
interests or any other participation, right or other interest in the nature of
an equity interest in such Person including, without limitation, Common Stock
and Preferred Stock of such Person, or any option, warrant or other security
convertible into any of the foregoing.

          "Capitalized Lease Obligations" means with respect to any Person,
           -----------------------------
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness will be the capitalized amount of such obligations
determined in accordance with GAAP.
<PAGE>

                                      -37-

          "Cash Equivalents" means
           ----------------

          (1)  marketable direct obligations issued by, or unconditionally
     guaranteed by, the United States Government or issued by any agency or
     instrumentality thereof and backed by the full faith and credit of the
     United States, in each case maturing within one year from the date of
     acquisition thereof;

          (2)  marketable direct obligations issued by any state of the United
     States of America or any political subdivision of any such state or any
     public instrumentality thereof maturing within one year from the date of
     acquisition thereof and, at the time of acquisition, having one of the two
     highest ratings obtainable from either Standard & Poor's Corporation

     ("S&P") or Moody's Investors Service, Inc. ("Moody's");
       ---                                        -------

          (3)  commercial paper maturing no more than one year from the date of
     creation thereof and, at the time of acquisition, having a rating of at
     least A-1 from S&P or at least P-1 from Moody's;

          (4)  certificates of deposit or bankers' acceptances maturing within
     one year from the date of acquisition thereof issued by any bank organized
     under the laws of the United States of America or any state thereof or the
     District of Columbia or any U.S. branch of a foreign bank having at the
     date of acquisition thereof combined capital and surplus of not less than
     $500.0 million;

          (5)  repurchase obligations with a term of not more than seven days
     for underlying securities of the types described in clause (1) above
     entered into with any bank meeting the qualifications specified in clause
     (4) above; and

          (6)  investments in money market funds which invest substantially all
     their assets in securities of the types described in clauses (1) through
     (5) above.

          A "Change of Control" of the Company will be deemed to have occurred
             -----------------
at such time as

          (1)  any Person or group of related Persons for purposes of Section
     13(d) of the Exchange Act (a "Group"), other than a Permitted Holder,
                                   -----
     becomes the beneficial owner (as defined under Rule 13d-3 or any successor
     rule or regulation promulgated under the Exchange Act, except that a Person
     will be deemed to have "beneficial ownership" of all securities that such
     Person has the right to acquire, whether such right is exercisable
     immediately or only after the passage of time) of more than 50% of the
     total voting power of the Company's Capital Stock;
<PAGE>

                                      -38-

          (2)  there is consummated any sale, lease, exchange or other transfer
     (in one transaction or a series of related transactions) of all or
     substantially all of the assets of the Company or TNMP to any Person or
     Group, together with any Affiliates thereof (whether or not otherwise in
     compliance with the provisions of this Statement of Resolution);

          (3)  there is consummated any consolidation or merger of the Company
     or TNMP in which the Company or TNMP, as the case may be, is not the
     continuing or surviving Person or pursuant to which the Common Stock of the
     Company or TNMP, as the case may be, would be converted into cash,
     securities or other property, other than a merger or consolidation of the
     Company in which the holders of the Capital Stock of the Company
     outstanding immediately prior to the consolidation or merger hold, directly
     or indirectly, at least a majority of the Capital Stock of the surviving
     corporation immediately after such consolidation or merger;

          (4)  during any period of two consecutive years, individuals who at
     the beginning of such period constituted the Board of Directors of the
     Company or TNMP (together with any new directors whose election by such
     Board of Directors or whose nomination for election by the shareholders of
     the Company or TNMP, as the case may be, has been approved by 66 2/3% of
     the directors then still in office who either were directors at the
     beginning of such period or whose election or recommendation for election
     was previously so approved) cease for any reason to constitute a majority
     of the Board of Directors of the Company or TNMP, as the case may be, then
     in office;

          (5)  the approval by the holders of Capital Stock of the Company or
     TNMP of any plan or proposal for the liquidation or dissolution of the
     Company or TNMP, as the case may be (whether or not otherwise in compliance
     with the provisions of the Indenture); or

          (6)  any order, judgment or decree shall be entered against the
     Company or TNMP decreeing the dissolution or split-up of the Company or
     TNMP, as the case may be; provided that any sale, assignment, conveyance,
                               --------
     transfer or other disposition of TNMP's assets to another Restricted
     Subsidiary in connection with the Company's compliance with Texas Senate
     Bill 7 shall not be deemed to be a Change of Control hereunder.

          "Change of Control Date" shall have the meaning provided in paragraph
           ----------------------
(g)(i).

          "Change of Control Offer" shall have the meaning provided in paragraph
           -----------------------
(g)(i).
<PAGE>

                                      -39-

          "Change of Control Payment Date" shall have the meanings provided in
           ------------------------------
paragraph (g)(ii).

          "Common Stock" of any Person means all Capital Stock of such Person
           ------------
that is generally entitled to

          (1)  vote in the election of directors of such Person; or

          (2)  if such Person is not a corporation, vote or otherwise
     participate in the selection of the governing body, partners, managers or
     others that will control the management and policies of such Person.

          "Company" shall have the meanings provided in the first paragraph of
           -------
this Statement of Resolution.

          "Consolidated Fixed Charge Coverage Ratio" means, with respect to any
           ----------------------------------------
Person, the ratio of EBITDA of such Person during the four full fiscal quarters
(the "Four Quarter Period") ending on or prior to the date of the transaction
      -------------------
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for
            ----------------
the Four Quarter Period. In addition to and without limitation of the foregoing,
for purposes of this definition, "EBITDA" and "Consolidated Fixed Charges" will
be calculated after giving effect on a pro forma basis for the period of such
                                       --- -----
calculation to

          (1)  the incurrence or repayment of any Indebtedness of such Person or
     any of its Restricted Subsidiaries or the issuance or redemption or other
     repayment of Preferred Stock of any such Restricted Subsidiary (and the
     application of the proceeds thereof) giving rise to the need to make such
     calculation and any incurrence or repayment of other Indebtedness and, in
     the case of any Restricted Subsidiary, the issuance or redemption or other
     repayment of Preferred Stock (and the application of the proceeds thereof),
     other than the incurrence or repayment of Indebtedness in the ordinary
     course of business for working capital purposes pursuant to working capital
     facilities, occurring during the Four Quarter Period or at any time
     subsequent to the last day of the Four Quarter Period and on or prior to
     the Transaction Date, as if such incurrence or repayment or issuance or
     redemption or other repayment, as the case may be (and the application of
     the proceeds thereof), occurred on the first day of the Four Quarter
     Period; and

          (2)  any Asset Sales or Asset Acquisitions (including, without
     limitation, any Asset Acquisition giving rise to the need to make such
     calculation as a result of such Person or one of its Restricted
     Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
     result of the Asset Acquisition) incurring, assuming or
<PAGE>

                                      -40-

     otherwise being liable for Acquired Indebtedness and also including any
     EBITDA (provided that such EBITDA will be included only to the extent that
             --------
     Consolidated Net Income would be includable pursuant to the definition of
     "Consolidated Net Income") (including any pro forma expense and cost
                                               --- -----
     reductions calculated on a basis consistent with Regulation S-X of the
     Exchange Act) attributable to the assets which are the subject of the Asset
     Acquisition or Asset Sale during the Four Quarter Period) occurring during
     the Four Quarter Period or at any time subsequent to the last day of the
     Four Quarter Period and on or prior to the Transaction Date, as if such
     Asset Sale or Asset Acquisition (including the incurrence, assumption or
     liability for any such Acquired Indebtedness) occurred on the first day of
     the Four Quarter Period.

          If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
will give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio,"

          (1)  interest on outstanding Indebtedness determined on a fluctuating
     basis as of the Transaction Date and which will continue to be so
     determined thereafter will be deemed to have accrued at a fixed rate per
     annum equal to the rate of interest on such Indebtedness in effect on the
     Transaction Date;

          (2)  if interest on any Indebtedness actually incurred on the
     Transaction Date may optionally be determined at an interest rate based
     upon a factor of a prime or similar rate, a eurocurrency interbank offered
     rate, or other rates, then the interest rate in effect on the Transaction
     Date will be deemed to have been in effect during the Four Quarter Period;
     and

          (3)  notwithstanding clause (1) above, interest on Indebtedness
     determined on a fluctuating basis, to the extent such interest is covered
     by one or more agreements in respect of Hedging Obligations, will be deemed
     to accrue at the rate per annum resulting after giving effect to the
     operation of such agreements.

          "Consolidated Fixed Charges" means, with respect to any Person, for
           --------------------------
any period, the sum, without duplication, of

          (1)  Consolidated Interest Expense, plus

          (2)  the product of
<PAGE>

                                      -41-

               (a) the amount of all dividend payments (whether or not in cash)
          on any series of Preferred Stock of such Person and its Restricted
          Subsidiaries (other than dividends paid in Capital Stock (other than
          Disqualified Capital Stock)) paid, accrued or scheduled to be paid or
          accrued during such period times

               (b) a fraction, the numerator of which is one and the denominator
          of which is one minus the then current effective consolidated federal,
          state and local tax rate of such Person, expressed as a decimal.

          "Consolidated Interest Expense" means, with respect to any Person, for
           -----------------------------
any period, the aggregate amount of interest expense which, in conformity with
GAAP, would be set forth opposite the caption "interest expense" or any like
caption on an income statement for such Person and its Restricted Subsidiaries
on a consolidated basis including, but not limited to,

          (1)  imputed interest included in Capitalized Lease Obligations and
     Attributable Indebtedness;

          (2)  all commissions, discounts and other fees and charges owed with
     respect to letters of credit and bankers' acceptance financing;

          (3)  the net payment obligations associated with Hedging Obligations;

          (4)  amortization of financing fees and expenses and the write-off of
     deferred financing costs;

          (5)  the interest portion of any deferred payment obligation;

          (6)  amortization of discount or premium, if any;

          (7)  all non-cash interest expense (other than interest amortized to
     cost of sales);

          (8)  all capitalized interest for such period; and

          (9)  all interest incurred or paid under any guarantee of Indebtedness
     (including a guarantee of principal, interest or any combination thereof)
     of any Person.

          "Consolidated Leverage Ratio" means, with respect to any Person, the
           ---------------------------
ratio of

          (1)  the sum of the aggregate outstanding amount of Indebtedness of
     such Person and its Restricted Subsidiaries and Preferred Stock of any such
     Restricted Sub-
<PAGE>

                                      -42-

     sidiary issued in accordance with paragraph (k)(iv) as of the date of
     calculation (the "Transaction Date") on a consolidated basis determined in
     accordance with GAAP to

          (2)  such Person's EBITDA for the four full fiscal quarters (the "Four
     Quarter Period") ending on or prior to the date of determination for which
     financial statements are available.

For purposes of this definition, clauses (1) and (2) above will be calculated
after giving effect on a pro forma basis to
                         --- -----

          (1)  any incurrence or repayment of Indebtedness and, in the case of
     any Restricted Subsidiary, the issuance or redemption or other repayment of
     Preferred Stock (and the application of the proceeds thereof), other than
     the incurrence or repayment of Indebtedness in the ordinary course of
     business for working capital purposes pursuant to working capital
     facilities, occurring during the Four Quarter Period or at any time
     subsequent to the last day of the Four Quarter Period and on or prior to
     the Transaction Date, as if such incurrence or repayment or issuance or
     redemption or other repayment, as the case may be (and the application of
     the proceeds thereof), occurred on the first day of the Four Quarter
     Period; and

          (2)  any Asset Sales or Asset Acquisitions (including any EBITDA
     (provided that such EBITDA will be included only to the extent that
      --------
     Consolidated Income would be includable pursuant to the definition of
     "Consolidated Net Income") (including any pro forma expense and cost
                                               --- -----
     reductions calculated on a basis consistent with Regulation S-X of the
     Exchange Act) attributable to the assets which are the subject of the Asset
     Acquisition or Asset Sale during the Four Quarter Period) occurring during
     the Four Quarter Period or at any time subsequent to the last day of the
     Four Quarter Period and on or prior to the Transaction Date, as if such
     Asset Sale or Asset Acquisition (including the incurrence, assumption or
     liability for any Acquired Indebtedness) occurred on the first day of the
     Four Quarter Period.

          If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
will give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary or such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness.

          "Consolidated Net Income" means, with respect to any Person, for any
           -----------------------
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that
           --------  -------
<PAGE>

                                      -43-

          (1)  the portion of Net Income of any Person, other than a Restricted
     Subsidiary of the referent Person, will be included only to the extent of
     the amount of dividends or distributions paid to the referent Person or a
     Restricted Subsidiary of such referent Person;

          (2)  the Net Income of any Restricted Subsidiary of the Person in
     question that is subject to any restriction or limitation on the payment of
     dividends or the making of other distributions will be excluded to the
     extent of, and for only the period of time that, such restriction or
     limitation actually prohibits the payment of such dividends or the making
     of such other distributions;

          (3)  the Net Income of any Person acquired in a pooling of interests
     transaction for any period prior to the date of such acquisition will be
     excluded;

          (4)  any net gain (but not loss) resulting from an Asset Sale by the
     Person in question or any of its Restricted Subsidiaries other than in the
     ordinary course of business will be excluded;

          (5)  extraordinary gains and losses will be excluded;

          (6)  income or loss attributable to discontinued operations
     (including, without limitation, operations disposed of during such period
     whether or not such operations were classified as discontinued) will be
     excluded; and

          (7)  in the case of a successor to the referent Person by
     consolidation or merger or as a transferee of the referent Person's assets,
     any earnings of the successor corporation prior to such consolidation,
     merger or transfer of assets will be excluded.

          "Cumulative Consolidated Net Income" means, with respect to any
           ----------------------------------
Person, as of any date of determination, the Consolidated Net Income of such
Person from April 1, 2000 to the end of such Person's must recently ended full
fiscal quarter prior to such date, taken as a single accounting period.

          "Definitive Shares" shall have the meaning provided in paragraph (m).
           -----------------

          "Depository" means, with respect to the shares of Senior Preferred
           ----------
Stock issued in the form of one or more Global Shares, The Depository Trust
Company or another Person designated as Depository by the Company, which must be
a clearing agency registered under the Exchange Act.
<PAGE>

                                      -44-

          "Disqualified Capital Stock" means any Capital Stock of a Person or a
           --------------------------
Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the mandatory redemption date of the Senior Preferred Stock, for cash
or securities constituting Indebtedness. Without limitation of the foregoing,
Disqualified Capital Stock will be deemed to include any Preferred Stock of a
Person or any Restricted Subsidiary thereof, with respect to either of which,
under the terms of such Preferred Stock, by agreement or otherwise, such Person
or Restricted Subsidiary is obligated to pay current dividends or distributions
in cash during the period prior to the mandatory redemption date of the Senior
Preferred Stock; provided, however, that Preferred Stock of a Person or any
                 --------  -------
Restricted Subsidiary thereof that is issued with the benefit of provisions
requiring a change of control offer to be made for such Preferred Stock in the
event of a change of control of such Person or Restricted Subsidiary which
provisions have substantially the same effect as the provisions described under
paragraph (g) above, will not be deemed to be Disqualified Capital Stock solely
by virtue of such provisions.  Without limitation of the foregoing, Disqualified
Capital Stock shall be deemed to include any Senior Securities and Parity
Securities.

          "Dividend Payment Date" shall have the meaning provided in paragraph
           ---------------------
(c)(i).

          "Dividend Period" means the Initial Dividend Period, and, thereafter,
           ---------------
each semi-annual period from a Dividend Payment Date to the next following
Dividend Payment Date (but without including such Dividend Payment Date).

          "EBITDA" means, with respect to any Person and its Restricted
           ------
Subsidiaries, for any period, an amount equal to

          (1)  the sum of

               (a)  Consolidated Net Income for such period, plus

               (b)  the provision for taxes for such period based on income or
          profits to the extent such income or profits were included in
          computing Consolidated Net Income and any provision for taxes utilized
          in computing net loss under clause (a) hereof, plus

               (c)  Consolidated Interest Expense for such period, plus

               (d)  depreciation for such period on a consolidated basis, plus
<PAGE>

                                      -45-

               (e)  amortization of intangibles for such period on a
          consolidated basis, plus

               (f)  any other non-cash items reducing Consolidated Net Income
          for such period, other than non-cash items that represent accruals of,
          or reserves for, cash disbursements to be made in any future period;
          minus

          (2) all non-cash items increasing Consolidated Net Income (other than
     any non-cash items that were accrued in the ordinary course of business)
     for such period,

all for such Person and its Restricted Subsidiaries determined on a consolidated
basis in accordance with GAAP; provided, however, that, for purposes of
                               --------  -------
calculating EBITDA during any fiscal quarter, cash income from a particular
Investment (other than a Restricted Subsidiary) of such Person will be included
only

          (1)  if cash income has been received by such Person with respect to
     such Investment during each of the previous four fiscal quarters, or

          (2)  if the cash income derived from such Investment is attributable
     to Cash Equivalents.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended,
           ------------
and the rules and regulations of the SEC promulgated thereunder.

          "fair market value" means, with respect to any asset or property, the
           -----------------
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction.  Fair market
value will be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a board resolution of
such Board of Directors.

          "GAAP" means generally accepted accounting principles consistently
           ----
applied as in effect in the United States from time to time.

          "Global Shares" shall have the meaning provided in paragraph (m).
           -------------

          "Hedging Obligations" means, with respect to any Person, the net
           -------------------
payment obligations of such Person under (a) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (b) other
agreements or arrangements entered into in order to protect such Person against
fluctuations in commodity, electricity or fuel prices, interest rates or
currency exchange rates.
<PAGE>

                                      -46-

          "Holder" means a holder of shares of Senior Preferred Stock as
           ------
reflected in the register maintained by the Transfer Agent for the Senior
Preferred Stock.

          "incur" means, with respect to any Indebtedness or other obligation of
           -----
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "incurrence," "incurred," "incurable," and "incurring" will have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
                               --------
obligation of such Person that exists at such time becoming Indebtedness will
not be deemed an incurrence of such Indebtedness.

          "Indebtedness" means (without duplication), with respect to any
           ------------
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property if and to the extent any of the foregoing indebtedness
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, and will also include, to the extent not otherwise
included,

          (1)  any Capitalized Lease Obligations of such Person;

          (2)  obligations secured by a lien to which the property or assets
     owned or held by such Person is subject, whether or not the obligation or
     obligations secured thereby have been assumed;

          (3)  guarantees of (or obligations with respect to letters of credit
     supporting) items of other Persons which would be included within this
     definition for such other Persons (whether or not such items would appear
     upon the balance sheet of the guarantor);

          (4)  all obligations for the reimbursement of any obligor on any
     letter of credit, banker's acceptance or similar credit transaction;

          (5)  Disqualified Capital Stock of such Person or any Restricted
     Subsidiary thereof and any Preferred Stock of a Restricted Subsidiary of
     such Person incurred under paragraph (k)(iv); and

          (6)  hedging obligations of any such Person applicable to any of the
     foregoing (if and to the extent such hedging obligations would appear as a
     liability upon a balance sheet of such Person prepared in accordance with
     GAAP).
<PAGE>

                                      -47-

          The amount of Indebtedness of any Person at any date will be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation; provided that
                                                                 --------

          (1)  the amount outstanding at any time of any Indebtedness issued
     with original issue discount is the principal amount of such Indebtedness
     less the remaining unamortized portion of the original issue discount of
     such Indebtedness at such time as determined in conformity with GAAP; and

          (2)  Indebtedness will not include

               (a) any liability for federal, state, local or other taxes, and

               (b) any accounts payable, trade payables and other accrued
          liabilities arising from the purchase of goods or materials or for
          services obtained in the ordinary course of business.

          "Indenture" means the indenture governing the Notes.
           ---------

          "Independent Financial Advisor" means an investment banking firm of
           -----------------------------
national reputation in the United States

          (1)  which does not, and whose directors, officers and employees or
     Affiliates do not, have a direct or indirect financial interest in the
     Company, and

          (2)  which, in the judgment of the Board of Directors of the Company,
     is otherwise independent and qualified to perform the task for which it is
     to be engaged .

Notwithstanding the foregoing, CIBC World Markets Corp. and its Affiliates shall
be deemed to be Independent Financial Advisors.

          "Initial Dividend Period" means the dividend period commencing on the
           -----------------------
Issue Date and ending on the first Dividend Payment Date to occur thereafter.

          "Institutional Accredited Investor" shall have the meaning provided in
           ---------------------------------
paragraph (r)(i).

          "Investment Grade Rating" means a rating equal to or higher than Baa3
           -----------------------
(or the equivalent) and BBB- (or the equivalent) by Moody's Investors Service,
Inc. (or any successor to the rating agency business thereof) and Standard &
Poor's Ratings Service, a
<PAGE>

                                      -48-

division of McGraw Hill, Inc. (or any successor to the rating agency business
thereof), respectively.

          "Investments" means, with respect of any Person, directly or
           -----------
indirectly, any advance, account receivable (other than an account receivable
arising in the ordinary course of business of such Person), loan or capital
contribution to (by means of transfers of property to others, payments for
property or services for the account or use of others or otherwise), the
purchase of any Capital Stock, bonds, notes, debentures, partnership or joint
venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments exclude

          (1)  extensions of trade credit on commercially reasonable terms in
     accordance with normal trade practices of such Person; and

          (2)  the repurchase of securities of any Person by such Person.

For the purposes of the paragraph (k)(ii) covenant, (1) "Investments" (a)
include and are valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary and (b) exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary, provided, that, in no event
                                                  --------
may such amount exceed the net amount of any Investments constituting Restricted
Payments made in such Subsidiary after the Issue Date and (2) the amount of any
Investment will be the original cost of such Investment plus the cost of all
additional Investments by the Company or any of its Restricted Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, reduced by the (i)
amount returned in cash with respect to such Investment whether through interest
payments, principal payments, dividends or other distributions and (ii) proceeds
received by the Company or any of its Restricted Subsidiaries from the
disposition, retirement or redemption of all or any portion of such Investment;

provided that the aggregate of all such reductions may not exceed the amount of
--------
such initial Investment plus the cost of all additional Investments; provided,
                                                                     --------
further, that no such payment of distributions or receipt of any such other
-------
amounts may reduce the amount of any Investment if such payment of distributions
or receipt of any such amounts would be included in Consolidated Net Income. If
the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Common Stock of any direct or indirect Restricted Subsidiary of
the Company such that, after giving effect to any such sale or disposition, the
Company no longer owns, directly or indirectly, 100% of the outstanding Common
Stock of such Restricted Subsidiary, the Company will be deemed to have made an
Investment on the date of any such sale or
<PAGE>

                                      -49-

disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.

          "Issue Date" means May 26, 2000.
           ----------

          "Junior Securities" shall have the meaning provided in paragraph (b).
           -----------------

          "Mandatory Redemption Price" shall have the meaning provided in
           --------------------------
paragraph (e)(ii).

          "Net Income" means, with respect to any Person, for any period, the
           ----------
net income (loss) of such Person determined in accordance with GAAP.

          "Net Proceeds" means
           ------------

           (1)  in the case of any sale of Capital Stock by or equity
     contribution to any Person, the aggregate net cash proceeds received by
     such Person, after payment of expenses, commissions and the like incurred
     in connection therewith;

           (2)  in the case of any exchange, exercise, conversion or surrender
     of outstanding securities of any kind for or into shares of Capital Stock
     of the Company which is not Disqualified Capital Stock, the net book value
     of such outstanding securities on the date of such exchange, exercise,
     conversion or surrender (plus any additional amount required to be paid by
     the holder to such Person upon such exchange, exercise, conversion or
     surrender, less any and all payments made to the holders, e.g., on account
                                                               ----
     of fractional shares and less all expenses incurred by such Person in
     connection therewith); and

           (3)  in the case of any issuance of any Indebtedness by the Company
     or any Restricted Subsidiary, the aggregate net cash proceeds received by
     such Person after the payment of expenses, commissions, underwriting
     discounts and the like incurred in connection therewith.

          "NMPRC" means the New Mexico Public Regulation Commission.
           -----

          "Notes" means $275.0 million aggregate principal amount of 10.25%
           -----
senior subordinated notes due 2010 of the Company originally issued on April 7,
2000 pursuant to the Indenture and any exchange notes issued pursuant to the
registration rights agreement relating thereto.

          "Officers' Certificate" shall have the meaning provided in paragraph
           ---------------------
(r)(iv)(d).
<PAGE>

                                      -50-

          "Parity Securities" shall have the meaning provided in paragraph (b).
           -----------------

          "Participants" shall have the meaning provided in paragraph (u)(i).
           ------------

          "Permitted Holders" means Laurel Hill Capital Partners, LLC, Caravelle
           -----------------
Investment Fund, L.L.C., CIBC WG Argosy Merchant Fund 2, L.L.C., Co-Investment
Merchant Fund 3, L.L.C., Continental Casualty Company and their respective
affiliates, other than their portfolio companies.

          "Permitted Indebtedness" means:
           ----------------------

          (1) Indebtedness of the Company or any Restricted Subsidiary arising
     under or in connection with the Senior Credit Facility in an aggregate
     principal amount not to exceed $185.0 million at any time outstanding less
     any mandatory prepayment actually made thereunder (to the extent, in the
     case of payments of revolving credit borrowings, that the corresponding
     commitments have been permanently reduced) or scheduled payments actually
     made thereunder;

          (2) Indebtedness under the Notes and the Indenture;

          (3) Indebtedness not covered by any other clause of this definition
     which is outstanding on the Issue Date reduced by the amount of any
     mandatory prepayments, permanent reductions or scheduled payments actually
     made thereunder;

          (4) Indebtedness of the Company to any Wholly Owned Subsidiary and
     Indebtedness of any Wholly Owned Subsidiary to the Company or another
     Wholly Owned Subsidiary;

          (5) Purchase Money Indebtedness and Capitalized Lease Obligations
     incurred to acquire property in the ordinary course of business which
     Purchase Money Indebtedness and Capitalized Lease Obligations do not in the
     aggregate exceed $10.0 million at any one time outstanding;

          (6) Indebtedness of the Company or any Restricted Subsidiary arising
     from the honoring by a bank or other financial institution of a check,
     draft or similar instrument inadvertently (except in the case of daylight
     overdrafts) drawn against insufficient funds in the ordinary course of
     business;

          (7) the incurrence by the Company or any Restricted Subsidiary of
     Hedging Obligations that are incurred in the ordinary course of business of
     the Company or such Restricted Subsidiary and not for speculative purposes;

     provided that, in the case of any Hedging Obligation that relates to
     --------
<PAGE>

                                      -51-

               (a) interest rate risk, the notional principal amount of such
          Hedging Obligation does not exceed the principal amount of the
          Indebtedness to which such Hedging Obligation relates and

               (b) currency risk, such Hedging Obligation does not increase the
          Indebtedness of the Company and its Restricted Subsidiaries
          outstanding other than as a result of fluctuations in foreign currency
          exchange rates or by reason of fees, indemnities and compensation
          payable thereunder;

          (8) Indebtedness of a Restricted Subsidiary (other than any Regulated
     Restricted Subsidiary) of the Company assumed by the Company to the extent
     such Indebtedness was permitted to be incurred by such Restricted
     Subsidiary at the time of incurrence thereof;

          (9)  Refinancing Indebtedness;

          (10) Indebtedness arising from agreements of the Company or a
     Restricted Subsidiary of the Company providing for indemnification,
     adjustment of purchase price, earn out or other similar obligations, in
     each case, incurred or assumed in connection with the disposition of any
     business, assets or a Restricted Subsidiary of the Company, other than
     guarantees of Indebtedness incurred by any Person acquiring all or any
     portion of such business, assets or Restricted Subsidiary for the purpose
     of financing such acquisition; provided that the maximum assumable
                                    --------
     liability in respect of all such Indebtedness shall at no time exceed the
     gross proceeds actually received by the Company and its Restricted
     Subsidiaries in connection with such disposition;

          (11) Indebtedness consisting of performance and other similar bonds
     and reimbursement obligations incurred by the Company in the ordinary
     course of business securing the performance of contractual, franchise,
     license or other obligations of the Company or a Restricted Subsidiary;

          (12) Indebtedness of a Receivables Subsidiary that is not recourse to
     the Company or any other Restricted Subsidiary (other than with respect to
     Standard Securitization Undertakings) in connection with a Qualified
     Receivables Transaction;

          (13) Indebtedness of the Company or any of its Restricted Subsidiaries
     constituting reimbursement obligations with respect to bankers' acceptances
     and letters of credit issued in the ordinary course of business in respect
     of workers' compensation claims or self-insurance, or other Indebtedness
     with respect to reimbursement type obligations regarding workers'
     compensation claims; provided, however, that obligations arising upon the
                          --------  -------
     drawing of such letters of credit or the incurrence of
<PAGE>

                                      -52-

     such Indebtedness are reimbursed within 30 days following such drawing or
     incurrence;

          (14) the accrual of interest, the issuance of additional Indebtedness
     in the form of additional promissory notes or otherwise in lieu of the
     payment of cash interest and the accretion of accreted value; and

          (15) additional Indebtedness of the Company and its Restricted
     Subsidiaries (other than its Regulated Restricted Subsidiaries) not to
     exceed $25.0 million in aggregate principal amount at any one time
     outstanding (which may be, but shall not be required to be, in the form of
     additional Indebtedness under the Senior Credit Facility).

          "Permitted Investments" means Investments made on or after the Issue
           ---------------------
Date consisting of

          (1) Investments by the Company, or by a Restricted Subsidiary thereof,
     in the Company or a Wholly Owned Subsidiary;

          (2) Investments by the Company, or by a Restricted Subsidiary thereof,
     in a Person, if as a result of such Investment

              (a) such Person becomes a Wholly Owned Subsidiary of the Company
          or

              (b) such Person is merged, consolidated or amalgamated with or
          into, or transfers or conveys substantially all of its assets to, or
          is liquidated into, the Company or a Wholly Owned Subsidiary thereof;

          (3) Investments in cash and Cash Equivalents;

          (4) reasonable and customary loans made to employees not to exceed
     $2.0 million in the aggregate at any one time outstanding;

          (5) an Investment that is made by the Company or a Restricted
     Subsidiary thereof in the form of any Capital Stock, bonds, notes,
     debentures, partnership or joint venture interests or other securities that
     are issued by a third party to the Company or such Restricted Subsidiary
     solely as partial consideration for the consummation of an Asset Sale;

          (6) Investments in securities of trade creditors or customers received
     pursuant to any plan of reorganization or similar arrangement upon the
     bankruptcy or insolvency of such trade creditors or customers;
<PAGE>

                                      -53-

          (7)  Hedging Obligations entered into in the ordinary course of the
     Company's or its Restricted Subsidiaries' business and not for speculative
     purposes;

          (8)  any Investment solely in exchange for the issuance of equity
     interests (other than Disqualified Capital Stock) of the Company;

          (9)  any Investment constituting Permitted Securities of a Person
     issued in exchange for trade or other claims against such Person in
     connection with a financial reorganization or restructuring of such Person
     or as a result of a foreclosure by the Company or any Restricted Subsidiary
     with respect to any secured Investment in default;

          (10) the contribution by the Company of any portion or all of the
     undeveloped sites located on the 2,700 acres adjacent to TNP One to any
     Person in exchange for an equity interest in such Person; provided that
                                                               --------
     such Person may not be a Subsidiary of the Company; provided, further, that
                                                         --------  -------
     (a) at or prior to the time of such contribution, the Company shall have
     received a minimum of $150 million of gross proceeds from the sale of TNP
     One and (b) at the time of such contribution, the Company's Consolidated
     Leverage Ratio is equal to or less than 4.5 to 1.0.; and

          (11) additional Investments not to exceed $10.0 million at any one
     time outstanding.

          "Permitted Securities" means equity securities or debt securities of
           --------------------
the Company as reorganized or readjusted or securities of the Company or any
other company, trust, corporation or partnership provided for by a plan of
reorganization or readjustment.

          "Person" means any individual, corporation, partnership, limited
           ------
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).

          "Preferred Stock" means any Capital Stock of a Person, however
           ---------------
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.

          "Private Placement Legend" shall have the meaning provided in
           ------------------------
paragraph (r)(vii).

          "Property" of any Person means all types of real, personal, tangible,
           --------
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
<PAGE>

                                      -54-

          "Public Equity Offering" means a public offering by the Company of
           ----------------------
shares of its Common Stock (however designated and whether voting or non-voting)
and any and all rights, warrants or options to acquire such Common Stock.

          "PUCT" means the Public Utility Commission of Texas.
           ----

          "Purchase Money Indebtedness" means Indebtedness of any Person
           ---------------------------
incurred in the normal course of business of such Person for the purpose of
financing all or any part of the purchase price, or the cost of installation,
construction or improvement of, any property or asset.

          "Qualified Receivables Transaction" means any transaction or series of
           ---------------------------------
transactions that may be entered into by the Company or any Restricted
Subsidiary pursuant to which the Company or any Restricted Subsidiary may sell,
convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a
transfer by the Company or any Restricted Subsidiary) and (b) any other Person
(in the case of a transfer by a Receivables Subsidiary), or may grant a security
interest in, any accounts receivable (whether now existing or arising in the
future) of the Company or any Restricted Subsidiary and any asset related
thereto, including, without limitation, all collateral securing the accounts
receivable, all contracts and all guarantees or other obligations in respect of
the accounts receivable, proceeds of the accounts receivable and other assets
which are customarily transferred, or in respect of which security interests are
customarily granted, in connection with asset securitization transactions
involving accounts receivable. In addition, "Qualified Receivables Transaction"
shall include any financing transaction by the Company or any Restricted
Subsidiary under Chapter 39, Subchapter G of the Texas Public Utility Regulatory
Act or any analogous law which the Company or such Restricted Subsidiary is
subject to.

          "QIB" shall have the meaning provided in paragraph (r)(i).
           ---

          "Rating Agencies" means Standard & Poor's Ratings Service, a division
           ---------------
of McGraw Hill, Inc., and Moody's Investors Service, Inc. or any successor to
the respective rating agency businesses thereof.

          "Receivables Subsidiary" means a Wholly Owned Subsidiary of the
           ----------------------
Company which engages in no activities other than in connection with the
financing of accounts receivable and which is designated by a board resolution
of the Board of Directors of the Company (as provided below) as a Receivables
Subsidiary:

          (1) has no portion of the Indebtedness or any other Obligations
     (contingent or otherwise) of which
<PAGE>

                                      -55-

               (a) is guaranteed by the Company or any other Restricted
          Subsidiary (excluding guarantees of obligations pursuant to Standard
          Securitization Undertakings),

               (b) is recourse to or obligates the Company or any other
          Restricted Subsidiary in any way other than pursuant to Standard
          Securitization Undertakings, or

               (c) subjects any property or asset of the Company or any other
          Restricted Subsidiary, directly or indirectly, contingently or
          otherwise, to the satisfaction thereof, other than pursuant to
          Standard Securitization Undertakings;

          (2) with which neither the Company nor any other Restricted Subsidiary
     of the Company has any material contract, agreement, arrangement or
     understanding (except in connection with a Qualified Receivables
     Transaction) other than on terms no less favorable to the Company or such
     other Restricted Subsidiary of the Company than those that might be
     obtained at the time from persons that are not Affiliates of the Company,
     other than fees payable in the ordinary course of business in connection
     with servicing accounts receivable; and

          (3) to which neither the Company nor any Restricted Subsidiary of the
     Company has any obligation to maintain or preserve such entity's financial
     condition or cause such entity to achieve certain levels of operating
     results.

          "Redeemable Dividend" means, for any dividend or distribution paid in
           -------------------
cash with regard to Preferred Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Preferred Stock.

          "Redemption Date", with respect to any shares of Senior Preferred
           ---------------
Stock, means the date on which such shares of Senior Preferred Stock are
redeemed by the Company.

          "Redemption Notice" shall have the meaning provided in paragraph
           -----------------
(e)(iii).

          "Refinancing Indebtedness" means Indebtedness that refunds, refinances
           ------------------------
or extends any Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date or other Indebtedness permitted to be incurred by
the Company or its Restricted Subsidiaries pursuant to the terms of this
Statement of Resolution, but only to the extent that

          (1) the Refinancing Indebtedness is scheduled to mature either
<PAGE>

                                      -56-

               (a) no earlier than the Indebtedness being refunded, refinanced
          or extended, or

               (b)  after April 1, 2010;

          (2)  such Refinancing Indebtedness is in an aggregate principal amount
     that is equal to or less than the sum of

               (a) the aggregate principal amount then outstanding under the
          Indebtedness being refunded, refinanced or extended,

               (b) the amount of accrued and unpaid interest, if any, and
          premiums owed, if any, not in excess of preexisting prepayment
          provisions on such Indebtedness being refunded, refinanced or
          extended, and

               (c) the amount of customary fees, expenses and costs related to
          the incurrence of such Refinancing Indebtedness; and

          (3)  such Refinancing Indebtedness is incurred by the same Person (or
     its successor) that initially incurred the Indebtedness being refunded,
     refinanced or extended.

          "Registrar" shall have the meaning provided in paragraph (q).
           ---------

          "Registration Rights Agreement" means the registration rights
           -----------------------------
agreement dated as of May 26, 2000 among the Company, CIBC World Markets Corp.
and Chase Securities Inc.

          "Regulated Restricted Subsidiary" means a Restricted Subsidiary that
           -------------------------------
is regulated or certified by the PUCT or the NMPRC or any successor thereto or
any analogous regulatory body of any state of the United States or the District
of Columbia.

          "Regulation S Global Share" means a permanent global security in
           -------------------------
registered form representing the aggregate principal amount of shares of Senior
Preferred Stock sold in reliance on Regulation S under the Securities Act.

          "Resale Restriction Termination Date" shall have the meaning provided
           -----------------------------------
in paragraph (r)(i).

          "Restricted Payment" means any of the following:
           ------------------

          (1)   the declaration or payment of any dividend or any other
     distribution or payment on Capital Stock of the Company or any Restricted
     Subsidiary of the Com-
<PAGE>

                                      -57-

     pany or any payment made to the direct or indirect holders (in their
     capacities as such) of Capital Stock of the Company or any Restricted
     Subsidiary of the Company (other than (a) dividends or distributions in
     respect of Senior Securities of the Company, (b) dividends or distributions
     payable solely in Capital Stock (other than Disqualified Capital Stock) or
     in options, warrants or other rights to purchase such Capital Stock (other
     than Disqualified Capital Stock), and (c) in the case of Restricted
     Subsidiaries of the Company, dividends or distributions payable to the
     Company or to a Restricted Subsidiary of the Company);

          (2)  the purchase, redemption or other acquisition or retirement for
     value of any Capital Stock of the Company or any of its Restricted
     Subsidiaries (other than (a) Senior Securities of the Company and (b)
     Capital Stock owned by the Company or a Wholly Owned Subsidiary of the
     Company, excluding Disqualified Capital Stock) or any option, warrants or
     other rights to purchase such Capital Stock;

          (3)  the making of any Investment or guarantee of any Investment in
     any Person other than a Permitted Investment;

          (4)  any designation of a Subsidiary as an Unrestricted Subsidiary
     (valued at the fair market value of the net assets of such Subsidiary on
     the date of designation); and

          (5)  the forgiveness of any Indebtedness of an Affiliate of the
     Company to the Company or a Restricted Subsidiary of the Company.

          "Restricted Subsidiary" means a Subsidiary of the Company other than
           ---------------------
an Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date.  The Board of Directors of the Company may
designate any Unrestricted Subsidiary as a Restricted Subsidiary if immediately
after giving effect to such action (and treating any Acquired Indebtedness as
having been incurred at the time of such action),

          (1)  the Company could have incurred at least $1.00 of additional
     Indebtedness (other than Permitted Indebtedness) pursuant to paragraph
     (k)(i); and

          (2)  no Voting Rights Triggering Event has occurred and is continuing
     or results therefrom.

          "Sale and Lease-Back Transaction" means any arrangement with any
           -------------------------------
Person providing for the leasing by the Company or any Restricted Subsidiary of
the Company of any real or tangible personal property, which property has been
or is to be sold or transferred by the Company or such Restricted Subsidiary to
such Person in contemplation of such leasing.
<PAGE>

                                      -58-

          "SEC" means the Securities and Exchange Commission.
           ---

          "Securities Act" means the Securities Act of 1933, as amended, and the
           --------------
rules and regulations of the SEC promulgated thereunder.

          "Senior Credit Facility" means the Credit Agreement dated as of April
           ----------------------
7, 2000, among the Company (as successor to ST Acquisition Corp., a Texas
corporation), the lenders party thereto in their capacities as lenders
thereunder, Canadian Imperial Bank of Commerce, as administrative agent, and
CIBC World Markets Corp. and Chase Securities Inc., as co-arrangers and co-book
managers, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted under
            --------
paragraph (k)(i)) or adding Restricted Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.

          "Senior Preferred Stock" shall have the meaning provided in paragraph
           ----------------------
(a).

          "Senior Securities" shall have the meaning provided in paragraph (b).
           -----------------

          "Share Certificates" shall have the meaning provided in paragraph (m).
           ------------------

          "Share Register" shall have the meaning provided in paragraph (q).
           --------------

          "Standard Securitization Undertakings" means representations,
           ------------------------------------
warranties, covenants and indemnities entered into by the Company or any
Restricted Subsidiary of the Company which are reasonably customary in an
accounts receivable securitization transaction.

          "Subsidiary" of any specified Person means any corporation,
           ----------
partnership, limited liability company, joint venture, association or other
business entity, whether now existing or hereafter organized or acquired,

          (1)  in the case of a corporation, of which more than 50% of the total
     voting power of the Capital Stock entitled (without regard to the
     occurrence of any contingency) to vote in the election of directors,
     officers or trustees thereof is held by such first-named Person or any of
     its Subsidiaries; or
<PAGE>

                                      -59-

          (2)  in the case of a partnership, limited liability company, joint
     venture, association or other business entity, with respect to which such
     first-named Person or any of its Subsidiaries has the power to direct or
     cause the direction of the management and policies of such entity by
     contract or otherwise or if in accordance with GAAP such entity is
     consolidated with the first-named Person for financial statement purposes.

          "Suspended Covenants" shall have the meaning provided in paragraph
           -------------------
(k).

          "Texas Senate Bill 7" means Senate Bill 7 of the State of Texas signed
           -------------------
in June 1999 by Texas Governor George W. Bush which implements competition in
Texas retail electric markets.

          "TNMP" means the Texas-New Mexico Power Company, a Texas corporation.
           ----

          "Transfer Agent" shall have the meaning provided in paragraph 1.
           --------------

          "Transfer Agent Office" shall have the meaning provided in paragraph
           ---------------------
(t).

          "Treasury Rate" means, as of any redemption date, the yield to
           -------------
maturity as of such redemption date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available as least two
Business Days prior to the redemption date (or, if such Statistical Release is
no longer published, any publicly available source of similar market date) most
nearly equal to the period from the redemption date to April 1, 2005; provided,
                                                                      --------
however, that if the period from the redemption date to April 1, 2005 is less
-------
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.

          "Unrestricted Subsidiary" means
           -----------------------

          (1)  any Subsidiary of an Unrestricted Subsidiary; and

          (2)  any Subsidiary of the Company which is designated after the Issue
     Date as an Unrestricted Subsidiary by a board resolution of the Board of
     Directors of the Company;

     provided that a Subsidiary may be so designated as an Unrestricted
     --------
     Subsidiary only if

          (a) such designation is in compliance with paragraph (k)(ii); and
<PAGE>

                                      -60-

          (b) neither the Company nor any Restricted Subsidiary will at any time

               (i)    provide a guarantee of, or similar credit support to, any
          Indebtedness of such Subsidiary (including any undertaking, agreement
          or instrument evidencing such Indebtedness),

               (ii)   be directly or indirectly liable for any Indebtedness of
          such Subsidiary or

               (iii)  be directly or indirectly liable for any other
          Indebtedness which provides that the holder thereof may (upon notice,
          lapse of time or both) declare a default thereon (or cause the payment
          thereof to be accelerated or payable prior to its final scheduled
          maturity) upon the occurrence of a default with respect to any other
          Indebtedness that is Indebtedness of such Subsidiary (including any
          corresponding right to take enforcement action against such
          Subsidiary),

except in the case of clause (i) or (ii) to the extent

          (i)   that the Company or such Restricted Subsidiary could otherwise
     provide such a guarantee or incur such Indebtedness (other than as
     Permitted Indebtedness) pursuant to paragraph (k)(i) and

          (ii)  the provision of such guarantee and the incurrence of such
     Indebtedness otherwise would be permitted under paragraph (k)(ii).

          "Wholly Owned Subsidiary" means any Restricted Subsidiary, all of the
           -----------------------
outstanding voting securities (other than directors' qualifying shares and, in
the case of TNMP, other than shares of preferred stock outstanding on the Issue
Date) of which are owned, directly or indirectly, by the Company.

          5.   The following resolution prospectively (i) increasing the number
of shares of Series D Redeemable Preferred Stock, and (ii) designating
additional authorized shares as Series D Redeemable Preferred Stock was duly
adopted by all necessary action of the Company on May 23, 2000:

          "RESOLVED FURTHER, that pursuant to the authority vested in the Board
by the Restated Articles and Section 2.13.B of the Texas Business Corporation
Act, the Board does hereby, effective prospectively as provided herein, (i)
increase the number of shares of Series D Redeemable Preferred Stock by 100,000
from 900,000 to 1,000,000, and (ii) designate as additional shares of Series D
Redeemable Preferred Stock all 100,000 shares that will be restored to the
status of authorized but unissued Senior Redeemable Preferred
<PAGE>

                                      -61-

Stock upon the redemption and cancellation of the currently outstanding Series A
Redeemable Preferred Stock as authorized below, which increase and designation
shall be effective upon completion of, and contingent upon, the redemption and
cancellation of all of the currently outstanding shares (being 100,000 shares)
of the Company's Series A Redeemable Preferred Stock; and"
<PAGE>

          IN WITNESS WHEREOF, the Company has caused this Statement of
Resolution to be executed this _______ day of May, 2000.

                                   TNP ENTERPRISES, INC.

                                   By:
                                      ---------------------------
                                      Name:
                                      Title:
<PAGE>

                                                                       EXHIBIT A
                                                                       ---------

          [THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
     1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
     NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
     REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
     DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
     IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AND SUBJECT TO COMPLIANCE
     WITH OTHER APPLICABLE LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
     HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
     THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE
     PROVIDED UNDER RULE 144(K) (OR ANY SUCCESSOR PROVISION THEREOF) AS
     PERMITTING THE RESALE BY NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT
     RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
     DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF
     THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE
     RESTRICTION TERMINATION DATE"), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A
     REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
     SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
     PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
     IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
     RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
     QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
     BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
     NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
     REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE
     EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
     OTHERWISE IN COMPLIANCE WITH OTHER APPLICABLE LAWS, SUBJECT TO THE ISSUER'S
     AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
     PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
     COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
     THEM. THE

                                      A-1
<PAGE>

     LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE
     RESALE RESTRICTION TERMINATION DATE.]/1/

                                                         CUSIP NO. [           ]

                             TNP ENTERPRISES, INC.
               INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS

                   14 1/2% SENIOR REDEEMABLE PREFERRED STOCK,
                                 SERIES [   ],
                    $1,000 LIQUIDATION PREFERENCE PER SHARE

No. [   ]                                                     [         ] Shares

          This certifies that CEDE & CO. is the owner of [                     ]
fully paid and non-assessable shares of 14 1/2% Senior Redeemable Preferred
Stock, Series [   ], $1,000 liquidation preference per share, of TNP
Enterprises, Inc. (the "Company"), a Texas corporation.  The shares represented
by this Certificate are transferable only on the stock transfer books of the
Company by the holder of record hereof, or by his duly authorized attorney or
legal representative, upon the surrender of this Certificate properly endorsed.
This Certificate is not valid until authenticated by the Company's transfer
agent.

          Dividend Payment Dates:  April 1 and October 1, commencing October 1,
2000.

          Record Dates:  March 15 and September 15.

          Mandatory Redemption Date:  April 1, 2011.

          This Certificate and the shares represented hereby are issued and
shall be subject to all the provisions of the Articles of Incorporation, the
Statement of Resolution under which the shares represented hereby were issued
and the By-Laws of the Company and the amendments from time to time made
thereto, copies of which are on file at the principal office of

_________________________
/1/  This legend is to be included on the Series A Senior Preferred Stock so
long as it constitutes a "restricted security" within the meaning of Rule
144(a)(3) under the Securities Act.

                                      A-2
<PAGE>

the Company, to all of which the holder of this Certificate assents by
acceptance hereof.

                                      A-3
<PAGE>

          IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed manually or by the facsimile signatures of its duly authorized
officers.

Dated:  [                ]

                                             TNP ENTERPRISES, INC.

                                             By: _______________________________
                                                 Name:
                                                 Title:

                                             By: _______________________________
                                                 Name:
                                                 Title:

Certificate of Authentication:

THE BANK OF NEW YORK, Transfer
  Agent and Registrar

By: __________________________
    Authorized Signatory

Date of Authentication:  [                ]

                                      A-4
<PAGE>

                             [FORM OF ASSIGNMENT]

          For value received _______________________ hereby sells, assigns and
transfers unto _____________________ the within Share Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint __________________________ attorney, to transfer said Share
Certificate on the books of the within-named Company, with full power of
substitution in the premises.

Dated ____________________, ____

          Signature:  __________________________________________________________
                      Note:   The above signature must correspond with the name
                              as written upon the face of this Share Certificate
                              in every particular, without alteration or
                              enlargement or any change whatever.

          Signature Guaranteed:  _______________________________________________

                                      A-5
<PAGE>

                SCHEDULE OF EXCHANGES OF CERTIFICATED SHARES/2/
                --------------------------------------------

          The following exchanges of a part of this Global Share for
certificated shares of Senior Preferred Stock have been made:

<TABLE>
<CAPTION>
                                                                  Number of
                                                                  shares of
                    Amount of              Amount of               Senior
                   decrease in            increase in             Preferred
               Number of shares of    Number of shares of       Stock of this        Signature of
                     Senior                  Senior             Global Share          authorized
               Preferred Stock of      Preferred Stock of         following           officer of
Date of               this                    this              such decrease       Transfer Agent
Exchange          Global Share            Global Share          (or increase)
----------------------------------------------------------------------------------------------------
<S>            <C>                    <C>                       <C>                 <C>
</TABLE>

_________________________
2    This is to be included only if the Senior Preferred Stock is in global
     form.

                                      A-6
<PAGE>

                                                                       EXHIBIT B
                                                                       ---------

                       FORM OF LEGEND FOR GLOBAL SHARES
                       --------------------------------

          Any Global Share authenticated and delivered hereunder shall bear a
legend in substantially the following form:

          THIS SECURITY IS A GLOBAL SHARE WITHIN THE MEANING OF THE STATEMENT OF
     RESOLUTION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
     DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
     SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
     PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
     CIRCUMSTANCES DESCRIBED IN THE STATEMENT OF RESOLUTION, AND NO TRANSFER OF
     THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
     DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
     TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED
     EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE STATEMENT OF
     RESOLUTION.

          UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
     OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
     ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND
     ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
     OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
     PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
     AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
     FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
     REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

                                      B-1
<PAGE>

                                                                       EXHIBIT C
                                                                       ---------
                   CERTIFICATE TO BE DELIVERED UPON EXCHANGE
             OR REGISTRATION OF TRANSFER OF SENIOR PREFERRED STOCK

          Re:  14 1/2% Senior Redeemable Preferred Stock,
               $1,000 liquidation preference per share (the
               "Senior Preferred Stock") of TNP Enterprises,
               Inc.
               ---------------------------------------------

          This Certificate relates to ____ shares of Senior Preferred Stock held
in* ___ book-entry or* _______ certificated form by ______ (the "Transferor").

The Transferor:*

     [_]  has requested the Transfer Agent by written order to deliver in
exchange for its beneficial interest in the Global Share held by the Depository
a share or shares of Senior Preferred Stock in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Share (or the portion thereof indicated above); or

     [_]  has requested the Transfer Agent by written order to exchange or
register the transfer of a share or shares of Senior Preferred Stock.

          In connection with such request and in respect of each such Senior
Preferred Stock, the Transferor does hereby certify that Transferor is familiar
with the Statement of Resolution relating to the above-captioned shares of
Senior Preferred Stock and the restrictions on transfers thereof as provided in
paragraph (r) of such Statement of Resolution, and that the transfer of this
Senior Preferred Stock does not require registration under the Securities Act of
1933, as amended (the "Act") because*:
                       ---

     [_]  Such Senior Preferred Stock is being acquired for the Transferor's own
account, without transfer (in satisfaction of paragraph (r)(i) or paragraph
(r)(iv) of the Statement of Resolution).

     [_]  Such Senior Preferred Stock is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Act), in reliance on Rule
144A.

     [_]  Such Senior Preferred Stock is being transferred to an institutional
"accredited investor" (within the meaning of

                                      C-1
<PAGE>

 subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the Act).

     [_]  Such Senior Preferred Stock is being transferred in reliance on
Regulation S under the Act.

     [_]  Such Senior Preferred Stock is being transferred in accordance with
Rule 144 under the Act.

     [_]  Such Senior Preferred Stock is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act.

                              ______________________________
                              [INSERT NAME OF TRANSFEROR]

                              By:  _________________________

Date:  _________________
       *Check applicable box.

                                      C-2
<PAGE>

                                                                       EXHIBIT D
                                                                       ---------

                           Form of Certificate to Be
                         Delivered in Connection with
                Transfers to Institutional Accredited Investors
                -----------------------------------------------

                                                             _____________, ____

The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286

Attention:  Corporate Trust Trustee Administration

Ladies and Gentlemen:

          In connection with our proposed purchase of shares of 14 1/2% Senior
Redeemable Preferred Stock, $1,000 liquidation preference per share (the "Senior
Preferred Stock"), of TNP Enterprises, Inc. (the "Company"), we confirm that:

          1.   We have received such information as we deem necessary in order
     to make our investment decision.

          2.   We understand that any subsequent transfer of the Senior
     Preferred Stock is subject to certain restrictions and conditions set forth
     in the Statement of Resolution and the undersigned agrees to be bound by,
     and not to resell, pledge or otherwise transfer the Senior Preferred Stock
     except in compliance with, such restrictions and conditions and the
     Securities Act of 1933, as amended (the "Securities Act").

          3.   We understand that the offer and sale of the Senior Preferred
     Stock has not been registered under the Securities Act, and that the Senior
     Preferred Stock may not be offered or sold within the United States or to,
     or for the account or benefit of, U.S. persons except as permitted in the
     following sentence. We agree, on our own behalf and on behalf of any
     accounts for which we are acting as hereinafter stated, that if we should
     sell any Senior Preferred Stock prior to (x) the date which is two years
     after the later of the date of original issuance of the Senior Preferred
     Stock (or such shorter period as may be prescribed by Rule 144(k) under the
     Securities Act or any successor provision thereto) or the last day on which
     the Company or any affiliate of the Company was owner of

                                      D-1
<PAGE>

     such shares of Senior Preferred Stock, or any predecessor thereto, and (y)
     such later date, if any, as may be required by applicable laws, we will do
     so only (A) to the Company, (B) inside the United States in accordance with
     Rule 144A under the Securities Act to a "qualified institutional buyer" (as
     defined therein), (C) inside the United States to an institutional
     "accredited investor" (as defined below) that, prior to such transfer,
     furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the
     Transfer Agent a signed letter substantially in the form hereof, (D)
     outside the United States in accordance with Regulation S under the
     Securities Act, (E) pursuant to the exemption from registration provided by
     Rule 144 under the Securities Act (if available) or (F) pursuant to an
     effective registration statement under the Securities Act and (G) pursuant
     to another available exemption under the Securities Act, and we further
     agree to provide to any person purchasing Senior Preferred Stock from us a
     notice advising such purchaser that resales of Senior Preferred Stock are
     restricted as stated herein.

          4.   We understand that, on any proposed resale of shares of Senior
     Preferred Stock, we will be required to furnish to the Transfer Agent and
     the Company, such certification, legal opinions and other information as
     the Transfer Agent and the Company may reasonably require to confirm that
     the proposed sale complies with the foregoing restrictions. We further
     understand that the shares of Senior Preferred Stock purchased by us will
     bear a legend to the foregoing effect.

          5.   We are an institutional "accredited investor" (as defined in Rule
     501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
     have such knowledge and experience in financial and business matters as to
     be capable of evaluating the merits and risks of our investment in the
     Senior Preferred Stock, and we and any accounts for which we are acting are
     each able to bear the economic risk of our or their investment, as the case
     may be.

          6.   We are acquiring Senior Preferred Stock purchased by us for our
     account or for one or more accounts (each of which is an institutional
     "accredited investor") as to each of which we exercise sole investment
     discretion.

          You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or

                                      D-2
<PAGE>

legal proceeding or official inquiry with respect to the matters covered hereby.

                                        Very truly yours,

                                        [Name of Transferee]

                                        By: _______________________________
                                            [Authorized Signatory]

          Upon transfer the shares of Senior Preferred Stock would be registered
in the name of the new beneficial owner as follows:

Name:______________________________

Address:___________________________

Taxpayer ID Number:________________

                                      D-3
<PAGE>

                                                                       EXHIBIT E
                                                                       ---------
                           Form of Certificate to Be
                            Delivered in Connection
                          with Regulation S Transfers
                          ---------------------------

                                                           _______________, ____

The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286

Attention:  Corporate Trust Trustee Administration

Ladies and Gentlemen:

          In connection with our proposed sale of shares of 14 1/2% Senior
Redeemable Preferred Stock, $1,000 liquidation preference per share (the "Senior
Preferred Stock"), of TNP Enterprises, Inc. (the "Company"), we confirm that
such sale has been effected pursuant to and in accordance with Regulation S
under the Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, we represent that:

          (1)  the offer of the shares of Senior Preferred Stock was not made to
   a person in the United States;

          (2)  either (a) at the time the buy offer was originated, the
   transferee was outside the United States or we and any person acting on our
   behalf reasonably believed that the transferee was outside the United States,
   or (b) the transaction was executed in, on or through the facilities of a
   designated off-shore securities market and neither we nor any person acting
   on our behalf knows that the transaction has been pre-arranged with a buyer
   in the United States;

          (3)  no directed selling efforts have been made in the United States
   in contravention of the requirements of Rule 903(b) or Rule 904(b) of
   Regulation S under the Securities Act, as applicable;

          (4)  the transaction is not part of a plan or scheme to evade the
   registration requirements of the Securities Act;

                                      E-1
<PAGE>

          (5)  we have advised the transferee of to the transfer restrictions
 applicable shares of Senior Preferred Stock; and

          (6)  if the circumstances set forth in Rule 904(c) under the
   Securities Act are applicable, we have complied with the additional
   conditions therein, including (if applicable) sending a confirmation or other
   notice stating that the shares of Senior Preferred Stock may be offered and
   sold during the restricted period specified in Rule 903(c)(2) or (3), as
   applicable, in accordance with the provisions of Regulation S; pursuant to
   registration of the shares of Senior Preferred Stock under the Securities
   Act; or pursuant to an available exemption from the registration requirements
   under the Act.

          You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.  Defined terms used herein without
definition have the respective meanings provided in Regulation S under the
Securities Act.

                              Very truly yours,

                              [Name of Transferee]

                              By: ______________________________
                                  [Authorized Signatory]

          Upon transfer the shares of Senior Preferred Stock would be registered
in the name of the new beneficial owner as follows:

Name:______________________________

Address:___________________________

Taxpayer ID Number:________________

                                      E-2<PAGE>

                                                                     Exhibit 4.4

                         REGISTRATION RIGHTS AGREEMENT

                           Dated as of May 26, 2000

                                 by and among

                            TNP ENTERPRISES, INC.,

                                  as Issuer,

                                      and

                           CIBC WORLD MARKETS CORP.

                                      and
                            CHASE SECURITIES INC.,
                             as Initial Purchasers
                          __________________________
                               100,000 Shares of

                  14 1/2% SENIOR REDEEMABLE PREFERRED STOCK,

                    $1,000 Liquidation Preference Per Share
<PAGE>

                               TABLE OF CONTENTS
                               -----------------
<TABLE>
<CAPTION>
                                                           Page
                                                           ----
<S>                                                        <C>
1.   Definitions.........................................   1

2.   Exchange Offer......................................   5

3.   Shelf Registration..................................   8

4.   Additional Dividends................................   9

5.   Registration Procedures.............................  11

6.   Registration Expenses...............................  20

7.   Indemnification.....................................  21

8.   Rules 144 and 144A..................................  24

9.   Underwritten Registrations..........................  24

10.  Miscellaneous.......................................  25

     (a)     Remedies                                      25
     (b)     No Inconsistent Agreements..................  25
     (c)     Adjustments Affecting Registrable Shares....  25
     (d)     Amendments and Waivers......................  25
     (e)     Notices                                       26
     (f)     Successors and Assigns......................  27
     (g)     Counterparts................................  27
     (h)     Headings                                      27
     (i)     Governing Law...............................  28
     (j)     Severability................................  28
     (k)     Shares Held by the Company or Its Affiliates  28
     (l)     Third Party Beneficiaries...................  28
     (m)     Registration of Dividend Shares.............  28
     (n)     Entire Agreement............................  28
</TABLE>
<PAGE>

                      SHARE REGISTRATION RIGHTS AGREEMENT

          This Registration Rights Agreement (this "Agreement") is made and
                                                    ---------
entered into as of May 26, 2000, by and among TNP Enterprises, Inc., a Texas
corporation, as issuer (the "Company"), and CIBC World Markets Corp. and Chase
                             -------
Securities Inc., as initial purchasers (the "Initial Purchasers").
                                             ------------------

          This Agreement is entered into in connection with the Purchase
Agreement, dated May 19, 2000, by and among the Company, SW Acquisition, L.P., a
Texas limited Partnership (the "Partnership" and, together with the Company, the
                                -----------
"Issuers"), and the Initial Purchasers (the "Purchase Agreement") relating to,
 -------                                     ------------------
among other things, the sale by the Issuers to the Initial Purchasers of 100,000
units (the "Units") consisting of 100,000 shares (the "Initial Shares") of the
            -----                                      --------------
Company's 14 1/2% Senior Redeemable Preferred Stock, $1,000 liquidation
preference per share (the "Shares"), and 100,000 warrants exercisable into
                           ------
limited partnership interests in the Partnership.  In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the Company has agreed
to provide the registration rights set forth in this Agreement for the benefit
of the holders of Registrable Shares (as defined), including, without
limitation, the Initial Purchasers.  The execution and delivery of this
Agreement is a condition to the Initial Purchasers' obligation to purchase the
Shares under the Purchase Agreement.

          The parties hereby agree as follows:

1.   Definitions
     -----------

          As used in this Agreement, the following terms shall have the
following meanings:

          Additional Dividends:  See Section 4(a).
          --------------------

          Advice:  See the last paragraph of Section 5.
          ------

          Agreement:  See the first introductory paragraph to this agreement.
          ---------

          Applicable Period:  See Section 2(b).
          -----------------

          Business Day:  A day that is not a Saturday, a Sunday, or a day on
          ------------
which banking institutions in New York, New York are required to be closed.

          Closing Date:  The Closing Date as defined in the Purchase Agreement.
          ------------

          Commission:  The Securities and Exchange Commission.
          ----------
<PAGE>

                                      -2-

          Company:  See the first introductory paragraph to this Agreement.
          -------

          Dividend Shares:  The Shares issued as dividends on outstanding Shares
          ---------------
or Dividend Shares, as the case may be.

          DTC:  See Section 5(i).
          ---

          Effectiveness Date:  The 150th day after the Issue Date.
          ------------------

          Effectiveness Period:  See Section 3(a).
          --------------------

          Event Date:  See Section 4(b).
          ----------

          Exchange Act:  The Securities Exchange Act of 1934, as amended, and
          ------------
the rules and regulations of the Commission promulgated thereunder.

          Exchange Offer:  See Section 2(a).
          --------------

          Exchange Registration Statement:  See Section 2(a).
          -------------------------------

          Exchange Shares:  See Section 2(a).
          ---------------

          Filing Date:  The 60th day after the Issue Date (regardless of whether
          -----------
the actual filing precedes such date).

          Holder:  Any registered holder of Registrable Shares.
          ------

          Indemnified Person:  See Section 7(c).
          ------------------

          Indemnifying Person:  See Section 7(c).
          -------------------

          Initial Purchasers:  See the first introductory paragraph to this
          ------------------
Agreement.

          Initial Shares:  See the second introductory paragraph to this
          --------------
Agreement.

          Initial Shelf Registration:  See Section 3(a).
          --------------------------

          Inspectors:  See Section 5(o).
          ----------

          Issue Date:  The date on which the Shares were sold to the Initial
          ----------
Purchasers pursuant to the Purchase Agreement.

          Issuers:  See the second introductory paragraph to this Agreement.
          -------
<PAGE>

                                      -3-

          NASD:  National Association of Securities Dealers, Inc.
          ----

          Participant:  See Section 7(a).
          -----------

          Participating Broker-Dealer:  See Section 2(b).
          ---------------------------

          Partnership:  See the second introductory paragraph to this Agreement.
          -----------

          Person:  Any individual, corporation, partnership, limited liability
          ------
company, joint venture, association, joint stock company, trust, unincorporated
organization or government (including any agency or political subdivision
thereof).

          Private Exchange:  See Section 2(b).
          ----------------

          Private Exchange Shares:  See Section 2(b).
          -----------------------

          Prospectus:  The prospectus included in any Registration Statement
          ----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Shares covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

          Purchase Agreement:  See the second introductory paragraph to this
          ------------------
Agreement.

          Records:  See Section 5(o).
          -------

          Registrable Shares:  Each Share upon original issuance thereof and at
          ------------------
all times subsequent thereto, each Exchange Share as to which Section 2(c)(iv)
hereof is applicable upon original issuance thereof and at all times subsequent
thereto and each Private Exchange Share, if issued, upon original issuance
thereof and at all times subsequent thereto, until, in the case of any such
Share, Exchange Share or Private Exchange Share, if issued, as the case may be,
the earliest to occur of (i) a Registration Statement (other than, with respect
to any Exchange Share as to which Section 2(c)(iv) hereof is applicable)
covering such Share, Exchange Share or Private Exchange Share, as the case may
be, has been declared effective by the Commission and such Share, Exchange Share
or Private Exchange Share, as the case may be, has been disposed of in
accordance with such effective Registration Statement, (ii) such Share, Exchange
Share or Private Exchange Share, as the case may be, is sold in compliance
<PAGE>

                                      -4-

with Rule 144, (iii) in the case of any Share, such Share has been exchanged
pursuant to the Exchange Offer for an Exchange Share or Exchange Shares which
may be resold without restriction under federal securities laws, or (iv) such
Share, Exchange Share or Private Exchange Share, as the case may be, ceases to
be outstanding for purposes of the Statement of Resolution.

          Registration Statement:  Any registration statement of the Company,
          ----------------------
including, but not limited to, the Exchange Registration Statement, that covers
any of the Registrable Shares pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.

          Rule 144:  Rule 144 under the Securities Act, as such Rule may be
          --------
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the Commission providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.

          Rule 144A:  Rule 144A under the Securities Act, as such Rule may be
          ---------
amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the Commission.

          Rule 415:  Rule 415 under the Securities Act, as such Rule may be
          --------
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.

          Securities Act:  The Securities Act of 1933, as amended, and the rules
          --------------
and regulations of the Commission promulgated thereunder.

          Shares:  See the second introductory paragraph to this Agreement.
          ------
Unless the context otherwise necessitates, when used in this Agreement the term
"Shares" shall be deemed to include any and all Dividend Shares that may be
outstanding at the time of the application of any of the applicable provisions
of this Agreement.

          Shelf Notice:  See Section 2(c).
          ------------

          Shelf Registration:  See Section 3(b).
          ------------------

          Statement of Resolution:  The statement of resolution filed by the
          -----------------------
Company with the Secretary of State of the State of Texas relating to the Shares
issued by the Company.
<PAGE>

                                      -5-

          Subsequent Shelf Registration:  See Section 3(b).
          -----------------------------

          Transfer Agent:  See Section 2(b)(3).
          --------------

          Underwritten registration or underwritten offering:  A registration in
          --------------------------------------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.

          Units:  See the second introductory paragraph to this Agreement.
          -----

2.   Exchange Offer
     --------------

          (a)  The Company agrees to file with the Commission no later than the
Filing Date, an offer to exchange (the "Exchange Offer") any and all of the
                                        --------------
Registrable Shares (other than Private Exchange Shares, if any) for a like
aggregate liquidate preference of preferred equity securities of the Company
which are identical in all material respects to the Shares (the "Exchange
                                                                 --------
Shares") (and which are entitled to the benefits of the Statement of
------
Resolution), except that the Exchange Shares shall have been registered pursuant
to an effective Registration Statement under the Securities Act and shall
contain no restrictive legend thereon.  The Exchange Offer shall be registered
under the Securities Act on the appropriate form (the "Exchange Registration
                                                       ---------------------
Statement") and shall comply with all applicable tender offer rules and
---------
regulations under the Exchange Act.  The Company agrees to use its reasonable
best efforts to (x) cause the Exchange Registration Statement to be declared
effective under the Securities Act on or before the Effectiveness Date; (y) keep
the Exchange Offer open for at least 30 days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is first mailed
to Holders; and (z) consummate the Exchange Offer on or prior to the 30th day
following the date on which the Exchange Registration Statement is declared
effective.  If after such Exchange Registration Statement is initially declared
effective by the Commission, the Exchange Offer or the issuance of the Exchange
Shares thereunder is interfered with by any stop order, injunction or other
order or requirement of the Commission or any other governmental agency or
court, such Exchange Registration Statement shall be deemed not to have become
effective for purposes of this Agreement.  Each Holder who participates in the
Exchange Offer will be required to represent that any Exchange Shares received
by it will be acquired in the ordinary course of its business, that at the time
of the consummation of the Exchange Offer such Holder does not and will not have
any arrangement or understanding with any Person to participate in the
distribution of the Exchange Shares, that such Holder is not an affiliate of the
Company within the meaning of Rule 405 of the Securities Act, and any additional
representations that in the written opinion of counsel to the Company are
necessary under then-existing interpretations of the Commission in order for the
Exchange Registration Statement to be declared effective.  Upon consummation of
the Exchange Offer in accordance with this Section 2, the provisions of this
Agreement shall continue to apply, mutatis mutandis, solely with respect to
                                   ----------------
Registrable Shares that are Private Exchange Shares and Exchange Shares held by
Participating Broker-Dealers,
<PAGE>

                                      -6-

and the Company shall have no further obligation to register Registrable Shares
(other than Private Exchange Shares and other than in respect of any Exchange
Shares as to which clause 2(c)(iv) hereof applies) pursuant to Section 3 of this
Agreement.

          (b)  The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the Staff of the Commission
with respect to the potential "underwriter" status of any broker-dealer that is
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Shares received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
 ---------------------------
publicly disseminated by the Staff of the Commission or such positions or
policies, in the judgment of the Initial Purchasers, represent the prevailing
views of the Staff of the Commission.  Such "Plan of Distribution" section shall
also allow, to the extent permitted by applicable policies and regulations of
the Commission, the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including, to the extent
so permitted, all Participating Broker-Dealers, and include a statement
describing the manner in which Participating Broker-Dealers may resell the
Exchange Shares.

          The Company shall use its reasonable best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time beginning when the Exchange Shares are first issued
in the Exchange Offer and ending upon the earlier of the expiration of the 180th
day after the Exchange Offer has been completed and such Persons are no longer
required to comply with the prospectus delivery requirements in connection with
offers and sales of the Exchange Shares (the "Applicable Period").
                                              -----------------

          If, upon consummation of the Exchange Offer, any Initial Purchaser
holds any Shares acquired by it and having the status of an unsold allotment in
the initial distribution, the Company upon the request of such Initial Purchaser
shall, simultaneously with the delivery of the Exchange Shares in the Exchange
Offer, issue and deliver to such Initial Purchaser, in exchange (the "Private
                                                                      -------
Exchange") for the Shares held by such Initial Purchaser, a like liquidation
--------
preference of preferred equity securities of the Company that are identical in
all material respects to the Exchange Shares except for the existence of
restrictions on transfer thereof under the Securities Act and securities laws of
the several states of the U.S. (the "Private Exchange Shares").  The Private
                                     -----------------------
Exchange Shares shall bear the same CUSIP number as the Exchange Shares to the
extent possible.  Dividends on the Exchange Shares and Private Exchange Shares
will accumulate from the last dividend payment date on which dividends were paid
on the Shares surrendered in exchange therefor or, if no dividends have been
paid on the Shares, from the Issue Date.
<PAGE>

                                      -7-

          In connection with the Exchange Offer, the Company shall:

          (1)  mail to each Holder a copy of the Prospectus forming part of the
     Exchange Registration Statement, together with an appropriate letter of
     transmittal and related documents;

          (2)  utilize the services of a depositary for the Exchange Offer with
     an address in the Borough of Manhattan, The City of New York, which may be
     a the transfer agent for the Shares (the "Transfer Agent") or an affiliate
                                               --------------
     thereof;

          (3)  permit Holders to withdraw tendered Registrable Shares at any
     time prior to the close of business, New York time, on the last Business
     Day on which the Exchange Offer shall remain open; and

          (4)  otherwise comply in all material respects with all applicable
     laws.

          As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:

          (5)  accept for exchange all Registrable Shares validly tendered and
     not validly withdrawn pursuant to the Exchange Offer or the Private
     Exchange;

          (6)  deliver to the Transfer Agent for cancellation all Registrable
     Shares so accepted for exchange concurrently with the consummation of such
     exchange; and

          (7)  cause the Transfer Agent to authenticate and deliver promptly to
     each Holder tendering such Registrable Shares, Exchange Shares or Private
     Exchange Shares, as the case may be, equal in liquidation preference to the
     Shares of such Holder so accepted for exchange.

          The Exchange Shares and the Private Exchange Shares may be issued
under the Statement of Resolution or a statement of resolution identical in all
material respects to the Statement of Resolution, which in either event will
provide that the Exchange Shares will not be subject to the transfer
restrictions set forth in the Statement of Resolution and that the Exchange
Shares, the Private Exchange Shares and the Shares, if any, will vote and
consent together on all matters as one class and that none of the Exchange
Shares, the Private Exchange Shares or the Shares, if any, will have the right
to vote or consent as a separate class on any matter.

          (c)  If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company is not permitted to
effect an Exchange Offer, (ii) the Exchange Offer is not consummated within 180
days of the Issue
<PAGE>

                                      -8-

Date, (iii) any holder of Private Exchange Shares so requests in writing to the
Company or (iv) in the case of any Holder that participates in the Exchange
Offer (and tenders its Registrable Shares prior to the expiration thereof), such
Holder does not receive Exchange Shares on the date of the exchange that may be
sold without restriction under federal securities laws (other than due solely to
the status of such Holder as an affiliate of the Company within the meaning of
the Securities Act) and so notifies the Company within 30 days following the
consummation of the Exchange Offer (and providing a reasonable basis for its
conclusions), in the case of each of clauses (i)-(iv), then the Company shall as
promptly as practicable deliver to the Holders and the Transfer Agent written
notice thereof (the "Shelf Notice") and shall file a Shelf Registration
                     ------------
pursuant to Section 3.

3.   Shelf Registration
     ------------------

          If a Shelf Notice is delivered as contemplated by Section 2(c), then:

          (a)  Shelf Registration.  The Company shall as promptly as reasonably
               ------------------
practicable file with the Commission a Registration Statement for an offering to
be made on a continuous basis pursuant to Rule 415 covering all of the
Registrable Shares (the "Initial Shelf Registration").  If the Company shall not
                         --------------------------
have yet filed the Exchange Registration Statement, the Company shall file with
the Commission the Initial Shelf Registration on or prior to the Filing Date and
shall use its reasonable best efforts to cause such Initial Shelf Registration
to be declared effective under the Securities Act on or prior to the
Effectiveness Date.  Otherwise, the Company shall file with the Commission the
Initial Shelf Registration within 45 days of the delivery of the Shelf Notice
and shall use its reasonable best efforts to cause such Shelf Registration to be
declared effective under the Securities Act on or prior to the 90th day after
filing of the Initial Shelf Registration.  The Initial Shelf Registration shall
be on Form S-1 or another appropriate form permitting registration of such
Registrable Shares for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings).  The
Company shall not permit any securities other than the Registrable Shares to be
included in any Shelf Registration.  The Company shall use its reasonable best
efforts to keep the Initial Shelf Registration continuously effective under the
Securities Act until the date which is 24 months from the Issue Date (or, if
Rule 144(k) under the Securities Act is amended to permit unlimited resales by
non-affiliates within a lesser period, such lesser period) (subject to extension
pursuant to the last paragraph of Section 5 hereof) (the "Effectiveness Period")
                                                          --------------------
or such shorter period ending when (i) all Registrable Shares covered by the
Initial Shelf Registration have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf
Registration covering all of the Registrable Shares has been declared effective
under the Securities Act.

          (b)  Subsequent Shelf Registrations.  If the Initial Shelf
               ------------------------------
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the
<PAGE>

                                      -9-

Effectiveness Period (other than because of the sale of all of the securities
registered thereunder), the Company shall use its reasonable best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within 30 days of such cessation of effectiveness amend
the Shelf Registration in a manner to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional "shelf" Registration
Statement pursuant to Rule 415 covering all of the Registrable Shares (a
"Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed,
 -----------------------------
the Company shall use its reasonable best efforts to cause the Subsequent Shelf
Registration to be declared effective as soon as practicable after such filing
and to keep such Subsequent Shelf Registration continuously effective for a
period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registrations was previously continuously effective. As used
herein the term "Shelf Registration" means the Initial Shelf Registration and
                 ------------------
any Subsequent Shelf Registration.

          (c)  Supplements and Amendments.  The Company shall promptly
               --------------------------
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate liquidation preference of
the Registrable Shares covered by such Shelf Registration or by any underwriter
of such Registrable Shares, in each case, with the Company's consent, which
consent shall not be unreasonably withheld or delayed.

4.   Additional Dividends
     --------------------

          (a)  The Company and the Initial Purchasers agree that the Holders of
Registrable Shares will suffer damages if the Company fails to fulfill its
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision.  Accordingly,
the Company agrees to pay, as liquidated damages, additional dividends on the
Registrable Shares ("Additional Dividends") under the circumstances and to the
                     --------------------
extent set forth below, each of which shall be given independent effect (each a
"Registration Default"):
 --------------------

          (i)  if (A) neither the Exchange Registration Statement nor the
     Initial Shelf Registration has been filed on or prior to the Filing Date or
     (B) notwithstanding that the Company has consummated or will consummate an
     Exchange Offer, the Company is required to file a Shelf Registration and
     such Shelf Registration is not filed on or prior to the 45th day after
     delivery of the Shelf Notice, then, in the case of subclause (A),
     commencing on the day after the Filing Date or, in the case of subclause
     (B), commencing on the 46th day following delivery of the Shelf Notice,
     Additional Dividends shall accumulate on the Registrable Shares over and
     above the stated dividend
<PAGE>

                                      -10-

     rate at a rate of 0.50% per annum for the first 90 days immediately
     following the Filing Date or such 45th day, as the case may be, such
     Additional Dividends rate increasing by an additional 0.25% per annum at
     the beginning of each subsequent 90-day period;

          (ii)  if (A) neither the Exchange Registration Statement nor the
     Initial Shelf Registration is declared effective on or prior to the
     Effectiveness Date or (B) notwithstanding that the Company has consummated
     or will consummate an Exchange Offer, the Company is required to file a
     Shelf Registration and such Shelf Registration is not declared effective by
     the Commission on or prior to the 90th day after filing of the Initial
     Shelf Registration, then, commencing on the day after the Effectiveness
     Date or the 90th day, as the case may be, Additional Dividends shall
     accumulate on the Registrable Shares over and above the stated dividend
     rate in effect at a rate of 0.50% per annum for the first 90 days
     immediately following the day after the Effectiveness Date or the 90th day,
     as the case may be, such Additional Dividends rate increasing by an
     additional 0.25% per annum at the beginning of each subsequent 90-day
     period; and

          (iii) if (A) the Company has not exchanged Exchange Shares for all
     Shares validly tendered in accordance with the terms of the Exchange Offer
     on or prior to the 180th day after the Issue Date, (B) the Exchange
     Registration Statement ceases to be effective prior to consummation of the
     Exchange Offer or (C) if applicable, a Shelf Registration has been declared
     effective and such Shelf Registration ceases to be effective at any time
     during the Effectiveness Period, then Additional Dividends shall accumulate
     on the Registrable Shares over and above the stated dividend rate at a rate
     of 0.50% per annum for the first 90 days commencing on the (x) 181st day
     after the Issue Date in the case of (A) above or (y) the day such Exchange
     Registration Statement or Shelf Registration ceases to be effective in the
     case of (B) and (C) above, such Additional Dividends rate increasing by an
     additional 0.25% per annum at the beginning of each such subsequent 90-day
     period;

provided, however, that the Additional Dividends rate on the Registrable Shares
--------  -------
may not exceed in the aggregate 2.0% per annum; provided further that (1) upon
                                                -------- -------
the filing of the Exchange Registration Statement or each Shelf Registration (in
the case of (i) above), (2) upon the effectiveness of the Exchange Registration
Statement or each Shelf Registration, as the case may be (in the case of (ii)
above), or (3) upon the exchange of Exchange Shares for all Registrable Shares
tendered (in the case of (iii)(A) above) or upon the effectiveness of an
Exchange Registration Statement or Shelf Registration which had ceased to remain
effective (in the case of (iii)(B) and (C) above), Additional Dividends on any
Registrable Shares then accumulating Additional Dividends as a result of such
clause (or the relevant subclause thereof), as the case may be, shall cease to
accumulate.
<PAGE>

                                      -11-

          (b)  The Company shall notify each Holder within one Business Day
after each and every date on which a Registration Default occurs in respect of
which Additional Dividends is required to be paid (an "Event Date"). Any amounts
                                                       ----------
of Additional Dividends due pursuant to a Registration Default will be payable
in cash, semi-annually on each regular dividend payment date specified in the
Statement of Resolution (to the Holders of Registrable Shares of record on the
regular record date therefor (as specified in the Statement of Resolution)
immediately preceding such dates), commencing with the first such regular
dividend payment date occurring after any such Additional Dividends commence to
accumulate. The amount of Additional Dividends will be determined by multiplying
the applicable Additional Dividends rate by the liquidation preference of the
Shares subject thereto, multiplied by a fraction, the numerator of which is the
number of days such Additional Dividends rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.

          Notwithstanding anything to the contrary in this Section 4, the
Company shall not be required to pay Additional Dividends to a Holder (i) if
such Holder failed to comply with its obligations to make the representations
set forth in Section 2(a) or failed to provide the information required to be
provided by it, if any, pursuant to Section 5 or (ii) if the Exchange Offer was
consummated within 180 days of the Issue Date and such Holder of Registrable
Shares was, at any time while the Exchange Offer was pending, eligible to
exchange, and did not validly tender, such Registrable Shares for freely
transferable corresponding Exchange Shares in such Exchange Offer.

          The parties hereto agree that the liquidated damages provided for in
this Section 4 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Registrable
Shares by reason of the failure of (i) the Shelf Registration or the Exchange
Registration Statement to be filed, (ii) the Shelf Registration to remain
effective or (iii) the Exchange Registration Statement to be declared effective
and remain effective and the Exchange Offer to be consummated, in each case to
the extent required by this Agreement.

5.   Registration Procedures
     -----------------------

          In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall use its reasonable best efforts to
effect such registrations to permit the sale of such securities covered thereby
in accordance with the intended method or methods of disposition thereof, and
pursuant thereto and in connection with any Registration Statement filed by the
Company hereunder, the Company shall use its reasonable best efforts to:

          (a)  Prepare and file with the Commission prior to the Filing Date,
the Exchange Registration Statement or if the Exchange Registration Statement is
not filed or is
<PAGE>

                                      -12-

unavailable, a Shelf Registration as prescribed by Section 2 or 3, and use its
reasonable best efforts to cause each such Registration Statement to become
effective and remain effective as provided herein; provided that, if (1) a Shelf
                                                   --------
Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an
Exchange Registration Statement filed pursuant to Section 2 is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Shares during the Applicable Period and has advised the Company
that it is a Participating Broker-Dealer, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, the Company
shall, if requested, furnish to and afford the Holders of the Registrable Shares
to be registered pursuant to such Shelf Registration or each such Participating
Broker-Dealer, as the case may be, covered by such Registration Statement, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be filed
(in each case at least five Business Days prior to such filing). The Company
shall not file any such Registration Statement or Prospectus or any amendments
or supplements thereto if the Holders of a majority in aggregate liquidation
preference of the Registrable Shares covered by such Registration Statement, or
any such Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object.

          (b)  Prepare and file with the Commission such amendments and post-
effective amendments to each Shelf Registration or Exchange Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented by
any Prospectus supplement required by applicable law, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force) under
the Securities Act; and comply with the provisions of the Securities Act and the
Exchange Act applicable to it with respect to the disposition of all securities
covered by such Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any securities being
sold by a Participating Broker-Dealer covered by any such Prospectus.  The
Company shall be deemed not to have used its reasonable best efforts to keep a
Registration Statement effective during the Applicable Period if it voluntarily
takes any action that would result in selling Holders of the Registrable Shares
covered thereby or Participating Broker-Dealers seeking to sell Exchange Shares
not being able to sell such Registrable Shares or such Exchange Shares during
that period unless such action is required by applicable law, rule or regulation
or unless the Company complies with this Agreement, including, without
limitation, the provisions of paragraph 5(k) hereof and the last paragraph of
Section 5.

          (c)  If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who
<PAGE>

                                      -13-

seeks to sell Exchange Shares during the Applicable Period from whom the Company
has received written notice that it will be a Participating Broker-Dealer,
notify the selling Holders of Registrable Shares, and each such Participating
Broker-Dealer, their counsel and the managing underwriters, if any, promptly
(but in any event within two Business Days), and confirm such notice in writing,
(i) when a Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to a Registration Statement or any post-
effective amendment, when the same has become effective (including in such
notice a written statement that any Holder may, upon request, obtain, without
charge, one conformed copy of such Registration Statement or post-effective
amendment including financial statements and schedules, documents incorporated
or deemed to be incorporated by reference and exhibits), (ii) of the issuance by
the Commission of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or the initiation of any proceedings for that purpose, (iii) if at
any time when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Shares the representations and
warranties of the Company contained in any agreement pursuant to this Agreement
(including any underwriting agreement contemplated by Section 5(n) hereof) cease
to be true and correct in any material respect, (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of a Registration Statement or any of the
Registrable Shares or the Exchange Shares to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event, the existence of any condition or any information becoming known that
makes any statement of material fact made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in, or amendments or supplements to, such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
and (vi) of the Company's reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate.

          (d)  If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, use its reasonable best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable Shares
or the Exchange Shares to
<PAGE>

                                      -14-

be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and,
if any such order is issued, to use its reasonable best efforts to obtain the
withdrawal of any such order at the earliest possible date.

          (e)  If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a majority in
aggregate liquidation preference of the Registrable Shares being sold in
connection with an underwritten offering, (i) as promptly as practicable
incorporate in a prospectus supplement or post-effective amendment such
information or revisions to information therein relating to such underwriters or
selling Holders as the managing underwriters, if any, or such Holders or their
counsel reasonably request to be included or made therein, (ii) make all
required filings of such prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment, and (iii) supplement or make amendments to such Registration
Statement.

          (f)  If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, furnish to each selling Holder of Registrable Shares and to
each such Participating Broker-Dealer who so requests and to counsel and each
managing underwriter, if any, without charge, one conformed copy of the
Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.

          (g)  If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer, deliver to each selling Holder of Registrable
Shares or each such Participating Broker-Dealer, as the case may be, their
respective counsel, and the underwriters, if any, without charge, as many copies
of the Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably request; and,
subject to the last paragraph of this Section 5, the Company hereby consents to
the use (in accordance with law) of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Registrable Shares and each
Participating Broker-Dealer, and the underwriters or agents, if any, and dealers
(if any), in connection with the offering and sale of the Registrable Shares
covered by, or the sale by Participating Broker-Dealers of the Exchange Shares
pursuant to, such Prospectus and any amendment or supplement thereto.
<PAGE>

                                      -15-

          (h)  Prior to any public offering of Registrable Shares or any
delivery of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, use its reasonable best efforts to register or qualify, and
cooperate with the selling Holders of Registrable Shares and each such
Participating Broker-Dealer, the underwriters, if any, and their respective
counsel in connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Shares or Exchange
Shares, as the case may be, for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer, or the managing underwriter or underwriters, if
any, reasonably request in writing; provided that where Exchange Shares held by
                                    --------
Participating Broker-Dealers or Registrable Shares are offered pursuant to an
underwritten offering, counsel to the underwriters shall, at the cost and
expense of the Company, perform the Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this Section
5(h); keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Exchange Shares
by Participating Broker-Dealers or the Registrable Shares covered by the
applicable Registration Statement; provided that the Company shall not be
                                   --------
required to (A) qualify generally to do business in any jurisdiction where it is
not then so qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
(C) subject itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.

          (i)  If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Shares, any Participating Broker-Dealer
and the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Shares to be
sold, which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company (the "DTC"); and
                                                                    ---
enable such Registrable Shares to be in such denominations and registered in
such names as the managing underwriter or underwriters, if any, or Holders may
reasonably request at least two Business Days prior to such sale of Registrable
Shares.

          (j)  Use its reasonable best efforts to cause the Registrable Shares
covered by the Registration Statement to be registered with or approved by such
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the underwriters, if any, to consummate the disposition of
such Registrable Shares, in which case the Company will cooperate in all
reasonable respects with the filing of such Registration Statement and the
granting of such approvals; provided that the Company shall not be required to
                            --------
(A) qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such
<PAGE>

                                      -16-

jurisdiction where it is not then so subject or (C) subject itself to taxation
in excess of a nominal dollar amount in any such jurisdiction where it is not
then so subject.

          (k)  If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to
Section 5(a) hereof) file with the Commission, at the Company's sole expense, a
supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Shares being
sold thereunder or to the purchasers of the Exchange Shares to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
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 the light of the circumstances under which they were
made, not misleading.

          (l)  Use its reasonable best efforts to cause the Registrable Shares
covered by a Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate liquidation
preference of Registrable Shares covered by such Registration Statement or the
managing underwriter or underwriters, if any.

          (m)  Prior to the effective date of the first Registration Statement
relating to the Registrable Shares, (i) provide the Holders with printed
certificates for the Registrable Shares or the Exchange Shares, as the case may
be, in a form eligible for deposit with the Depository Trust Company and (ii)
provide a CUSIP number for the Registrable Shares or the Exchange Shares, as the
case may be.

          (n)  In connection with an underwritten offering of Registrable Shares
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of preferred equity securities similar to
the Shares and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Shares and, in such
connection, (i) make such representations and warranties to the underwriters,
with respect to the business of the Company and its subsidiaries and the
Registration Statement, Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, as are customarily made
by issuers to underwriters in underwritten offerings of preferred equity
securities similar to the Shares, and confirm the same in writing if and when
requested; (ii) obtain the opinion of counsel to the Company and updates thereof
in form and substance reasonably satisfactory to the managing underwriter or
underwriters,
<PAGE>

                                      -17-

addressed to the underwriters covering the matters customarily covered in
opinions requested in underwritten offerings of preferred equity securities
similar to the Shares and such other matters as may be reasonably requested by
managing underwriters; (iii) obtain "cold comfort" letters and updates thereof
in form and substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each of the underwriters, such letters
to be in customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings of preferred
equity securities similar to the Shares and such other matters as reasonably
requested by the managing underwriter or underwriters; and (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in Section 7
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate liquidation preference of Registrable Shares covered by
such Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said Section.
The above shall be done at each closing under such underwriting agreement, or as
and to the extent required thereunder.

          (o)  If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, make available for inspection by any selling Holder of such
Registrable Shares being sold, and each Participating Broker-Dealer, any
underwriter participating in any such disposition of Registrable Shares, if any,
and any attorney, accountant or other agent retained by any such selling Holder,
each Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
                    ----------
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise any
 -------
applicable due diligence responsibilities, and cause the officers, directors and
employees of the Company and its subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such Registration
Statement.  Records which the Company determines, in good faith, to be
confidential and any Records which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction, (iii) the
information in such Records has been made generally available to the public
other than as a result of a disclosure or failure to safeguard by such Inspector
or (iv) disclosure of such information is, in the opinion of counsel for any
Inspector, necessary or advisable in connection with any action, claim, suit or
proceeding,
<PAGE>

                                      -18-

directly or indirectly, involving or potentially involving such Inspector and
arising out of, based upon, related to, or involving this Agreement, or any
transactions contemplated hereby or arising hereunder. Each selling Holder of
such Registrable Shares and each Participating Broker-Dealer will be required to
agree that information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company or any of its subsidiaries unless
and until such is made generally available to the public. Each Inspector, each
selling Holder of such Registrable Shares and each Participating Broker-Dealer
will be required to further agree that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction pursuant to clauses
(ii) or (iv) of the previous sentence or otherwise, give notice to the Company
and allow the Company to undertake appropriate action to obtain a protective
order or otherwise prevent disclosure of the Records deemed confidential at its
expense.

          (p)  Provide a transfer agent for the Registrable Shares or the
Exchange Shares, as the case may be.

          (q)  Comply with all applicable rules and regulations of the
Commission and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable Shares are sold to
underwriters in a firm commitment or best efforts underwritten offering and (ii)
if not sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter of the Company after the effective date of a
Registration Statement, which statements shall cover said 12-month periods.

          (r)  Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for
underwritten transactions, addressed to the Transfer Agent for the benefit of
all Holders of Registrable Shares participating in the Exchange Offer or the
Private Exchange, as the case may be, as follows:  (i) the Exchange Shares or
the Private Exchange Shares, as the case may be have been duly authorized, and
are validly issued, fully paid and nonassessable and free of any preemptive or
similar rights; and (ii) the Amended and Restated Articles of Incorporation of
the Company, by virtue of the Statement of Resolution, sets forth the rights,
preferences and priorities of the Exchange Shares or Private Exchange Shares, as
the case may be, and the holders of Exchange Shares or Private Exchange Shares,
as the case may be, will have the rights set forth in the Statement of
Resolution.

          (s)  If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Shares by Holders to the Company (or to such
other Person
<PAGE>

                                      -19-

as directed by the Company) in exchange for the Exchange Shares or the Private
Exchange Shares, as the case may be, the Company shall mark, or caused to be
marked, on such Registrable Shares that such Registrable Shares are being
cancelled in exchange for the Exchange Shares or the Private Exchange Shares, as
the case may be; in no event shall such Registrable Shares be marked as paid or
otherwise satisfied.

          (t)  Cooperate with each seller of Registrable Shares covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Shares and their respective counsel in
connection with any filings required to be made with the NASD.

          (u)  Use its best efforts to take all other steps reasonably necessary
to effect the registration of the Registrable Shares covered by a Registration
Statement contemplated hereby.

          The Company may require each seller of Registrable Shares as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Shares as the
Company may, from time to time, reasonably request.  The Company may exclude
from such registration the Registrable Shares of any seller who fails to furnish
such information within a reasonable time after receiving such request.  No
seller shall be entitled to Additional Dividends pursuant to Section 4 unless
and until such seller has provided all such information.  Each seller as to
which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such seller not
materially misleading.

          Each Holder of Registrable Shares and each Participating Broker-Dealer
agrees by acquisition of such Registrable Shares or Exchange Shares to be sold
by such Participating Broker-Dealer, as the case may be, that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Shares covered by such Registration
Statement or Prospectus or Exchange Shares to be sold by such Holder or
Participating Broker-Dealer, as the case may be, and, in each case,
dissemination of such Prospectus until such Holder's or Participating Broker-
Dealer's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k), or until it is advised in writing (the "Advice")
                                                                      ------
by the Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto.  In the event the
Company shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Shares covered by such Registration
Statement or Exchange Shares to be sold by such Participating Bro-
<PAGE>

                                      -20-

ker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.

6.   Registration Expenses
     ---------------------

          All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company, whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Shares or Exchange Shares and
determination of the eligibility of the Registrable Shares or Exchange Shares
for investment under the laws of such jurisdictions (x) where the holders of
Registrable Shares are located, in the case of the Exchange Shares, or (y) as
provided in Section 5(h) hereof, in the case of Registrable Shares or Exchange
Shares to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses, including, without limitation, expenses of
printing certificates for Registrable Shares or Exchange Shares in a form
eligible for deposit with the DTC and of printing prospectuses if the printing
of prospectuses is requested by the managing underwriter or underwriters, if
any, or by the Holders of a majority in aggregate liquidation preference of the
Registrable Shares included in any Registration Statement or by any
Participating Broker-Dealer, as the case may be, (iii) reasonable messenger,
telephone and delivery expenses incurred in connection with the Exchange
Registration Statement and any Shelf Registration, (iv) fees and disbursements
of counsel for the Company and reasonable fees and disbursements of special
counsel for the Initial Purchasers and the sellers of Registrable Shares, (v)
fees and disbursements of all independent certified public accountants referred
to in Section 5(n)(iii) (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) rating agency fees, (vii) Securities Act liability insurance,
if the Company desires such insurance, (viii) fees and expenses of all other
Persons retained by the Company (ix) internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees of the Company, performing legal or accounting duties), (x) the
expense of any annual or special audit, (xi) the fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, (xii) the fees and disbursements of underwriters, if any, customarily
paid by issuers or sellers of securities (but not including any underwriting
discounts or commissions or transfer taxes, if any, attributable to the sale of
the Registrable Shares which discounts, commissions or taxes shall be paid by
Holders of such Registrable Shares) and (xiii) the expenses relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, securities sales agreements, indentures and any other
documents necessary in order to comply with this Agreement.
<PAGE>

                                      -21-

7.   Indemnification
     ---------------

          (a)  the Company agrees to indemnify and hold harmless each Holder of
Registrable Shares and each Participating Broker-Dealer, the officers,
directors, employees and agents of each such Person, and each Person, if any,
who controls any such Person within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from
                                                           -----------
and against any and all losses, claims, damages and liabilities (including,
without limitation, the reasonable legal fees and other reasonable expenses
actually incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or caused by, 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, in
the light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information relating to any Participant
furnished to the Company in writing by or on behalf of such Participant
expressly for use therein; provided, however, that the Company shall not be
                           --------  -------
liable if such untrue statement or omission or alleged untrue statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus or any amendment or supplement thereto and the Prospectus does
not contain any other untrue statement or omission or alleged untrue statement
or omission of a material fact that was the subject matter of the related
proceeding and any such loss, liability, claim, damage or expense suffered or
incurred by the Participants resulted from any action, claim or suit by any
Person who purchased Registrable Shares or Exchange Shares which are the subject
thereof from such Participant and it is established in the related proceeding
that such Participant failed to deliver or provide a copy of the Prospectus (as
amended or supplemented) to such Person with or prior to the confirmation of the
sale of such Registrable Shares or Exchange Shares sold to such Person if
required by applicable law, unless such failure to deliver or provide a copy of
the Prospectus (as amended or supplemented) was a result of noncompliance by the
Company with Section 5 of this Agreement.

          (b)  Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Company, its directors and officers
and each Person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus.  The liability of any Participant under this paragraph shall in no
event exceed the proceeds received
<PAGE>

                                      -22-

by such Participant from sales of Registrable Shares or Exchange Shares giving
rise to such obligations.

          (c)  If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
                                            ------------------
notify the Person against whom such indemnity may be sought (the "Indemnifying
                                                                  ------------
Person") in writing, and the Indemnifying Person, upon request of the
------
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
                 --------  -------
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise.  In any such proceeding, any Indemnified Person
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed in
writing to the contrary, (ii) the Indemnifying Person has failed within a
reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and the Indemnified Person shall have reasonably concluded that there may
be one or more legal defenses available to it and/or other Indemnified Persons
that are different from or additional to those available to any such
Indemnifying Person.  It is understood that, unless there is a conflict among
Indemnified Persons, the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed as they are incurred.  Any such separate firm for the Participants
and such control Persons of Participants shall be designated in writing by
Participants who sold a majority in interest of Registrable Shares sold by all
such Participants and any such separate firm for the Company, its directors,
officers and such control Persons of the Company shall be designated in writing
by the Company.  The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there is a final non-appealable judgment for the plaintiff, the
Indemnifying Person agrees to indemnify any Indemnified Person from and against
any loss or liability by reason of such settlement or judgment.  Notwithstanding
the foregoing sentence, if at any time an Indemnified Person shall have
requested an Indemnifying Person to reimburse the Indemnified Person for
reasonable fees and expenses actually incurred by counsel as contemplated by the
third sentence of this paragraph, the Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected without its consent if
(i) such settlement is entered into more than 30 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying
<PAGE>

                                      -23-

Person shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement; provided, however, that the
                                              --------  -------
Indemnifying Person shall not be liable for any settlement effected without its
consent pursuant to this sentence if the Indemnifying Person is contesting, in
good faith, the request for reimbursement. No Indemnifying Person shall, without
the prior written consent of the Indemnified Person, effect any settlement of
any pending or threatened proceeding in respect of which any Indemnified Person
is or could have been a party and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement (A) includes an unconditional
release of such Indemnified Person, in form and substance satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of an Indemnified Person.

          (d)  If the indemnification provided for in the first and second
paragraphs of this Section 7 is unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions (or alleged statements or omissions) that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations.  The relative fault of the parties
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 Participants or such other Indemnified Person, as the case
may be, on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission and
any other equitable considerations appropriate under the circumstances.

          (e)  The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
                                                           --- ----
(even if the Participants 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 the immediately preceding paragraph.  The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds
<PAGE>

                                      -24-

received by such Participant from sales of Registrable Shares or Exchange
Shares, as the case may be, exceeds the amount of any damages that such
Participant 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
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.

          (f)  The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.

8.   Rules 144 and 144A
     ------------------

          The Company covenants, for so long as any Registrable Shares remain
outstanding, that it will file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
Commission thereunder in a timely manner and, if at any time it is not required
to file such reports, it will, upon the request of any Holder of Registrable
Shares, make publicly available other information so long as necessary to permit
sales pursuant to Rule 144 and Rule 144A.  The Company further covenants, for so
long as any Registrable Shares remain outstanding, to make available to any
Holder or beneficial owner of Registrable Shares in connection with any sale
thereof and any prospective purchaser of such Registrable Shares from such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Securities Act in order to permit resales of such Registrable Shares
pursuant to Rule 144A.

9.   Underwritten Registrations
     --------------------------

          If any of the Registrable Shares covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate liquidation preference of such
Registrable Shares included in such offering and shall be reasonably acceptable
to the Company.

          No Holder of Registrable Shares may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Shares on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
<PAGE>

                                      -25-

10.  Miscellaneous
     -------------

          (a)  Remedies.  Except as provided in Section 4, in the event of a
               --------
breach by the Company of any of its obligations under this Agreement, each
Holder of Registrable Shares and each Participating Broker-Dealer holding
Exchange Shares, in addition to being entitled to exercise all rights provided
herein, in the Statement of Resolution or, in the case of an Initial Purchaser,
in the Purchase Agreement, or granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
Except as provided in Section 4, the Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement and hereby further agrees that, in
the event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.

          (b)  No Inconsistent Agreements.  The Company has not entered, as of
               --------------------------
the date hereof, and the Company shall not enter, after the date of this
Agreement, into any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders of Registrable Shares in
this Agreement or otherwise conflicts with the provisions hereof.  The Company
has not entered and shall not enter into any agreement with respect to any of
its securities which will grant to any Person piggy-back rights with respect to
a Registration Statement.

          (c)  Adjustments Affecting Registrable Shares.  The Company shall not
               ----------------------------------------
directly or indirectly, take any action with respect to the Registrable Shares
as a class that would adversely affect the ability of the Holders of Registrable
Shares to include such Registrable Shares in a registration undertaken pursuant
to this Agreement.

          (d)  Amendments and Waivers.  The provisions of this Agreement may not
               ----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) the Holders of not less than a majority in aggregate liquidation
preference of the then outstanding Registrable Shares and (B) in circumstances
that would adversely affect Participating Broker-Dealers, the Participating
Broker-Dealers holding not less than a majority in aggregate liquidation
preference of the Exchange Shares held by all Participating Broker-Dealers;
provided, however, that Section 7 and this Section 10(d) may not be amended,
--------  -------
modified or supplemented without the prior written consent of each Holder and
each Participating Broker-Dealer (including any person who was a Holder or
Participating Broker-Dealer of Registrable Shares or Exchange Shares, as the
case may be, disposed of pursuant to any Registration Statement).
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders of Registrable Shares whose securities are being tendered pursuant to
the Exchange Offer or sold pursuant to a Registration Statement and that does
not directly or indirectly affect, impair, limit or
<PAGE>

                                      -26-

compromise the rights of other Holders of Registrable Shares may be given by
Holders of at least a majority in aggregate liquidation preference of the
Registrable Shares being tendered or being sold by such Holders pursuant to such
Registration Statement.

          (e)  Notices.  All notices and other communications provided for or
               -------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or telecopier:

          1.   if to a Holder of Registrable Shares or any Participating Broker-
     Dealer, at the most current address of such Holder or Participating Broker-
     Dealer, as the case may be, set forth on the records of the registrar under
     the Statement of Resolution, with a copy in like manner to the Initial
     Purchasers as follows:

               CIBC WORLD MARKETS CORP.
               CHASE SECURITIES INC.
               c/o CIBC WORLD MARKETS CORP.
               425 Lexington Avenue
               3rd Floor
               New York, New York 10017
               Facsimile No.: (212) 885-4998
               Attention: Corporate Finance
                          Department

          with a copy to:

               Cahill Gordon & Reindel
               80 Pine Street
               New York, New York  10005
               Facsimile No.: (212) 269-5420
               Attention: Roger Meltzer, Esq.

          2.   if to the Initial Purchasers, at the address specified in Section
     10(e)(1);

          3.   if to the Company, as follows:

               c/o Laurel Hill Capital Partners LLC
               2 Robbins Lane, Suite 201
               Jericho, New York 11753
               Facsimile No.: (516) 933-3108
               Attention: Kathleen Marion
<PAGE>

                                      -27-

          with copies to:

               Milbank, Tweed, Hadley & McCloy LLP
               1 Chase Manhattan Plaza
               New York, New York 10005
               Facsimile No.: (212) 530-5219
               Attention: M. Douglas Dunn, Esq.

          All such notices and communications shall be deemed to have been duly
given:  when delivered by hand, if personally delivered; five Business Days
after being deposited in the mail, postage prepaid, if mailed; one Business Day
after being timely delivered to a next-day air courier guaranteeing overnight
delivery; and when receipt is acknowledged by the addressee, if telecopied.

          Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Transfer Agent at
the address specified in the Statement of Resolution.

          (f) Successors and Assigns.  This Agreement shall inure to the benefit
              ----------------------
of and be binding upon the successors and assigns of each of the parties hereto
and the Holders; provided, however, that this Agreement shall not inure to the
                 --------  -------
benefit of or be binding upon a successor or assign of a Holder unless and to
the extent such successor or assign holds Registrable Shares.

          (g) Counterparts.  This Agreement may be executed in any number of
              ------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

          (h) Headings.  The headings in this Agreement are for convenience of
              --------
reference only and shall not limit or otherwise affect the meaning hereof.

          (i) Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
              -------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.  EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
<PAGE>

                                      -28-

          (j) Severability.  If any term, provision, covenant or restriction of
              ------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction.  It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

          (k) Shares Held by the Company or Its Affiliates.  Whenever the
              --------------------------------------------
consent or approval of Holders of a specified percentage of Registrable Shares
is required hereunder, Registrable Shares held by the Company or its affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.

          (l) Third Party Beneficiaries.  Holders of Registrable Shares and
              -------------------------
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.

          (m) Registration of Dividend Shares.  If the issuance of Dividend
              -------------------------------
Shares requires registration under the Securities Act and any such issuance
shall not have been effectively registered under the Securities Act pursuant to
the Exchange Registration Statement then, prior to any issuance of Dividend
Shares, the Company shall file with the Commission and cause to become effective
a Registration Statement registering the issuance of such Dividend Shares.

          (n) Entire Agreement.  This Agreement, together with the Purchase
              ----------------
Agreement and the Statement of Resolution, is intended by the parties as a final
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein and any and all
prior oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda among the Initial
Purchasers on the one hand and the Company on the other, or between or among any
agents, representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter hereof and
thereof are merged herein and replaced hereby.
<PAGE>

          IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                   TNP ENTERPRISES, INC.

                                   By: ___________________________________
                                       Name:
                                       Title:

                                   CIBC WORLD MARKETS CORP.

                                   By: ___________________________________
                                       Name:
                                       Title:

                                   CHASE SECURITIES INC.

                                   By: ___________________________________
                                       Name:
                                       Title:

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