FIRST AMENDMENT TO MERGER AGREEMENT

     This first amendment (the  "Amendment") to the Merger  Agreement is entered
into on this 3rd day of January, 2000, by and among Pease Oil and Gas Company, a
Nevada  corporation   ("Pease"),   its  wholly  owned  Delaware  subsidiary  CPI
Acquisition Corp. ("CPI  Acquisition") and Carpatsky  Petroleum Inc., an Alberta
corporation ("Carpatsky"), and evidences the following:

     WHEREAS,  Pease,  CPI  Acquisition  and  Carpatsky  have  entered  into  an
Agreement  and Plan of Merger  ("Merger  Agreement"),  dated  August  31,  1999,
providing  for,  among other things,  the  continuance of Carpatsky into a newly
formed Delaware corporation ("New Carpatsky"), and the merger of CPI Acquisition
with and into New Carpatsky;

     WHEREAS,  capitalized  terms used herein have the meaning  given to them in
the Merger Agreement, unless otherwise provided herein;

     WHEREAS,   Carpatsky  and  Bellwether   Exploration   Company,  a  Delaware
corporation  ("Bellwether"),  have entered into a Securities Purchase Agreement,
of even date herewith, ("the "Purchase Agreement"), pursuant to which Bellwether
has agreed to  purchase,  and  Carpatsky  has agreed to issue and sell,  a newly
created  series  of  Carpatsky  convertible  preferred  shares  (the  "Carpatsky
Preferred Shares"),  having the rights,  preferences and privileges as set forth
in the Articles of Amendment attached as Exhibit A to the Purchase Agreement;

     WHEREAS,  among other things, the Carpatsky  Preferred Shares will grant to
Bellwether  the  right to cast a  majority  of the votes  cast at a  meeting  of
Carpatsky shareholders;

     WHEREAS,  in  connection  with the  issuance  of such  Carpatsky  Preferred
Shares,  (i) the parties to the Merger  Agreement desire to make certain changes
to the Merger Agreement to provide for the treatment of the Carpatsky  Preferred
Shares in the  Redomestication  and Merger and (ii) Pease  desires to consent to
the  issuance  of the  Carpatsky  Preferred  Stock  as  required  by the  Merger
Agreement;

     NOW,  THEREFORE,  the parties hereto, for good and valuable  consideration,
the receipt and sufficiency of which is acknowledged, and desiring to be legally
bound, do hereby agree as follows:


                                        1

<PAGE>



                    ARTICLE I. CONSENT TO PURCHASE AGREEMENT

     Section 1.1 Consent of Pease and CPI Acquisition. Pease and CPI Acquisition
acknowledge  receipt of a copy of the Purchase  Agreement and hereby  consent to
the  issuance  of the  Carpatsky  Preferred  Stock  and the  other  transactions
contemplated  by the Purchase  Agreement.  The issuance of the  Preferred  Stock
pursuant to and other transactions  contemplated by the Purchase Agreement shall
not be a "Competing Transaction" as defined in the Merger Agreement.

                   ARTICLE II. AMENDMENTS TO MERGER AGREEMENT

     Section 2.1 Amendment to Recitals of the Merger  Agreement.  The Section of
the  Merger  Agreement  entitled  "RECITALS"  is hereby  amended  to read in its
entirety as follows:


                                    RECITALS

     A. Upon the terms and subject to the conditions of this  Agreement,  on the
Effective  Time (as  hereinafter  defined) and in  accordance  with the Business
Corporations Act (Alberta) ("ABCA") and the General Corporation Law of the State
of Delaware ("Delaware Law"),  Carpatsky will effect a continuance into Delaware
by filing with the Secretary of State of Delaware a Certificate of Domestication
and a  Certificate  of  Incorporation  in  accordance  with  Section  388 of the
Delaware Law (the "Redomestication"),  subject to the right of holders of common
shares,  without par value  ("Old  Carpatsky  Common  Stock") and the holders of
convertible  preferred  shares,  series A,  without  par value  ("Old  Carpatsky
Preferred  Shares") (each such  dissenting  holder,  a "Dissenting Old Carpatsky
Stockholder")  to seek an  appraisal  of the fair value  thereof as  provided in
Section 184 of the ABCA, and

          (i) each share of Old Carpatsky  Common Stock,  issued and outstanding
     prior to the effective time of the  Redomestication  not owned by Carpatsky
     or any subsidiary of Carpatsky,  will be converted into one share of common
     stock,  $.01  par  value  ("New  Carpatsky  Common  Stock"),  of  Carpatsky
     Petroleum,  Inc.,  a  corporation  redomesticated  in the State of Delaware
     ("New  Carpatsky")  (Old  Carpatsky  Common Stock and New Carpatsky  Common
     Stock are sometimes  referred to herein  collectively as "Carpatsky  Common
     Stock");

          (ii) each Old Carpatsky  Preferred Share, issued and outstanding prior
     to the effective time of the  Redomestication not owned by Carpatsky or any
     subsidiary of Carpatsky, will be converted into 1.073 shares of convertible
     preferred  stock,  series  A,  $.01 par  value  ("New  Carpatsky  Preferred
     Stock"), of New Carpatsky having the rights, preferences and privileges set
     forth in the certificate of designation  attached to the First Amendment to
     Merger  Agreement  dated December 30, 1999 (the "First  Amendment to Merger
     Agreement") as Exhibit A (Old Carpatsky  Preferred Shares and New Carpatsky
     Preferred Stock are sometimes referred to herein collectively as "Carpatsky
     Preferred Stock"); and


                                        2

<PAGE>



          (iii) each outstanding  warrant,  option or other right to acquire Old
     Carpatsky  Common  Stock shall be  converted  into an  equivalent  right to
     acquire New Carpatsky Common Stock on the terms and conditions provided for
     in such warrant, option or other right.

     B. Concurrently with the Redomestication, Acquisition Corp., upon the terms
and subject to the  conditions  of this  Agreement  and in  accordance  with the
Delaware  Law,  will  merge  with and into New  Carpatsky  (the  "Merger"),  and
pursuant  thereto,  each  share  of  New  Carpatsky  Common  Stock,  issued  and
outstanding  immediately  prior to the Effective Time (as defined herein) of the
Merger,  not  owned  directly  or  indirectly  by  Carpatsky  or  Pease or their
respective subsidiaries,  will be converted at the Effective Time into the right
to receive  0.57842  shares of common  stock,  par value $.01 per share of Pease
("Pease Common Stock"),  and each share of New Carpatsky Preferred Stock will be
converted into one share of  convertible  preferred  stock,  series A, par value
$0.01 per share of Pease  ("New  Pease  Preferred  Stock")  having  the  rights,
preferences  and  privileges  set forth in Exhibit B to the First  Amendment  to
Merger  Agreement,  subject  to the  right  of  holders  of such  shares  of New
Carpatsky  Common Stock and New Carpatsky  Preferred  Stock (each, a "Dissenting
New  Carpatsky  Stockholder"  and together  with the  Dissenting  Old  Carpatsky
Stockholders,  collectively, the "Dissenting Carpatsky Stockholders") to seek an
appraisal of the fair value  thereof as provided in Section 262 of Delaware Law,
and each share of common stock,  $.01 per share par value, of Acquisition  Corp.
("Acquisition Corp. Common Stock") issued and outstanding  immediately prior the
Effective  Time,  will be converted at the Effective  Time into one share of New
Carpatsky Common Stock.

     C. Pursuant to the  provisions of those  certain  letter  agreements by and
between Pease and the holders (the "Pease Preferred Stockholders") of all of the
issued  and  outstanding  shares  of  Series  B 5%  PIK  Cumulative  Convertible
Preferred Stock,  par value $.01 per share ("Pease  Preferred  Stock"),  of even
date  herewith  in  substantially  the  form of  Exhibit  A hereto  (the  "Pease
Preferred  Stockholder  Agreements"),  at the Effective  Time and subject to the
provisions of Article II hereof,  each share of Pease Preferred Stock issued and
outstanding  immediately  prior  to the  Effective  Time  (excluding  any  Pease
Preferred  Stock held in  treasury  or owned by Pease or any direct or  indirect
subsidiary  of Pease  immediately  prior to the  Effective  Time which  shall be
canceled and extinguished) shall be exchanged (the "Exchange") into the right to
receive  8,865,665  shares of Pease  Common  Stock (the "Pease  Preferred  Stock
Exchange Ratio").



                                        3

<PAGE>


     D. Following the consummation of the Merger, the fully diluted ownership of
the common stock of the Surviving Corporation will be:

                                           Number              Percent
                                           ------              -------
Pease Common Stockholders                  1,688,698             1.65%
Pease Preferred Stockholders               8,865,665             8.66%
Pease Option and Warrant holders             393,811              .38%
Carpatsky Common Stockholders             44,959,557            43.91%
Carpatsky Preferred Stockholders          28,920,984            28.25%
Carpatsky Warrant holders                 17,448,263            17.04%
Carpatsky Option holders                     115,684              .11%
                                         -----------           ------
                                         102,392,662           100.0%

     E. In the Purchase  Agreement (as defined in the Amendment)  Bellwether has
agreed to vote for the  Redomestication  and  Merger,  subject  to the terms and
conditions  of  the  Merger  Agreement,   and  when  Bellwether  votes  for  the
Redomestication  and Merger it will no longer be able to exercise its dissenters
rights of appraisal;

     F. The Board of Directors of Pease has determined that the Exchange and the
Merger,  as amended by the First Amendment to Merger  Agreement,  are consistent
with and in furtherance of the long-term business strategy of Pease and are fair
to, and in the best  interests of, Pease and its  stockholders  and has approved
and adopted this  Agreement,  including the issuance of Pease Common Stock,  and
the other transactions contemplated hereby.

     G.  The  Board  of  Directors  of  Carpatsky   has   determined   that  the
Redomestication  and  Merger,  as  amended  by the  First  Amendment  to  Merger
Agreement,  are consistent  with and in  furtherance  of the long-term  business
strategy of Carpatsky and are fair to, and in the best  interests of,  Carpatsky
and its  stockholders  and has  approved  and  adopted  this  Agreement  and the
transactions contemplated hereby.

     H.  For   federal   income  tax   purposes,   it  is   intended   that  the
Redomestication,   the   Exchange   and  the   Merger   qualify  as  a  tax-free
reorganizations  under the relevant  provisions  of the United  States  Internal
Revenue Code of 1986, as amended (the "Code").

     Section 2.2 Amendment to Article II of the Merger Agreement.  Article II of
the  Merger   Agreement   entitled   "CONVERSION  OF  SECURITIES;   EXCHANGE  OF
CERTIFICATES" is hereby amended to read in its entirety as follows:



                                        4

<PAGE>


                                   ARTICLE II

               CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

     Section  2.01  Merger   Consideration;   Conversion  and   Cancellation  of
Securities.  At the Effective Time, by virtue of the  Redomestication and Merger
and  without  any  action  on the  part  of  Carpatsky,  New  Carpatsky,  Pease,
Acquisition Corp. or their respective stockholders:

          (a) Subject to the other provisions of this Article II,

               (i)  each  share  of  New  Carpatsky   Common  Stock  issued  and
          outstanding  immediately  prior to the Effective  Time  (excluding any
          Carpatsky  Common Stock described in Section 2.01(c) of this Agreement
          and  shares  held  by  Dissenting  Carpatsky  Stockholders)  shall  be
          converted  into the right to receive  0.57842  shares of Pease  Common
          Stock (the "Carpatsky Common Stock Exchange Ratio");

               (ii) each  share of New  Carpatsky  Preferred  Stock  issued  and
          outstanding  immediately  prior to the Effective  Time  (excluding any
          Carpatsky  Preferred  Stock  described  in  Section  2.01(c)  of  this
          Agreement and shares held by Dissenting Carpatsky  Stockholders) shall
          be  converted  into  the  right to  receive  one  share  of New  Pease
          Preferred Stock (the "Carpatsky Preferred Stock Exchange Ratio"); and

               (iii) each share of  Acquisition  Corp.  Common  Stock issued and
          outstanding at the Effective Time shall be converted into the right to
          receive one share of New Carpatsky  Common Stock. The Carpatsky Common
          Stock Exchange Ratio, the Carpatsky Preferred Stock Exchange Ratio and
          the  Pease  Preferred  Stock  Exchange  Ratio are  referred  to herein
          collectively as the "Exchange Ratios".

     Notwithstanding the foregoing, except as contemplated by this Agreement, if
between the date of this Agreement and the Effective Time the outstanding shares
of Old or New  Carpatsky  Common  Stock,  Old Carpatsky  Preferred  Shares,  New
Carpatsky  Preferred  Stock or Pease Common Stock or Pease Preferred Stock shall
have been changed  into a different  number of shares or a different  class,  by
reason  of  any  stock  dividend,  subdivision,  reclassification,   conversion,
recapitalization,  split, combination or exchange of shares, the Exchange Ratios
shall be correspondingly  adjusted to reflect such stock dividend,  subdivision,
reclassification,  conversion, recapitalization,  split, combination or exchange
of shares.

          (b) Subject to the other  provisions of this Article II, the rights to
acquire shares of Carpatsky  Common Stock  previously  granted and to be granted
pursuant to the  Carpatsky  Options (as  hereinafter  defined) and the Carpatsky
Warrants  (as  hereinafter  defined)  and to certain  other  persons  and in the
amounts identified in Schedule  4.03(b)(i) of the Carpatsky  Disclosure Schedule
(as hereinafter defined) shall  be adjusted as  of and at the Effective Time, in


                                        5

<PAGE>


accordance  with the  provisions  of such  agreements,  to reflect the Carpatsky
Common Stock Exchange Ratio.

          (c)  Notwithstanding  any provision of this Agreement to the contrary,
each share of Carpatsky  Common Stock or Carpatsky  Preferred  Stock held in the
treasury of  Carpatsky  and each share of  Carpatsky  Common  Stock or Carpatsky
Preferred Stock owned by Pease or Acquisition Corp., respectively, or any direct
or indirect wholly owned subsidiary of Carpatsky or of Pease,  immediately prior
to the Effective Time shall be canceled and extinguished  without any conversion
thereof and no payment shall be made with respect thereto.

          (d)  Subject  to the  provisions  of  Section  2.01(f),  all shares of
Carpatsky  Common Stock (other than shares of New Carpatsky Common Stock held by
Pease at the Effective Time),  Carpatsky  Preferred Stock, Pease Preferred Stock
and  Acquisition  Corp.  Common  Stock shall cease to be  outstanding  and shall
automatically  be  canceled  and  retired,   and  each  certificate   previously
evidencing Carpatsky Common Stock, Carpatsky Preferred Stock and Pease Preferred
Stock  immediately  prior to the  Effective  Time  (the  "Converted  Shares"  or
"Converted Share  Certificates," as the case may be) shall thereafter  represent
the right to receive, subject to Section 2.02(g) of this Agreement,  that number
of shares of Pease Common Stock or New Pease Preferred Stock determined pursuant
to Section 2.01(a) hereof or, if applicable,  cash pursuant to Sections  2.01(f)
or  2.02(f) of this  Agreement  (the  "Merger  Consideration").  The  holders of
Converted Share Certificates shall cease to have any rights with respect to such
Converted  Shares except as otherwise  provided herein or by law. Such Converted
Share Certificates  shall be exchanged for certificates  evidencing whole shares
of Pease Common Stock or New Pease  Preferred  Stock upon the  surrender of such
Converted  Share  Certificates in accordance with the provisions of Section 2.02
of this Agreement,  without interest. No fractional shares of Pease Common Stock
or New Pease  Preferred Stock shall be issued in connection with the Merger and,
in lieu thereof,  a cash payment  shall be made  pursuant to Section  2.02(f) of
this  Agreement.   Each  share  of  Acquisition  Corp.  Common  Stock  shall  be
automatically converted into one share of New Carpatsky Common Stock.

          (e) All shares of Pease  Common  Stock and New Pease  Preferred  Stock
issued to the former  holders of Carpatsky  Common  Stock,  Carpatsky  Preferred
Stock and Pease  Preferred  Stock in the Merger  shall be  registered  under the
Securities Act of 1933, as amended (the "Securities Act").

          (f)  Notwithstanding  anything in this Agreement to the contrary,  any
issued and outstanding shares of capital stock of Carpatsky held by a Dissenting
Carpatsky  Stockholder  who has not  voted  in  favor  of nor  consented  to the
Redomestication  or the Merger and who complies  with all the  provisions of the
ABCA or Delaware  Law  concerning  the right of holders of such stock to dissent
from the Redomestication or the Merger and to require appraisal of their shares,
shall not be converted as described in Section 2.01(a) but shall become,  at the
Effective  Time,  by virtue of the Merger and without any  further  action,  the
right to  receive  such  consideration  as may be  determined  to be due to such
Dissenting  Carpatsky  Stockholder  pursuant to the ABCA or Delaware Law, as the
case may be;  provided,  however,  that  shares  of  Carpatsky  Common  Stock or
Carpatsky  Preferred Stock  outstanding  immediately prior to the Effective Time


                                       6

<PAGE>


and held by a Dissenting  Carpatsky  Stockholder who shall,  after the Effective
Time,  withdraw  his demand for  appraisal  or lose his right of  appraisal,  in
either case  pursuant to the ABCA or Delaware  Law, as the case may be, shall be
deemed to be converted as of the Effective Time, into the right to receive Pease
Common Stock or New Pease Preferred Stock, respectively.

     Section 2.02 Exchange and Surrender of Certificates.

          (a) Subject to Section 2.02(h) below, as of the Effective Time,  Pease
shall deposit,  or shall cause to be deposited with American Securities Transfer
& Trust, Inc., 12039 West Alameda Parkway,  Lakewood, CO 80228 (the "US Exchange
Agent") and, if required by  regulatory  authorities,  CIBC Mellon Trust Company
(the "Canadian  Exchange Agent"; the US Exchange and the Canadian Exchange Agent
are collectively  referred to herein as the "Exchange Agents"),  for the benefit
of the holders of Converted Share Certificates,  for exchange in accordance with
this  Article  II,  the  Merger  Consideration,  together  with  any  dividends,
distributions  or payments  pursuant to Section  2.02(e)  with  respect  thereto
(hereinafter referred to as the "Exchange Fund").

          (b) As soon as reasonably  practicable  after the Effective  Time, the
Exchange  Agents  shall  mail to each  holder of  record of shares of  Carpatsky
Common Stock,  Carpatsky  Preferred Stock and Pease Preferred Stock who have not
exchanged their Converted Share Certificates as contemplated by Section 2.02(h),
immediately  prior to the Effective  Time a letter of  transmittal  (which shall
specify  that  delivery  shall be  effected,  and risk of loss and  title to the
Converted  Share  Certificates  shall pass,  only upon delivery of the Converted
Share  Certificates to the Exchange Agents,  and which shall be in such form and
have such other provisions as Pease may reasonably specify) and instructions for
use in effecting the surrender of the Converted  Share  Certificates in exchange
for  certificates  representing  shares  of  Pease  Common  Stock  or New  Pease
Preferred Stock issuable pursuant to Section 2.01 in exchange for such Converted
Share  Certificates.  Upon  surrender  of  a  Converted  Share  Certificate  for
cancellation to the Exchange  Agents,  together with such letter of transmittal,
duly executed,  the holder of such Converted Share Certificate shall be entitled
to receive in exchange therefor a certificate  representing that number of whole
shares of Pease Common Stock or New Pease  Preferred  Stock (as the case may be)
which such holder has the right to receive in exchange for the  Converted  Share
Certificate  surrendered  pursuant to the  provisions  of this Article II (after
taking into  account all  Converted  Shares then held by such  holder),  and the
Converted Share Certificates so surrendered shall forthwith be canceled.  In the
event of a transfer of ownership of Carpatsky Common Stock,  Carpatsky Preferred
Stock or Pease Preferred  Stock which is not registered in the transfer  records
of Carpatsky or Pease as the case may be, a certificate  representing the proper
number of  shares of Pease  Common  Stock or New  Pease  Preferred  Stock may be
issued to a transferee  if the Converted  Share  Certificate  representing  such
Carpatsky  Common Stock,  Carpatsky  Preferred Stock or Pease Preferred Stock is
presented to the  Exchange  Agents,  accompanied  by all  documents  required to


                                       7

<PAGE>



evidence and effect such  transfer  and by evidence  that any  applicable  stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.02,  each Converted  Share  Certificate  shall be deemed at any time after the
Effective Time to represent  only the Pease Common Stock or New Pease  Preferred
Stock  into which the  Converted  Shares  represented  by such  Converted  Share
Certificate  have been converted as provided in this Article II and the right to
receive  upon  such  surrender  cash in lieu of any  fractional  shares of Pease
Common Stock or New Pease Preferred Stock as contemplated by Section 2.02(f).

          (c) After the Effective Time,  there shall be no further  registration
of transfers of  Carpatsky  Common  Stock,  Carpatsky  Preferred  Stock or Pease
Preferred Stock. If, after the Effective Time, certificates  representing shares
of Carpatsky  Common Stock,  Carpatsky  Preferred Stock or Pease Preferred Stock
are  presented  to Pease or the  Exchange  Agents,  they shall be  canceled  and
exchanged  for  the  Merger  Consideration  provided  for in this  Agreement  in
accordance with the procedures set forth herein.

          (d) Any portion of the Merger  Consideration or the Exchange Fund made
available  to the  Exchange  Agents  pursuant to Section  2.02(a)  that  remains
unclaimed  by the  holders  of  shares  of  Carpatsky  Common  Stock,  Carpatsky
Preferred Stock or Pease Preferred Stock one year after the Effective Time shall
be returned to Pease upon demand,  and any such holder who has not exchanged its
shares of Carpatsky Common Stock,  Carpatsky  Preferred Stock or Pease Preferred
Stock in accordance  with this Section 2.02 prior to that time shall  thereafter
look only to Pease for  payment  of the Merger  Consideration  in respect of its
shares of Carpatsky Common Stock,  Carpatsky  Preferred Stock or Pease Preferred
Stock. Notwithstanding the foregoing, Pease shall not be liable to any holder of
Converted Shares for any amount paid to a public official pursuant to applicable
abandoned property, escheat or similar laws.

          (e) No  dividends,  interest or other  distributions  with  respect to
shares of Pease Common Stock or New Pease  Preferred  Stock shall be paid to the
holder of any unsurrendered  Converted Share Certificates  unless and until such
Converted Share  Certificates  are surrendered as provided in this Section 2.02.
Upon such surrender,  Pease shall pay, without interest, all dividends and other
distributions  payable in respect of such  shares of Pease  Common  Stock or New
Pease  Preferred  Stock on a date subsequent to, and in respect of a record date
after, the Effective Time.

          (f) No certificates  or scrip  evidencing  fractional  shares of Pease
Common Stock or New Pease Preferred Stock shall be issued upon the surrender for
exchange of Converted Share  Certificates,  and such fractional  share interests
shall not entitle the owner thereof to any rights as a stockholder of Pease.  In
lieu  of any  such  fractional  interests,  each  holder  of a  Converted  Share
Certificate  shall,  upon surrender of such certificate for exchange pursuant to
this Article II, be paid an amount in cash  (without  interest),  rounded to the
nearest cent,  determined by multiplying the last sale price of the Pease Common
Stock in the Over-the-Counter market prior to the Closing Date by the fractional
share of Pease  Common  Stock or New Pease  Preferred  Stock (on an as converted
basis) to which such  holder  would  otherwise  be entitled  (after  taking into
account all  Converted  Shares  held of record by such  holder at the  Effective
Time).


                                        8

<PAGE>


          (g)  Pease  shall  be  entitled  to  deduct  and  withhold   from  the
consideration  otherwise payable pursuant to this Agreement to any former holder
of Carpatsky  Common Stock,  Carpatsky  Preferred Stock or Pease Preferred Stock
such  amounts as Pease (or any  affiliate  thereof)  is  required  to deduct and
withhold  with  respect to the  making of such  payment  under the Code,  or any
provision of state,  local or foreign tax law. To the extent that amounts are so
withheld by Pease,  such  withheld  amounts shall be treated for all purposes of
this Agreement as having been paid to the former holder of the Carpatsky  Common
Stock,  Carpatsky  Preferred  Stock or Pease Preferred Stock in respect of which
such  deduction and  withholding  was made. In the event the amount  withheld is
insufficient  so to  satisfy  the  withholding  obligations  of  Pease,  (or any
affiliate  thereof),  such former  stockholder  shall  reimburse  Pease (or such
affiliate),   at  its   request,   the   amount   of  any  such   insufficiency.
Notwithstanding  the  foregoing,  no such  withholding  shall be  required  with
respect to any shares of Carpatsky  Preferred Stock or New Pease Preferred Stock
issued  or   issuable   in  the  Merger  to   Bellwether   Exploration   Company
("Bellwether").

          (h)  Bellwether  shall be  entitled,  at its  election,  to attend the
Closing of the Merger and to tender at such Closing to Pease the Converted Share
Certificates held by Bellwether duly endorsed for transfer to New Carpatsky, and
shall be  entitled  to receive  certificates  registered  in  Bellwether's  name
representing  the number of shares of Pease Common Stock and New Pease Preferred
Stock to which Bellwether is entitled under this Agreement.

     Section 2.03 Amendment to Article III. The following  amendments are hereby
made to the Sections of Article III of the Merger Agreement as indicated:

          (a)  Section  3.03(d)  is  amended  to add the  words  "and New  Pease
Preferred  Stock" after the words  "Pease  Common  Stock" in the first  sentence
thereof.

          (b) Section 3.04 is amended to add the words "and New Pease  Preferred
Stock" after the words  "Pease  Common  Stock" in the first and second  sentence
thereof.

          (c)  Section  3.12(b)  is  amended  to add the  words  "or  New  Pease
Preferred Stock" after the words "Pease Common Stock."

     Section 2.04  Amendment to Article IV. The following  amendments are hereby
made to the Sections of Article IV of the Merger Agreement as indicated:

          (a) Section  4.03(a) is amended to replace the number  77,728,263  for
40,796,246;  and to add the  words ", and an  unlimited  number of shares of Old
Carpatsky Preferred Stock" after the words "issued and outstanding".


                                        9

<PAGE>


          (b) Section  4.03(b) is amended to add the words "or Preferred  Stock"
after the words "Common Stock" in the second sentence thereof.

          (c)  Section  4.04 is amended to add the words "and  Preferred  Stock"
after the words "Common Stock" in the second sentence thereof.

          (d)  Section  4.11(c) is  amended to add the words "and Old  Carpatsky
Preferred  Shares"  after  the words  "Old  Carpatsky  Common  Stock" in the two
locations  where such words  appear,  to add the words "and New Pease  Preferred
Stock"  after the words "Pease  Common  Stock" in the two  locations  where such
words appear and to add the words "and Preferred  Stock" after the words "Common
Stock" in the two locations where such words appear in the parenthetical to such
sentence.

          (e)  Section  4.12 is amended to add the words "and  Preferred  Shares
voting together as a class" after "Old Carpatsky Common Stock" in clause (i) and
to add the words "and  Preferred  Stock  voting  together as a class"  after the
words "New Carpatsky Common Stock" in clause (ii).

     Section 2.05 Amendment to Article VI. Section  6.02(a) of Article VI of the
Merger  Agreement  is hereby  amended to add the words "and New Pease  Preferred
Stock" after the words "Pease  Common  Stock" in the first and second  sentences
thereof.

     Section 2.06 Amendment to Article VII. The following  amendments are hereby
made to the Sections of Article VII the Merger Agreement as indicated.

          (a) The first  sentence  of  Section  7.01(b)  is  amended  to read as
follows:

     "(b) Stockholder Approval.  The Amendment,  this Agreement and the issuance
     of the Pease shares  described in this  Agreement  in  connection  with the
     Merger shall have been  approved and adopted by the  requisite  vote of the
     stockholders  of Pease,  and the  Redomestication,  this  Agreement and the
     Merger shall have been  approved and adopted by the  requisite  vote of the
     stockholders of Carpatsky."

          (b) Section 7.02(e)(2) is amended to read in its entirety as follows:

     "(2) Carpatsky shall have received the written  opinion of Messrs.  Feleski
     Flynn,  Calgary,  Alberta dated the Closing  Date,  the effect that the tax
     consequences to Canadian stockholder of Carpatsky under Canadian income tax
     laws shall be consistent with the description  thereof included in Form S-4
     at the time the Form S-4 is declared effective."

          (c) Section  7.02(h) and 7.03(g),  requiring  "comfort  letters"  from
auditors of Pease and Carpatsky, are deleted.


                                       10

<PAGE>


          (d) Section 7.03(h) is amended to add the words "and Preferred  Stock"
after the words  "Carpatsky  Common  Stock" in the two  places  where such words
appear.

          (e) Section 7.03(l) is amended to read in its entirety as follows:

     "(l) Carpatsky  Financial  Statements.  Carpatsky  shall have completed and
     obtained  audits of its financial  statements  for the years ended December
     31, 1997 and 1998 and  completed its  financial  statements  for the fiscal
     periods  ended  September  30,  1998 and 1999,  all by December  31,  1999.
     Assuming such financial  statements  have accounted for the Ukrainian joint
     ventures  using  proportionate   consolidation,   they  shall  reflect  the
     following (to the extent provided below):

               (i) A working capital deficit for Carpatsky, on a proportionately
          consolidated   basis,  as  of  September  30,  1999  no  greater  than
          $5,000,000.  For  purposes of this  calculation,  any amount  received
          under Carpatsky's $1.0 private placement of securities may be added to
          current  assets as at September 30, 1999 and debt  actually  converted
          into equity may be deleted as at September  30,  1999,  on a pro forma
          basis.

               (ii)  Total   long  term   liabilities,   on  a   proportionately
          consolidated basis, as at September 30, 1999 shall not exceed $550,000
          (excluding accrued interest payable).

               (iii) The balance due to the joint  account as at  September  30,
          1999 for Carpatsky's  working  interest in the RC Field in the Ukraine
          does not exceed $6.75 million.

               (iv)  Carpatsky's net revenue  interest in the RC Field shall not
          be less than 19.7% on October 1, 1999.

               (v) Carpatsky or its  subsidiaries  is delivering gas for sale by
          Closing of the Merger under such reasonable gas sales  arrangements as
          Pease  shall have  approved in writing,  which  approval  shall not be
          unreasonably withheld.

               (vi) Carpatsky, its subsidiaries or Ukrainian joint ventures have
          commenced  receiving payment for at least 90% of the gas sold pursuant
          to 7.03(l)(v)  above by the Closing of the Merger and that  reasonable
          assurance  can be given  that  future  payments  will  continue  to be
          received.

               (vii) [This subsection has been deleted.]"

     Section 2.07  Amendment to Section  8.01 of Article  VIII.  Section 8.01 is
amended by  changing  the words  "December  31,  1999" to "March  31,  2000" and
changing  the words  "March 31, 2000" to "April 30, 2000" and the last clause of
such section, ("to receive . . . merger") shall be deleted.


                                       11

<PAGE>


                ARTICLE III. AMENDMENTS TO EXHIBITS AND SCHEDULES

     Section 3.1  Amendments to Exhibits.  The following  Exhibits to the Merger
Agreement are added or amended as indicated below:

          (a) The following Exhibits to are added to the Merger Agreement in the
form attached to this Amendment:

               Exhibit A        Preferred Stock Designation for New Carpatsky

               Exhibit B        Preferred Stock Designation for Pease

          (b) The following  amendments are made to the Exhibits attached to the
Merger Agreement:

               Exhibit  A  to  the Merger Agreement  (changes to Pease preferred
stockholder agreements) is amended as reflected on the attachment hereto.

               Exhibit  B-4 is amended  to read in  its entirety as  Exhibit B-4
attached hereto.

     Section 3.2 Amendment to Schedules.  The following  Schedules to the Merger
Agreement are hereby amended as follows:

          (a) Schedule  1.05 is amended to read in its entirety as Schedule 1.05
attached hereto.

          (b) Schedules 4.01, 4.03(b)(iii),  4.07(ii), 4.08, 4.11, 4.17 and 4.19
are amended to add the following  language:  "The letter from Krug & Sobel,  LLC
addressed  to  the  Pease  Board  of  Directors,   dated  August  19,  1999,  is
incorporated  into this Schedule and the entire text of such letter is deemed to
be included herein."

          (c)  Schedules  4.01(c),  4.03(b)(iii),   4.03(c)B  (regarding  Melman
Shares),  4.08 and 4.11 (regarding  taxes),  4.19(A) are modified or replaced as
reflected on the attachments to this Amendment:

                         ARTICLE IV. GENERAL PROVISIONS

     Section  4.1  No  Other  Changes.  Except  as  otherwise  changed  by  this
Amendment, the Merger Agreement shall remain in full force and effect, unaltered
by this Amendment.


                                       12

<PAGE>


     Section  4.2  Multiple  Counterparts.  This  Amendment  may be  executed in
multiple  counterparts,  each of which  shall be an  original,  and all of which
taken together shall be one instrument.

     IN WITNESS WHEREOF,  this Amendment was executed as of the date above first
written.

                                         PEASE OIL AND GAS COMPANY


                                         By:  /s/ Patrick J. Duncan
                                            ---------------------------------
                                              Name:  Patrick J. Duncan
                                              Title: President


                                         CPI ACQUISISTION CORP.


                                         By:  /s/
                                             ---------------------------------
                                              Name:
                                              Title:


                                         CARPATSKY PETROLEUM, INC.


                                         By:  /s/ David A. Melman
                                              --------------------------------
                                              Name:  David A. Melman
                                              Ttile: Chief Corporate Officer


                                       13

<PAGE>



Schedule 1.05

Directors of Pease (Radiant Energy)
----------------------------------

J.P. Bryan

Dr. Jack Burks

David Melman

Leslie Texas

Steve Antry

2 other nominees to be identified by Bellwether in writing prior to the Closing

Directors of Surviving Corporation
----------------------------------

J.P. Bryan

David Melman

1 other nominee to be identified by Bellwether in writing prior to the Closing

Officers of Pease (Radiant Energy) and the Surviving Corporation
----------------------------------------------------------------

J.P. Bryan                 Chief Executive Officer

Leslie Texas               President

Robert Bensh               Vice President

Additional Officers
-------------------

David Melman

Patrick Duncan


                                       14

<PAGE>


Schedule 4.01

     C.  Carpatsky,  through  the Joint  Activity  Agreement  No.  410/95  dated
September 15, 1995, revised on October 15, 1996 and amended on December 25, 1997
and again on August 26, 1998,  owns an interest  for the purpose of  investment,
exploration and operation of the Rudovsko-Chervonozavodsky field, located in the
Poltava district of eastern Ukraine (this contract,  as amended,  is referred to
collectively  herein as the  "Joint  Activity  Agreement").  The Joint  Activity
Agreement  is  sometimes  referred  to as  the  Carpatsky-Poltavaneftagaz  Joint
Activity,  which  essentially  acts as, and is referred to as, a Ukrainian Joint
Venture.  Pursuant to the terms of the Joint Activity  Agreement,  Carpatsky has
the  right,  not  the  obligation,  to  own  up to a 45%  net  revenue  interest
(representing  a 50% working  interest) in the Joint  Activity.  The net revenue
interest is determined by: a.) dividing Carpatsky's total capital contributions,
as defined in the Joint Activity Agreement,  by the total capital  contributions
of the Joint  Activity;  and b.)  multiplying  this percentage by 90%. The Joint
Activity  Agreement  is unclear  whether or not the working  interest  decreases
proportionately should Carpatsky's total contributions, as compared to the total
contributions of the Joint Activity,  fall below 50%. However, it is Carpatsky's
representation to Pease that the working interest, and corresponding obligations
to the Joint Account, would be proportionately reduced under such circumstances.
As of September 30, 1999, Carpatsky's net revenue interest in the Joint Activity
was 41.68%  (representing a presumed working interest of 46.31%).  On October 1,
1999,  Carpatsky's net revenue  interest was effectively  reduced to 31.98% when
its Ukrainian  partner  increased  their equity  position  through an additional
capital  contribution  to the Joint Account.  The Ukrainian  partner has advised
Carpatsky  that it has until  December  31, 1999 to make an  additional  capital
contribution  of  approximately  $2.9  million.  A failure  to do so may  dilute
Carpatsky's  interest in the RC field even further and will  preclude  Carpatsky
from  participating  in at least  the  next  two  wells  that  will be  drilled.
Carpatsky's  rights and  obligations  are subject to all terms and conditions of
the Joint Activity Agreement, as amended.









                                       15

<PAGE>


Schedule 4.03(b)(iii)

     As discussed in Schedule  4.01 C,  Carpatsky's  net revenue  interest as of
October  1, 1999 in the  Carpatsky-Poltavaneftagaz  Joint  Activity  is  31.98%.
Pursuant  to the  terms of the  Joint  Activity  Agreement,  as  amended,  as of
September 30, 1999, Carpatsky has the right to increase its net revenue interest
percentage to 45% by contributing,  or repaying,  approximately  $2.9 million to
the Joint Account,  or its partners.  The terms of the Joint Activity  Agreement
contemplate that Carpatsky will be a 50/50 partner on all  expenditures  subject
to the Joint Activity.  The Joint Activity Agreement also contemplates that from
time-to-time  the  respective  partners may not  contribute at the  contemplated
50/50  levels  and has  certain  provisions  that  deal with  these  imbalances.
However,  it is unclear as to whether or not  Carpatsky's  right to increase its
net revenue  interest  percentage  to 45% will or can be honored by its partners
indefinitely.



















                                       16

<PAGE>



Schedule 4.03(c)

     B. Carpatsky Stock Awards

          1. As  previously  disclosed  in Schedule  4.03(b)(i)C,  item 5, Torch
Energy  Advisors   Incorporated  will  receive  1,200,000  Carpatsky  shares  in
settlement of a payable due Torch for services performed for $150,000,

          2. As previously  disclosed in Schedule  4.03(b)(i)C,  item 4, Proteus
International has been offered 720,000 Carpatsky shares and warrants to purchase
435,000  Carpatsky  common shares in settlement of a $90,000 claim for services.
As previously disclosed,  the warrants will be exercisable at US $0.20 per share
and will expire on December 31, 2000.

          3. As previously disclosed in Schedule  4.03(b)(i)C,  item 6, David A.
Melman will receive  953,333 common shares of Carpatsky and warrants to purchase
357,000  Carpatsky common shares in connection with financial  services rendered
in a US $1,000,000 private placement. As previously disclosed, the warrants will
be exercisable at US $0.20 per share and will expire on December 31, 2000.

          4. In connection  with the  contemplated  merger with Pease,  David A.
Melman will receive 2.0 million  shares of Carpatsky  (to be issued prior to the
Effective Time of the merger) as compensation for services rendered.


















                                       17

<PAGE>


Schedule 4.08

     As of September 30, 1999, the Carpatsky-Poltavaneftagaz  Joint Activity had
incurred a Corporate  Profits  Liability in UAH of 2,899,558  (US  equivalent is
$648,714 using  September 30, 1999 exchange  rates).  This liability is past due
and incurring  interest at a annual rate of 45% (the discount rate in UAH of the
National Bank of Ukraine). Using Carpatsky's presumed working interest of 46.31%
at September 30, 1999, our  proportionate  share is  approximately  US $300,419,
excluding interest.  However, as discussed in Schedule 4.01C, the wording of the
Carpatsky-Poltavaneftagaz  Joint  Activity  Agreement  leaves  the  issue of the
adjustable  working interest  unclear.  Accordingly,  if the working interest is
50%, Carpatsky's  proportionate share could be as high as US$324,357,  excluding
interest.























                                       18

<PAGE>



Schedule 4.11

     B.  As  disclosed  in  Schedule   4.08,   as  of  September  30,  1999  the
Carpatsky-Poltavaneftagaz  Joint  Activity  had  incurred  a  Corporate  Profits
Liability in UAH of $2,899,558 (US  equivalent is $648,714  using  September 30,
1999 exchange  rates).  This liability is past due and incurring  interest at an
annual rate of 45% (the  discount  rate in UAH of the National Bank of Ukraine).
Using Carpatsky's presumed working interest of 46.31% at September 30, 1999, our
proportionate share is approximately US $300,419,  excluding interest.  However,
because it is  unclear  whether  the  working  interest  could  arguably  be 50%
Carpatsky  proportionate  share  could  be  as  high  as  US$324,357,  excluding
interest.






























                                       19

<PAGE>


Schedule 4.19

     The following are Carpatsky's  contractual commitments in excess of $10,000
over 12 months as of June 30, 1999:

     A As discussed in Schedule 4.01 C and  disclosed in Schedule  4.03(b)(iii),
Carpatsky's    working    interest    as   of    October    1,   1999   in   the
Carpatsky-Poltavaneftagaz Joint Activity is 31.98%. Pursuant to the terms of the
Joint Activity Agreement,  as amended,  as of September 30, 1999,  Carpatsky has
the right to increase its working interest percentage to 50% by contributing, or
repaying,  approximately  $2.9 million to the Joint Account,  or its partners by
December 31, 1999. A failure to do so may dilute Carpatsky's  interest in the RC
field even further and will preclude  Carpatsky from  participating  in at least
the next two  wells  that  will be  drilled.  The  terms of the  Joint  Activity
Agreement contemplate that Carpatsky will be a 50/50 partner on all expenditures
subject to the Joint Activity.  The Joint Activity  Agreement also  contemplates
that  from  time-to-time  the  respective  partners  may not  contribute  at the
contemplated  50/50  levels  and has  certain  provisions  that deal with  these
imbalances.  However,  it is unclear as to whether or not  Carpatsky's  right to
increase its working  interest  percentage  to 50% will or can be honored by its
partners indefinitely.





























                                       20

<PAGE>


                                    Exhibit A
                                       to
                       First Amendment to Merger Agreement
                             dated December 30, 1999

                         [NEW CARPATSKY PETROLEUM, INC.]

                           CERTIFICATE OF DESIGNATION
                         OF CONVERTIBLE PREFERRED STOCK,
                       SERIES A SETTING FORTH THE POWERS,
                      PREFERENCES, RIGHTS, QUALIFICATIONS,
                         LIMITATIONS AND RESTRICTIONS OF
                              SUCH PREFERRED STOCK

     Pursuant to the Delaware General Corporation Law, [NEW CARPATSKY PETROLEUM,
INC.], a Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY:

     That pursuant to the authority conferred upon the Board of Directors of the
Corporation by the Articles of Incorporation of the Corporation (the "Charter"),
the  Board of  Directors  of the  Corporation  on [ ],  2000  duly  adopted  the
following  resolution  creating  a  series  of  Preferred  Stock  designated  as
Convertible  Preferred Stock, Series A and such resolution has not been modified
and is in full force and effect on the date hereof:

     RESOLVED that,  pursuant to the authority  vested in the Board of Directors
of the Corporation in accordance with the provisions of the Charter, a series of
authorized  Preferred  Stock,  without par value,  of the Corporation are hereby
created  and that the  designation  and number of shares  thereof and the voting
powers,  preferences  and  relative,  participating,  optional and other special
rights of the shares of such series of Preferred Stock, and the  qualifications,
limitations and restrictions thereof are as follows:

     Section 1. Designation and Number.

     (a) The shares of such series of  Preferred  Stock shall be  designated  as
"Convertible  Preferred  Stock,  Series A"  ("Preferred  Stock").  The number of
shares initially  constituting the Preferred Stock shall be 102,410,000  shares,
which number may be  increased or decreased by the Board of Directors  without a
vote of stockholders;  provided,  however, that such number may not be decreased
below the number of then outstanding shares of such series of Preferred Stock.

     (b) The  Preferred  Stock  shall,  with  respect to rights on  liquidation,
dissolution  or winding up, rank prior to all other classes and series of Junior
Stock  of  the  Corporation  now  or  hereafter  authorized  including,  without
limitation, the Common Stock.


                                        1

<PAGE>


     (c) Capitalized  terms used herein and not otherwise defined shall have the
meanings set forth in Section 10 below.

     Section 2. Dividends and Distributions.

     In the event that the Corporation  shall declare a cash dividend to holders
of Common Stock,  then the Board of Directors  shall declare,  and the holder of
each share of  Preferred  Stock shall be  entitled to receive,  a dividend in an
amount equal to the amount of such  dividend  received by a holder of the number
of shares of Common Stock for which such share of Preferred Stock is convertible
on the  record  date for such  dividend.  Any such  amount  shall be paid to the
holders of shares of Preferred  Stock at the same time such  dividend is made to
holders of Common Stock.

     The holders of shares of  Preferred  Stock shall not be entitled to receive
any dividends or other distributions except as provided herein.

     Section 3. Voting Rights.

     In addition to any voting  rights  provided by law and except  where only a
specified  class or series of shares is entitled to vote,  the holders of shares
of Preferred Stock shall have the following voting rights:

     (a)  Except as  otherwise  required  by  applicable  law and so long as the
Preferred Stock is outstanding,  each share of Preferred Stock shall entitle the
holder thereof to vote, in person or by proxy or written  consent,  at a special
or annual meeting of stockholders  or in connection with any stockholder  action
taken in lieu of a meeting of  stockholders,  on all matters voted on by holders
of Common  Stock,  including  the election of  directors,  voting  together as a
single class with all other shares entitled to vote thereon. With respect to any
such vote,  each share of Preferred  Stock shall  entitle the holder  thereof to
cast one vote for each share of Preferred  Stock  standing in his or her name on
the transfer books of the  Corporation as of the record date for determining the
stockholders of the Corporation eligible to vote on any such matters.

     (b) Unless the consent or approval of a greater number of shares shall then
be required by law, the  affirmative  vote of the holders of at least 66-2/3% of
the outstanding shares of Preferred Stock,  voting separately as a single class,
in person or by proxy, at a special or annual meeting of stockholders called for
the purpose, shall be necessary to (i) authorize,  adopt or approve an amendment
to the Charter  that would  increase or decrease  the par value of the shares of
Preferred Stock, or alter or change the powers, preferences or special rights of
the shares of Preferred Stock, (ii) amend,  alter or repeal the Charter so as to
affect the shares of Preferred Stock adversely,  including,  without limitation,
by granting any voting right to any holder of notes, bonds,  debentures or other
debt obligations of the Corporation, or (iii) authorize, increase the authorized

                                        2

<PAGE>


number of shares  of, or issue  (including  on  conversion  or  exchange  of any
convertible or exchangeable  securities or by  reclassification)  any additional
shares of Preferred Stock except under Section 9.

     (c) For so long as the  shares  of  Preferred  Stock are  outstanding,  the
Corporation  shall not issue any capital stock  entitling the holder  thereof to
vote generally under ordinary circumstances in the election of directors,  other
than (i) Common Stock and (ii) Preferred Stock issued pursuant to Section 9.

     Section 4. Redemption.

     The Corporation  shall not have any right to redeem any shares of Preferred
Stock.

     Section 5. Reacquired Shares.

     Any shares of Preferred Stock converted,  exchanged, redeemed, purchased or
otherwise  acquired by the Corporation in any manner whatsoever shall be retired
and  cancelled  promptly  after  the  acquisition  thereof.  All such  shares of
Preferred  Stock shall upon their  cancellation  become  authorized but unissued
shares of preferred stock.
















                                        3

<PAGE>


     Section 6. Liquidation, Dissolution or Winding Up.

     (a) If the  Corporation  shall  commence a voluntary  case under the United
States bankruptcy laws or any applicable  bankruptcy,  insolvency or similar law
of any other  country,  or  consent  to the  entry of an order for  relief in an
involuntary  case  under  any  such  law or to the  appointment  of a  receiver,
liquidator,   assignee,  custodian,  trustee,  sequestrator  (or  other  similar
official) of the Corporation or of any substantial part of its property, or make
an  assignment  for the  benefit  of its  creditors,  or  admit in  writing  its
inability  to pay its debts  generally  as they  become due (any such  event,  a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having  jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy,  insolvency  or similar law of any other  country,  or  appointing a
receiver,  liquidator,  assignee,  custodian,  trustee,  sequestrator  (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs,  and on account of any
such  event the  Corporation  shall  liquidate,  dissolve  or wind up, or if the
Corporation shall otherwise  liquidate,  dissolve or wind up, the holders of the
Preferred Stock shall be entitled to receive the Liquidation Amount prior to any
payment being made or any property of the Corporation  being  distributed to the
holders of the Common Stock or the holders of any Junior Stock. After payment to
the holders of the Preferred Stock of the Liquidation Amount, the holders of the
Preferred  Stock shall be entitled to receive  (rateably with the holders of the
Common  Shares) for each share of Preferred  Stock held,  the amount which would
have been received by the Holder of such  Preferred  Stock if on the record date
for such  distribution,  the holder of such  Preferred  Stock had converted such
Preferred  Stock  into the  number of shares of Common  Stock  into  which  such
Preferred Stock was convertible on the record date for such distribution.

     (b) Neither the consolidation or merger of the Corporation with or into any
other  Person nor the sale or other  distribution  to  another  Person of all or
substantially  all the assets,  property or business of the Corporation shall be
deemed to be a  liquidation,  dissolution or winding up of the  Corporation  for
purposes of this Section 6.

     Section 7. Conversion.

     (a) Subject to the terms and  conditions  set forth  herein,  each share of
Preferred  Stock  shall  be  convertible   into  a  number  of  fully  paid  and
non-assessable shares of Common Stock as is equal, subject to Section 7(g), to a
fraction, the numerator of which shall be the Common Stock Conversion Number and
the denominator of which shall be the number of shares of Preferred Stock issued
and outstanding on the date of conversion.  The Common Stock  Conversion  Number
shall  initially be 50,000,000,  and shall be subject to adjustment as set forth
in this Section. Such conversion right may only be exercised by the holders of a
majority of the outstanding shares of Preferred Stock surrendering  certificates
("Surrendered  Certificates")  representing a majority of the outstanding shares
of Preferred Stock to the Corporation at any time during usual business hours at



                                       4

<PAGE>



its principal  place of business to be maintained by it,  accompanied by written
notice  that the holders of a majority of the  outstanding  shares of  Preferred
Stock  elect to convert  such  shares  and  specifying  the name or names  (with
address) in which a certificate or  certificates  for shares of Common Stock are
to be issued and (if so required by the Corporation) by a written  instrument or
instruments of transfer in form reasonably  satisfactory to the Corporation duly
executed by the holder or its duly authorized legal  representative and transfer
tax stamps or funds  therefor,  if required  pursuant to Section 7(j). Upon such
surrender,  all shares of Preferred Stock shall  automatically be converted into
Common  Stock  as  provided  in  this  Section.  Notwithstanding  the  foregoing
provisions  or anything  set forth herein or in the  Certificate,  any shares of
Preferred  Stock  remaining  outstanding  on  December  28, 2004 shall be and be
deemed to have been converted into Common Stock at the Conversion Number then in
effect.

     (b) As promptly as practicable after the surrender,  as herein provided, of
shares  of  Preferred  Stock  for  conversion  pursuant  to  Section  7(a),  the
Corporation  shall  deliver to all holders of Preferred  Stock a written  notice
informing  such  holders (i) that the  holders of a majority of the  outstanding
shares of Preferred Stock have delivered their  certificates  for such shares to
the Corporation in satisfactory  form for conversion into Common Shares pursuant
to the  requirements  of this Section 7, (ii) that, as result of such  delivery,
all  outstanding  Preferred  Stock has been  converted into the right to receive
Common Stock and (iii) of the Common  Stock  Conversion  Number and  instructing
such holders to surrender the certificates representing their Preferred Stock to
the  Corporation  in the  manner  specified  in  Section  7(a) above in order to
receive  certificates   representing  the  Common  Stock  deliverable  upon  the
conversion  of their  Preferred  Stock.  As  promptly as  practicable  after the
surrender of any  certificates  representing  Preferred Stock in accordance with
the requirements of this Section 7, the Corporation shall deliver to or upon the
written  order of the holder of such  shares so  surrendered  a  certificate  or
certificates  representing the number of fully paid and non-assessable shares of
Common  Stock  into  which such  shares of  Preferred  Stock may be or have been
converted in  accordance  with the  provisions of this Section 7. Subject to the
following  provisions of this  paragraph and of Section  7(d),  such  conversion
shall be deemed to have been made immediately  prior to the close of business on
the date that such  shares of  Preferred  Stock shall have been  surrendered  in
satisfactory form for conversion,  and the Person or Persons entitled to receive
the Common Stock  deliverable  upon conversion of such shares of Preferred Stock
shall be treated for all purposes as having  become the record holder or holders
of such Common Stock at such  appropriate  time,  and such  conversion  shall be
based on the Common Stock  Conversion  Number in effect at such time;  provided,
however,  that no  surrender  shall be  effective  to  constitute  the Person or
Persons entitled to receive the Common Stock deliverable upon such conversion as
the record holder or holders of such Common Stock while the share transfer books
of the  Corporation  shall be closed  (but not for any  period in excess of five
days), but such surrender shall be effective to constitute the Person or Persons
entitled to receive  such Common Stock as the record  holder or holders  thereof
for all  purposes  immediately  prior  to the  close  of  business  on the  next

                                        5

<PAGE>


succeeding day on which such share transfer books are open, and such  conversion
shall be deemed to have been  made at,  and shall be based on the  Common  Stock
Conversion Number in effect at, such time on such next succeeding day.

     (c) To the extent  permitted  by law,  when shares of  Preferred  Stock are
converted, all dividends declared and unpaid on the Preferred Stock so converted
to the  date of  conversion  shall  be  immediately  due and  payable  and  must
accompany the shares of Common Stock issued upon such conversion.

     (d) The Common Stock  Conversion  Number shall be subject to  adjustment as
follows:

          (i) In case the Corporation shall at any time or from time to time (A)
     pay a dividend or make a distribution on the  outstanding  shares of Common
     Stock in capital  stock  (which,  for  purposes of this  Section 7(d) shall
     include, without limitation,  any dividends or distributions in the form of
     options,  warrants  or  other  rights  to  acquire  capital  stock)  of the
     Corporation,  (B) subdivide the  outstanding  shares of Common Stock into a
     larger number of shares, (C) combine the outstanding shares of Common Stock
     into a smaller  number of shares,  or (D) issue any  shares of its  capital
     stock in a  reclassification  of the Common  Stock  then,  and in each such
     case, the Common Stock  Conversion  Number in effect  immediately  prior to
     such event shall be adjusted to equal the Common Stock Conversion Number in
     effect  immediately  prior to such action  multiplied  by a  fraction,  the
     numerator  of which is the  number of shares  of Common  Stock  outstanding
     after the action  described in clauses (A) through (D) and the  denominator
     of which is the number of shares of Common  Stock  outstanding  immediately
     prior to such action.  An adjustment  made pursuant to this Section 7(d)(i)
     shall become effective  retroactively  (A) in the case of any such dividend
     or distribution,  to a date immediately  following the close of business on
     the record date for the  determination  of holders of Common Stock entitled
     to receive  such  dividend or  distribution  or (B) in the case of any such
     subdivision,  combination or reclassification,  to the close of business on
     the day upon which such corporate action becomes effective.

          (ii) In case the  Corporation  shall at any time or from  time to time
     issue  shares  of  Common  Stock  (or   securities   convertible   into  or
     exchangeable for Common Stock, or any options,  warrants or other rights to
     acquire shares of Common Stock) for a consideration per share less than the
     Current Market Price per share of Common Stock then in effect at the record
     date or issuance date, as the case may be (the "Date"),  referred to in the
     following  sentence  (treating the  consideration per share of any security
     convertible or  exchangeable  or exercisable  into Common Stock as equal to
     (A) the sum of the price for such  security  convertible,  exchangeable  or
     exercisable  into Common Stock plus any  additional  consideration  payable
     (without  regard to any  anti-dilution  adjustments)  upon the  conversion,
     exchange or exercise of such  security into Common Stock divided by (B) the
     number of shares of Common Stock  initially  underlying  such  convertible,
     exchangeable  or  exercisable  security),  then, and in each such case, the



                                       6

<PAGE>


     Common Stock  Conversion  Number in effect shall be adjusted by multiplying
     the Common Stock Conversion  Number in effect on the day immediately  prior
     to the Date by a fraction  (x) the  numerator  of which shall be the sum of
     the  number  of shares of  Common  Stock  outstanding  on the Date plus the
     number of additional  shares of Common Stock issued or to be issued (or the
     maximum  number  into which such  convertible  or  exchangeable  securities
     initially  may convert or exchange or for which such  options,  warrants or
     other rights  initially may be exercised) and (y) the  denominator of which
     shall be the sum of the number of shares of Common Stock outstanding on the
     Date  plus the  number  of shares  of  Common  Stock  which  the  aggregate
     consideration  for the  total  number of such  additional  shares of Common
     Stock (or securities  convertible into or exchangeable for Common Stock, or
     any options,  warrants or other rights to acquire  shares of Common  Stock)
     plus the aggregate amount of any additional consideration initially payable
     (without regard to any  anti-dilution  adjustments)  upon such  conversion,
     exchange or exercise of such security  into Common Stock would  purchase at
     the  Current  Market  Price  per share of  Common  Stock on the Date.  Such
     adjustment  shall  be  made  whenever  such  shares,  securities,  options,
     warrants  or  other  rights  are  issued,   and  shall   become   effective
     retroactively to a date immediately  following the close of business (i) in
     the case of issuance to  stockholders of the  Corporation,  as such, on the
     record date for the determination of stockholders  entitled to receive such
     shares, securities, options, warrants or other rights and (ii) in all other
     cases, on the date ("issuance  date") of such issuance;  provided that: (A)
     the  determination  as to  whether an  adjustment  is  required  to be made
     pursuant to this Section  7(d)(ii)  shall be made upon the issuance of such
     shares or such convertible or exchangeable securities, options, warrants or
     other rights; (B) if any convertible or exchangeable  securities,  options,
     warrants or other rights (or any portions  thereof)  which shall have given
     rise to an adjustment  pursuant to this Section 7(d)(ii) shall have expired
     or terminated without the exercise thereof and/or if by reason of the terms
     of such convertible or exchangeable securities,  options, warrants or other
     rights  there  shall have been an  increase  or  increases  or  decrease or
     decreases, with the passage of time or otherwise, in the price payable upon
     the exercise or conversion thereof, then the Common Stock Conversion Number
     hereunder  shall be readjusted  (but to no greater  extent than  originally
     adjusted)  on the  basis  of  (x)  eliminating  from  the  computation  any
     additional  shares of Common Stock  corresponding  to such  convertible  or
     exchangeable  securities,  options,  warrants or other rights as shall have
     expired or terminated,  (y) treating the additional shares of Common Stock,
     if any,  actually issued or issuable  pursuant to the previous  exercise of
     such  convertible or exchangeable  securities,  options,  warrants or other
     rights as having been issued for the  consideration  actually  received and
     receivable   therefor  and  (z)  treating  any  of  such   convertible   or


                                        7

<PAGE>


     exchangeable  securities,  options,  warrants or other  rights which remain
     outstanding as being subject to exercise or conversion on the basis of such
     exercise  or  conversion  price  as  shall  be in  effect  at the  time  of
     adjustment;  and (C) no  adjustment in the Common Stock  Conversion  Number
     shall be made pursuant to this Section 7(d)(ii) as a result of any issuance
     of securities by the  Corporation  in respect of which an adjustment to the
     Common Stock Conversion Number is made pursuant to Section 7(d)(i).

          (iii) In the case the  Corporation,  at any time or from time to time,
     shall take any action  affecting  its Common Stock  similar to or having an
     effect  similar to any of the actions  described in any of Section  7(d)(i)
     and  Section  7(d)(ii),  or  Section  7(h) (but not  including  any  action
     described  in  any  such  Section)  and  the  Board  of  Directors  of  the
     Corporation  in good faith  determines  that it would be  equitable  in the
     circumstances to adjust the Common Stock  Conversion  Number as a result of
     such  action,  then,  and in each such case,  the Common  Stock  Conversion
     Number  shall be  adjusted  in such manner and at such time as the Board of
     Directors of the Corporation in good faith determines would be equitable in
     the circumstances  (such  determination to be evidenced in a resolution,  a
     certified  copy of which  shall be mailed to the  holders of the  Preferred
     Stock).

          (iv)  Notwithstanding  anything herein to the contrary,  no adjustment
     under  this  Section  7(d)  shall be made  upon the  grant  of  options  to
     employees  or  directors  of the  Corporation  pursuant  to  benefit  plans
     approved by the Board of Directors of the  Corporation or upon the issuance
     of shares of Common  Stock upon  exercise of such  options if the  exercise
     price thereof was not less than the Market Price of the Common Stock on the
     date such options were granted.

     (e) If the  Corporation  shall  take a record of the  holders of its Common
Stock  for the  purpose  of  entitling  them to  receive  a  dividend  or  other
distribution,  and shall  thereafter and before the distribution to stockholders
thereof   legally   abandon  its  plan  to  pay  or  deliver  such  dividend  or
distribution,  then  thereafter  no  adjustment  in the Common Stock  Conversion
Number then in effect shall be required by reason of the taking of such record.

     (f) Upon any  increase or decrease in the Common Stock  Conversion  Number,
then,  and in each such case,  the  Corporation  promptly  shall deliver to each
registered  holder  of  Preferred  Stock  at  least 10  Business  Days  prior to
effecting  any  of the  foregoing  transactions  a  certificate,  signed  by the
President or a Vice-President and by the Treasurer or an Assistant  Treasurer or
the  Secretary or an Assistant  Secretary of the  Corporation,  setting forth in
reasonable  detail the event  requiring the  adjustment  and the method by which
such adjustment was calculated and specifying the increased or decreased  Common
Stock Conversion Number then in effect following such adjustment.

     (g) No fractional shares or scrip  representing  fractional shares shall be
issued upon the  conversion of any shares of Preferred  Stock.  If more than one
share of Preferred  Stock shall be surrendered for conversion at one time by the
same holder,  the number of full shares of Common Stock issuable upon conversion


                                       8

<PAGE>


thereof  shall be  computed  on the basis of the  aggregate  number of shares of
Preferred  Stock so  surrendered.  If the  conversion  of any share or shares of
Preferred  Stock  results  in a  fraction,  an  amount  equal  to such  fraction
multiplied  by the Current  Market Price of the Common Stock on the Business Day
preceding  the day of  conversion  shall be paid to such  holder  in cash by the
Corporation.

     (h) In case of any  capital  reorganization  or  reclassification  or other
change of outstanding  shares of Common Stock (other than a change in par value,
or from par value to no par  value,  or from no par value to par  value),  or in
case of any  consolidation  or merger of the  Corporation  with or into  another
Person (other than a  consolidation  or merger in which the  Corporation  is the
resulting or surviving Person and which does not result in any  reclassification
or  change  of  outstanding  Common  Stock),  or in  case of any  sale or  other
disposition to another Person of all or  substantially  all of the assets of the
Corporation (any of the foregoing,  a "Transaction"),  the Corporation,  or such
successor or purchasing Person, as the case may be, shall execute and deliver to
each holder of Preferred  Stock at least 10 Business Days prior to effecting any
of the foregoing  Transactions  a  certificate  that the holder of each share of
Preferred Stock then outstanding shall have the right thereafter to convert such
share of  Preferred  Stock  into the kind and amount of shares of stock or other
securities (of the Corporation or another issuer,  the "Other  Securities"))  or
property or cash receivable  upon such  Transaction by a holder of the number of
shares of Common Stock into which such share of Preferred  Stock could have been
converted immediately prior to such Transaction.  Such certificate shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments  provided  for in this  Section  7.  If,  in the  case  of any  such
Transaction,  the Other Securities,  cash or property receivable  thereupon by a
holder of Common Stock includes shares of stock or other  securities of a Person
other than the  successor or purchasing  Person and other than the  Corporation,
which controls or is controlled by the successor or purchasing  Person or which,
in connection with such Transaction,  issues Other Securities, other property or
cash to holders of Common Stock, then such certificate also shall be executed by
such  Person,   and  such  Person  shall,  in  such  certificate,   specifically
acknowledge  the  obligations  of  such  successor  or  purchasing   Person  and
acknowledge  its obligations to issue such Other  Securities,  other property or
cash to the  holders  of  Preferred  Stock  upon  conversion  of the  shares  of
Preferred Stock as provided  above.  The provisions of this Section 7(h) and any
equivalent  thereof in any such certificate  similarly shall apply to successive
Transactions.

     (i) The  Corporation  shall at all times  reserve  and keep  available  for
issuance  upon  the  conversion  of the  Preferred  Stock,  such  number  of its
authorized  but  unissued  shares of  Common  Stock as will from time to time be
sufficient  to permit the  conversion  of all  outstanding  shares of  Preferred
Stock,  and shall take all action required to increase the authorized  number of
shares of Common Stock if at any time there shall be insufficient authorized but
unissued  shares of Common  Stock to permit  such  reservation  or to permit the
conversion of all outstanding shares of Preferred Stock.



                                        9

<PAGE>



     (j) The  issuance  or delivery of  certificates  for Common  Stock upon the
conversion  of shares of  Preferred  Stock shall be made  without  charge to the
converting  holder of shares of Preferred Stock for such certificates or for any
tax in  respect  of  the  issuance  or  delivery  of  such  certificates  or the
securities  represented  thereby,  and  such  certificates  shall be  issued  or
delivered  in the  respective  names  of, or  (subject  to  compliance  with the
applicable provisions of federal and state securities laws) in such names as may
be  directed  by,  the  holders  of the  shares of  Preferred  Stock  converted;
provided,  however,  that the  Corporation  shall not be required to pay any tax
which may be payable in respect of any  transfer  involved in the  issuance  and
delivery of any such  certificate in a name other than that of the holder of the
shares of Preferred Stock converted,  and the Corporation  shall not be required
to issue or  deliver  such  certificate  unless or until the  Person or  Persons
requesting the issuance or delivery  thereof shall have paid to the  Corporation
the amount of such tax or shall have established to the reasonable  satisfaction
of the Corporation that such tax has been paid.

     (k) If an offer is made to purchase  Common  Stock and the offer  must,  by
reason of  applicable  securities  legislation  or the  requirements  of a stock
exchange on which the Common  Stock is listed,  be made to all or  substantially
all  holders  of  Common  Stock  located  in a  province  of Canada in which the
requirement  applies,  the  holders  of  Preferred  Stock  shall  be  given  the
opportunity  to  participate  in the offer  through  conversion of the Preferred
Stock into Common Stock; unless

          (i) an identical  offer (in terms of price per security and percentage
     of outstanding  securities to be taken upon,  exclusive of securities owned
     immediately prior to the bid by the offeror, or associates or affiliates of
     the offeror,  and in all other material  respects) is made  concurrently to
     purchase  Preferred Stock, which offer has no condition attached other than
     the right not to take up and pay for  securities  tendered if no securities
     are purchased pursuant to the offer for Common Stock; or

          (ii) less than 50% of the Common Stock  outstanding  immediately prior
     to the offer,  other than Common Stock owned by the offeror,  or associates
     or affiliates of the offeror, are deposited pursuant to the offer.

     Section 8. Certain Remedies.

     Any registered holder of Preferred Stock shall be entitled to an injunction
or  injunctions  to prevent  breaches of the  provisions of this  Certificate of
Designation  and to  enforce  specifically  the  terms  and  provisions  of this
Certificate  of  Designation  in any  court of the  United  States  or any state
thereof having jurisdiction, this being in addition to any other remedy to which
such holder may be entitled at law or in equity.


                                       10

<PAGE>


     Section 9. Additional Shares of Preferred Stock.

     While any shares of Preferred Stock are outstanding,  the Corporation shall
not issue any  additional  shares of  Common  Stock or  convertible  securities,
rights,  warrants,  options or other  commitments  to issue Common Stock unless,
prior to such  issuance,  the  Corporation  declares  and pays a dividend on the
Preferred  Stock of a number of shares of Preferred Stock equal to the number of
shares of Common  Stock being  issued or the maximum  number of shares of Common
Stock  which may be issued  pursuant  to such  convertible  securities,  rights,
warrants, options or commitments;  provided,  however, the Corporation shall not
be required to issue additional shares of Preferred Stock in connection with the
issuance of Common Stock  pursuant to agreements  described in a Schedule to the
Purchase Agreement.

     Section 10. Definitions.

     For the purposes of this Certificate of Designation of Preferred Stock, the
following terms shall have the meanings indicated:

     "Business  Day" shall mean any day other than a  Saturday,  Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law or executive order to close.

     "Common Stock" shall mean and include the Common Stock,  without par value,
of the Corporation and each other class of capital stock of the Corporation that
does not  have a  preference  over  any  other  class  of  capital  stock of the
Corporation  as to dividends or upon  liquidation,  dissolution or winding up of
the  Corporation  and,  in each case,  shall  include any other class of capital
stock of the Corporation into which such stock is reclassified or reconstituted.

     "Current  Market Price" per share shall mean, on any date specified  herein
for the determination  thereof, (a) the average daily Market Price of the Common
Stock for those days  during the period of 20 days,  ending on such date,  which
are Trading Days,  and (b) if the Common Stock is not then listed or admitted to
trading on any national  securities  exchange or quoted in the  over-the-counter
market, the Market Price on such date.

     "Junior  Stock"  shall mean any capital  stock of the  Corporation  ranking
junior (either as to dividends or upon  liquidation,  dissolution or winding up)
to the Preferred Stock including, without limitation, the Common Stock.

     "Liquidation  Amount" with respect to a share of Preferred Stock shall mean
the sum of (a) all declared and unpaid  dividends on such Preferred  Stock,  and
(b) the sum of  $10.00  divided  by the  number of  shares  of  Preferred  Stock
outstanding on the applicable date.


                                       11

<PAGE>


     "Market  Price" shall mean, per share of Common Stock on any date specified
herein: (a) the closing price per share of the Common Stock on the Alberta Stock
Exchange or other principal Canadian stock exchange on which the Common Stock is
traded,  stated in U.S.  dollars at the then current  exchange ratio of Canadian
dollars  into U.S.  dollars  or (b) if there  shall have been no trading on such
date or if the Common  Stock is not so  designated,  the average of the reported
closing  bid and asked  prices of the Common  Stock on such date as shown by any
reputable  dealer in Common  Stock as selected by the Board of  Directors of the
Corporation.  If none of (a) or (b) is  applicable,  Market  Price  shall mean a
market price per share determined at the  Corporation's  expense by an appraiser
chosen by the holders of a majority of the shares of  Preferred  Stock or, if no
such  appraiser is so chosen more than twenty  business days after notice of the
necessity of such  calculation  shall have been delivered by the  Corporation to
the holders of Preferred Stock, then by an appraiser chosen by the Corporation.

     "Person" shall mean any individual, firm, corporation,  partnership, trust,
incorporated or unincorporated  association,  limited liability  company,  joint
venture, joint stock company,  government (or an agency or political subdivision
thereof)  or other  entity of any kind,  and shall  include  any  successor  (by
merger) of such entity.

     "Purchase  Agreement" shall mean the Securities Purchase  Agreement,  dated
December 30, 1999, between the Corporation and Bellwether Exploration Company.

     "Trading Day" shall mean a day on which the national  securities  exchanges
are open for trading.

     IN WITNESS WHEREOF,  CARPATSKY PETROLEUM,  INC. has caused this Certificate
to be duly executed in its corporate name on this [ ]th day of [ ], 2000.



                                      [NEW CARPATSKY PETROLEUM, INC.]


                                      By
                                        ----------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:    President
                                            ------------------------------------
ATTEST:



By
  -------------------------------------
Name:
     ---------------------------------
Title:    Secretary
      --------------------------------


                                       12

<PAGE>


                                    Exhibit B
                                       to
                       First Amendment to Merger Agreement
                             dated December 30, 1999

                           [PEASE OIL AND GAS COMPANY]


                           CERTIFICATE OF DESIGNATION
                         OF CONVERTIBLE PREFERRED STOCK,
                       SERIES A SETTING FORTH THE POWERS,
                      PREFERENCES, RIGHTS, QUALIFICATIONS,
                         LIMITATIONS AND RESTRICTIONS OF
                              SUCH PREFERRED STOCK

     Pursuant  to the  Nevada  Business  Corporations  Act,  [PEASE  OIL AND GAS
COMPANY], a Nevada corporation (the "Corporation"), DOES HEREBY CERTIFY:

     That pursuant to the authority conferred upon the Board of Directors of the
Corporation by the Articles of Incorporation of the Corporation (the "Charter"),
the  Board of  Directors  of the  Corporation  on [ ],  2000  duly  adopted  the
following  resolution  creating  a  series  of  Preferred  Stock  designated  as
Convertible  Preferred Stock, Series A and such resolution has not been modified
and is in full force and effect on the date hereof:

     RESOLVED that,  pursuant to the authority  vested in the Board of Directors
of the Corporation in accordance with the provisions of the Charter, a series of
authorized  Preferred  Stock,  without par value,  of the Corporation are hereby
created  and that the  designation  and number of shares  thereof and the voting
powers,  preferences  and  relative,  participating,  optional and other special
rights of the shares of such series of Preferred Stock, and the  qualifications,
limitations and restrictions thereof are as follows:

     Section 1. Designation and Number.

     (a) The shares of such series of  Preferred  Stock shall be  designated  as
"Convertible  Preferred  Stock,  Series A"  ("Preferred  Stock").  The number of
shares initially  constituting the Preferred Stock shall be 102,410,000  shares,
which number may be  increased or decreased by the Board of Directors  without a
vote of stockholders;  provided,  however, that such number may not be decreased
below the number of then outstanding shares of such series of Preferred Stock.

     (b) The  Preferred  Stock  shall,  with  respect to rights on  liquidation,
dissolution  or winding up, rank prior to all other classes and series of Junior
Stock  of  the  Corporation  now  or  hereafter  authorized  including,  without
limitation, the Common Stock.


                                        1

<PAGE>


     (c) Capitalized  terms used herein and not otherwise defined shall have the
meanings set forth in Section 10 below.

     Section 2. Dividends and Distributions.

     In the event that the Corporation  shall declare a cash dividend to holders
of Common Stock,  then the Board of Directors  shall declare,  and the holder of
each share of  Preferred  Stock shall be  entitled to receive,  a dividend in an
amount equal to the amount of such  dividend  received by a holder of the number
of shares of Common Stock for which such share of Preferred Stock is convertible
on the  record  date for such  dividend.  Any such  amount  shall be paid to the
holders of shares of Preferred  Stock at the same time such  dividend is made to
holders of Common Stock.

     The holders of shares of  Preferred  Stock shall not be entitled to receive
any dividends or other distributions except as provided herein.

     Section 3. Voting Rights.

     In addition to any voting  rights  provided by law and except  where only a
specified  class or series of shares is entitled to vote,  the holders of shares
of Preferred Stock shall have the following voting rights:

     (a)  Except as  otherwise  required  by  applicable  law and so long as the
Preferred Stock is outstanding,  each share of Preferred Stock shall entitle the
holder thereof to vote, in person or by proxy or written  consent,  at a special
or annual meeting of stockholders  or in connection with any stockholder  action
taken in lieu of a meeting of  stockholders,  on all matters voted on by holders
of Common  Stock,  including  the election of  directors,  voting  together as a
single class with all other shares entitled to vote thereon. With respect to any
such vote,  each share of Preferred  Stock shall  entitle the holder  thereof to
cast one vote for each share of Preferred  Stock  standing in his or her name on
the transfer books of the  Corporation as of the record date for determining the
stockholders of the Corporation eligible to vote on any such matters.

     (b) Unless the consent or approval of a greater number of shares shall then
be required by law, the  affirmative  vote of the holders of at least 66-2/3% of
the outstanding shares of Preferred Stock,  voting separately as a single class,
in person or by proxy, at a special or annual meeting of stockholders called for
the purpose, shall be necessary to (i) authorize,  adopt or approve an amendment
to the Charter  that would  increase or decrease  the par value of the shares of
Preferred Stock, or alter or change the powers, preferences or special rights of
the shares of Preferred Stock, (ii) amend,  alter or repeal the Charter so as to
affect the shares of Preferred Stock adversely,  including,  without limitation,
by granting any voting right to any holder of notes, bonds,  debentures or other
debt obligations of the Corporation, or (iii) authorize, increase the authorized



                                       2

<PAGE>


number of shares  of, or issue  (including  on  conversion  or  exchange  of any
convertible or exchangeable  securities or by  reclassification)  any additional
shares of Preferred Stock except under Section 9.

     (c) For so long as the  shares  of  Preferred  Stock are  outstanding,  the
Corporation  shall not issue any capital stock  entitling the holder  thereof to
vote generally under ordinary circumstances in the election of directors,  other
than (i) Common Stock and (ii) Preferred Stock issued pursuant to Section 9.

     Section 4. Redemption.

     The Corporation  shall not have any right to redeem any shares of Preferred
Stock.

     Section 5. Reacquired Shares.

     Any shares of Preferred Stock converted,  exchanged, redeemed, purchased or
otherwise  acquired by the Corporation in any manner whatsoever shall be retired
and  cancelled  promptly  after  the  acquisition  thereof.  All such  shares of
Preferred  Stock shall upon their  cancellation  become  authorized but unissued
shares of preferred stock.




























                                        3

<PAGE>


     Section 6. Liquidation, Dissolution or Winding Up.

     (a) If the  Corporation  shall  commence a voluntary  case under the United
States bankruptcy laws or any applicable  bankruptcy,  insolvency or similar law
of any other  country,  or  consent  to the  entry of an order for  relief in an
involuntary  case  under  any  such  law or to the  appointment  of a  receiver,
liquidator,   assignee,  custodian,  trustee,  sequestrator  (or  other  similar
official) of the Corporation or of any substantial part of its property, or make
an  assignment  for the  benefit  of its  creditors,  or  admit in  writing  its
inability  to pay its debts  generally  as they  become due (any such  event,  a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having  jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy,  insolvency  or similar law of any other  country,  or  appointing a
receiver,  liquidator,  assignee,  custodian,  trustee,  sequestrator  (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs,  and on account of any
such  event the  Corporation  shall  liquidate,  dissolve  or wind up, or if the
Corporation shall otherwise  liquidate,  dissolve or wind up, the holders of the
Preferred Stock shall be entitled to receive the Liquidation Amount prior to any
payment being made or any property of the Corporation  being  distributed to the
holders of the Common Stock or the holders of any Junior Stock. After payment to
the holders of the Preferred Stock of the Liquidation Amount, the holders of the
Preferred  Stock shall be entitled to receive  (rateably with the holders of the
Common  Shares) for each share of Preferred  Stock held,  the amount which would
have been received by the Holder of such  Preferred  Stock if on the record date
for such  distribution,  the holder of such  Preferred  Stock had converted such
Preferred  Stock  into the  number of shares of Common  Stock  into  which  such
Preferred Stock was convertible on the record date for such distribution.

     (b) Neither the consolidation or merger of the Corporation with or into any
other  Person nor the sale or other  distribution  to  another  Person of all or
substantially  all the assets,  property or business of the Corporation shall be
deemed to be a  liquidation,  dissolution or winding up of the  Corporation  for
purposes of this Section 6.

     Section 7. Conversion.

     (a) Subject to the terms and  conditions  set forth  herein,  each share of
Preferred  Stock  shall  be  convertible   into  a  number  of  fully  paid  and
non-assessable shares of Common Stock as is equal, subject to Section 7(g), to a
fraction, the numerator of which shall be the Common Stock Conversion Number and
the denominator of which shall be the number of shares of Preferred Stock issued
and outstanding on the date of conversion.  The Common Stock  Conversion  Number
shall  initially be 50,000,000,  and shall be subject to adjustment as set forth
in this Section. Such conversion right may only be exercised by the holders of a
majority of the outstanding shares of Preferred Stock surrendering  certificates
("Surrendered  Certificates")  representing a majority of the outstanding shares
of Preferred Stock to the Corporation at any time during usual business hours at



                                       4

<PAGE>



its principal  place of business to be maintained by it,  accompanied by written
notice  that the holders of a majority of the  outstanding  shares of  Preferred
Stock  elect to convert  such  shares  and  specifying  the name or names  (with
address) in which a certificate or  certificates  for shares of Common Stock are
to be issued and (if so required by the Corporation) by a written  instrument or
instruments of transfer in form reasonably  satisfactory to the Corporation duly
executed by the holder or its duly authorized legal  representative and transfer
tax stamps or funds  therefor,  if required  pursuant to Section 7(j). Upon such
surrender,  all shares of Preferred Stock shall  automatically be converted into
Common  Stock  as  provided  in  this  Section.  Notwithstanding  the  foregoing
provisions  or anything  set forth herein or in the  Certificate,  any shares of
Preferred  Stock  remaining  outstanding  on  December  28, 2004 shall be and be
deemed to have been converted into Common Stock at the Conversion Number then in
effect.

     (b) As promptly as practicable after the surrender,  as herein provided, of
shares  of  Preferred  Stock  for  conversion  pursuant  to  Section  7(a),  the
Corporation  shall  deliver to all holders of Preferred  Stock a written  notice
informing  such  holders (i) that the  holders of a majority of the  outstanding
shares of Preferred Stock have delivered their  certificates  for such shares to
the Corporation in satisfactory  form for conversion into Common Shares pursuant
to the  requirements  of this Section 7, (ii) that, as result of such  delivery,
all  outstanding  Preferred  Stock has been  converted into the right to receive
Common Stock and (iii) of the Common  Stock  Conversion  Number and  instructing
such holders to surrender the certificates representing their Preferred Stock to
the  Corporation  in the  manner  specified  in  Section  7(a) above in order to
receive  certificates   representing  the  Common  Stock  deliverable  upon  the
conversion  of their  Preferred  Stock.  As  promptly as  practicable  after the
surrender of any  certificates  representing  Preferred Stock in accordance with
the requirements of this Section 7, the Corporation shall deliver to or upon the
written  order of the holder of such  shares so  surrendered  a  certificate  or
certificates  representing the number of fully paid and non-assessable shares of
Common  Stock  into  which such  shares of  Preferred  Stock may be or have been
converted in  accordance  with the  provisions of this Section 7. Subject to the
following  provisions of this  paragraph and of Section  7(d),  such  conversion
shall be deemed to have been made immediately  prior to the close of business on
the date that such  shares of  Preferred  Stock shall have been  surrendered  in
satisfactory form for conversion,  and the Person or Persons entitled to receive
the Common Stock  deliverable  upon conversion of such shares of Preferred Stock
shall be treated for all purposes as having  become the record holder or holders
of such Common Stock at such  appropriate  time,  and such  conversion  shall be
based on the Common Stock  Conversion  Number in effect at such time;  provided,
however,  that no  surrender  shall be  effective  to  constitute  the Person or
Persons entitled to receive the Common Stock deliverable upon such conversion as
the record holder or holders of such Common Stock while the share transfer books
of the  Corporation  shall be closed  (but not for any  period in excess of five
days), but such surrender shall be effective to constitute the Person or Persons
entitled to receive  such Common Stock as the record  holder or holders  thereof
for all  purposes  immediately  prior  to the  close  of  business  on the  next


                                        5

<PAGE>



succeeding day on which such share transfer books are open, and such  conversion
shall be deemed to have been  made at,  and shall be based on the  Common  Stock
Conversion Number in effect at, such time on such next succeeding day.

         (c) To the extent  permitted by law, when shares of Preferred Stock are
converted, all dividends declared and unpaid on the Preferred Stock so converted
to the  date of  conversion  shall  be  immediately  due and  payable  and  must
accompany the shares of Common Stock issued upon such conversion.

         (d) The Common Stock  Conversion  Number shall be subject to adjustment
as follows:

          (i) In case the Corporation shall at any time or from time to time (A)
     pay a dividend or make a distribution on the  outstanding  shares of Common
     Stock in capital  stock  (which,  for  purposes of this  Section 7(d) shall
     include, without limitation,  any dividends or distributions in the form of
     options,  warrants  or  other  rights  to  acquire  capital  stock)  of the
     Corporation,  (B) subdivide the  outstanding  shares of Common Stock into a
     larger number of shares, (C) combine the outstanding shares of Common Stock
     into a smaller  number of shares,  or (D) issue any  shares of its  capital
     stock in a  reclassification  of the Common  Stock  then,  and in each such
     case, the Common Stock  Conversion  Number in effect  immediately  prior to
     such event shall be adjusted to equal the Common Stock Conversion Number in
     effect  immediately  prior to such action  multiplied  by a  fraction,  the
     numerator  of which is the  number of shares  of Common  Stock  outstanding
     after the action  described in clauses (A) through (D) and the  denominator
     of which is the number of shares of Common  Stock  outstanding  immediately
     prior to such action.  An adjustment  made pursuant to this Section 7(d)(i)
     shall become effective  retroactively  (A) in the case of any such dividend
     or distribution,  to a date immediately  following the close of business on
     the record date for the  determination  of holders of Common Stock entitled
     to receive  such  dividend or  distribution  or (B) in the case of any such
     subdivision,  combination or reclassification,  to the close of business on
     the day upon which such corporate action becomes effective.

          (ii) In case the  Corporation  shall at any time or from  time to time
     issue  shares  of  Common  Stock  (or   securities   convertible   into  or
     exchangeable for Common Stock, or any options,  warrants or other rights to
     acquire shares of Common Stock) for a consideration per share less than the
     Current Market Price per share of Common Stock then in effect at the record
     date or issuance date, as the case may be (the "Date"),  referred to in the
     following  sentence  (treating the  consideration per share of any security
     convertible or  exchangeable  or exercisable  into Common Stock as equal to
     (A) the sum of the price for such  security  convertible,  exchangeable  or
     exercisable  into Common Stock plus any  additional  consideration  payable
     (without  regard to any  anti-dilution  adjustments)  upon the  conversion,
     exchange or exercise of such  security into Common Stock divided by (B) the
     number of shares of Common Stock  initially  underlying  such  convertible,
     exchangeable  or  exercisable  security),  then, and in each such case, the



                                       6

<PAGE>


     Common Stock  Conversion  Number in effect shall be adjusted by multiplying
     the Common Stock Conversion  Number in effect on the day immediately  prior
     to the Date by a fraction  (x) the  numerator  of which shall be the sum of
     the  number  of shares of  Common  Stock  outstanding  on the Date plus the
     number of additional  shares of Common Stock issued or to be issued (or the
     maximum  number  into which such  convertible  or  exchangeable  securities
     initially  may convert or exchange or for which such  options,  warrants or
     other rights  initially may be exercised) and (y) the  denominator of which
     shall be the sum of the number of shares of Common Stock outstanding on the
     Date  plus the  number  of shares  of  Common  Stock  which  the  aggregate
     consideration  for the  total  number of such  additional  shares of Common
     Stock (or securities  convertible into or exchangeable for Common Stock, or
     any options,  warrants or other rights to acquire  shares of Common  Stock)
     plus the aggregate amount of any additional consideration initially payable
     (without regard to any  anti-dilution  adjustments)  upon such  conversion,
     exchange or exercise of such security  into Common Stock would  purchase at
     the  Current  Market  Price  per share of  Common  Stock on the Date.  Such
     adjustment  shall  be  made  whenever  such  shares,  securities,  options,
     warrants  or  other  rights  are  issued,   and  shall   become   effective
     retroactively to a date immediately  following the close of business (i) in
     the case of issuance to  stockholders of the  Corporation,  as such, on the
     record date for the determination of stockholders  entitled to receive such
     shares, securities, options, warrants or other rights and (ii) in all other
     cases, on the date ("issuance  date") of such issuance;  provided that: (A)
     the  determination  as to  whether an  adjustment  is  required  to be made
     pursuant to this Section  7(d)(ii)  shall be made upon the issuance of such
     shares or such convertible or exchangeable securities, options, warrants or
     other rights; (B) if any convertible or exchangeable  securities,  options,
     warrants or other rights (or any portions  thereof)  which shall have given
     rise to an adjustment  pursuant to this Section 7(d)(ii) shall have expired
     or terminated without the exercise thereof and/or if by reason of the terms
     of such convertible or exchangeable securities,  options, warrants or other
     rights  there  shall have been an  increase  or  increases  or  decrease or
     decreases, with the passage of time or otherwise, in the price payable upon
     the exercise or conversion thereof, then the Common Stock Conversion Number
     hereunder  shall be readjusted  (but to no greater  extent than  originally
     adjusted)  on the  basis  of  (x)  eliminating  from  the  computation  any
     additional  shares of Common Stock  corresponding  to such  convertible  or
     exchangeable  securities,  options,  warrants or other rights as shall have
     expired or terminated,  (y) treating the additional shares of Common Stock,
     if any,  actually issued or issuable  pursuant to the previous  exercise of
     such  convertible or exchangeable  securities,  options,  warrants or other
     rights as having been issued for the  consideration  actually  received and
     receivable   therefor  and  (z)  treating  any  of  such   convertible   or


                                        7

<PAGE>


     exchangeable  securities,  options,  warrants or other  rights which remain
     outstanding as being subject to exercise or conversion on the basis of such
     exercise  or  conversion  price  as  shall  be in  effect  at the  time  of
     adjustment;  and (C) no  adjustment in the Common Stock  Conversion  Number
     shall be made pursuant to this Section 7(d)(ii) as a result of any issuance
     of securities by the  Corporation  in respect of which an adjustment to the
     Common Stock Conversion Number is made pursuant to Section 7(d)(i).

          (iii) In the case the  Corporation,  at any time or from time to time,
     shall take any action  affecting  its Common Stock  similar to or having an
     effect  similar to any of the actions  described in any of Section  7(d)(i)
     and  Section  7(d)(ii),  or  Section  7(h) (but not  including  any  action
     described  in  any  such  Section)  and  the  Board  of  Directors  of  the
     Corporation  in good faith  determines  that it would be  equitable  in the
     circumstances to adjust the Common Stock  Conversion  Number as a result of
     such  action,  then,  and in each such case,  the Common  Stock  Conversion
     Number  shall be  adjusted  in such manner and at such time as the Board of
     Directors of the Corporation in good faith determines would be equitable in
     the circumstances  (such  determination to be evidenced in a resolution,  a
     certified  copy of which  shall be mailed to the  holders of the  Preferred
     Stock).

          (iv)  Notwithstanding  anything herein to the contrary,  no adjustment
     under  this  Section  7(d)  shall be made  upon the  grant  of  options  to
     employees  or  directors  of the  Corporation  pursuant  to  benefit  plans
     approved by the Board of Directors of the  Corporation or upon the issuance
     of shares of Common  Stock upon  exercise of such  options if the  exercise
     price thereof was not less than the Market Price of the Common Stock on the
     date such options were granted.

     (e) If the  Corporation  shall  take a record of the  holders of its Common
Stock  for the  purpose  of  entitling  them to  receive  a  dividend  or  other
distribution,  and shall  thereafter and before the distribution to stockholders
thereof   legally   abandon  its  plan  to  pay  or  deliver  such  dividend  or
distribution,  then  thereafter  no  adjustment  in the Common Stock  Conversion
Number then in effect shall be required by reason of the taking of such record.

     (f) Upon any  increase or decrease in the Common Stock  Conversion  Number,
then,  and in each such case,  the  Corporation  promptly  shall deliver to each
registered  holder  of  Preferred  Stock  at  least 10  Business  Days  prior to
effecting  any  of the  foregoing  transactions  a  certificate,  signed  by the
President or a Vice-President and by the Treasurer or an Assistant  Treasurer or
the  Secretary or an Assistant  Secretary of the  Corporation,  setting forth in
reasonable  detail the event  requiring the  adjustment  and the method by which
such adjustment was calculated and specifying the increased or decreased  Common
Stock Conversion Number then in effect following such adjustment.

     (g) No fractional shares or scrip  representing  fractional shares shall be
issued upon the  conversion of any shares of Preferred  Stock.  If more than one
share of Preferred  Stock shall be surrendered for conversion at one time by the
same holder,  the number of full shares of Common Stock issuable upon conversion

                                        8

<PAGE>


thereof  shall be  computed  on the basis of the  aggregate  number of shares of
Preferred  Stock so  surrendered.  If the  conversion  of any share or shares of
Preferred  Stock  results  in a  fraction,  an  amount  equal  to such  fraction
multiplied  by the Current  Market Price of the Common Stock on the Business Day
preceding  the day of  conversion  shall be paid to such  holder  in cash by the
Corporation.

     (h) In case of any  capital  reorganization  or  reclassification  or other
change of outstanding  shares of Common Stock (other than a change in par value,
or from par value to no par  value,  or from no par value to par  value),  or in
case of any  consolidation  or merger of the  Corporation  with or into  another
Person (other than a  consolidation  or merger in which the  Corporation  is the
resulting or surviving Person and which does not result in any  reclassification
or  change  of  outstanding  Common  Stock),  or in  case of any  sale or  other
disposition to another Person of all or  substantially  all of the assets of the
Corporation (any of the foregoing,  a "Transaction"),  the Corporation,  or such
successor or purchasing Person, as the case may be, shall execute and deliver to
each holder of Preferred  Stock at least 10 Business Days prior to effecting any
of the foregoing  Transactions  a  certificate  that the holder of each share of
Preferred Stock then outstanding shall have the right thereafter to convert such
share of  Preferred  Stock  into the kind and amount of shares of stock or other
securities (of the Corporation or another issuer,  the "Other  Securities"))  or
property or cash receivable  upon such  Transaction by a holder of the number of
shares of Common Stock into which such share of Preferred  Stock could have been
converted immediately prior to such Transaction.  Such certificate shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments  provided  for in this  Section  7.  If,  in the  case  of any  such
Transaction,  the Other Securities,  cash or property receivable  thereupon by a
holder of Common Stock includes shares of stock or other  securities of a Person
other than the  successor or purchasing  Person and other than the  Corporation,
which controls or is controlled by the successor or purchasing  Person or which,
in connection with such Transaction,  issues Other Securities, other property or
cash to holders of Common Stock, then such certificate also shall be executed by
such  Person,   and  such  Person  shall,  in  such  certificate,   specifically
acknowledge  the  obligations  of  such  successor  or  purchasing   Person  and
acknowledge  its obligations to issue such Other  Securities,  other property or
cash to the  holders  of  Preferred  Stock  upon  conversion  of the  shares  of
Preferred Stock as provided  above.  The provisions of this Section 7(h) and any
equivalent  thereof in any such certificate  similarly shall apply to successive
Transactions.

     (i) The  Corporation  shall at all times  reserve  and keep  available  for
issuance  upon  the  conversion  of the  Preferred  Stock,  such  number  of its
authorized  but  unissued  shares of  Common  Stock as will from time to time be
sufficient  to permit the  conversion  of all  outstanding  shares of  Preferred
Stock,  and shall take all action required to increase the authorized  number of
shares of Common Stock if at any time there shall be insufficient authorized but
unissued  shares of Common  Stock to permit  such  reservation  or to permit the
conversion of all outstanding shares of Preferred Stock.



                                        9

<PAGE>


     (j) The  issuance  or delivery of  certificates  for Common  Stock upon the
conversion  of shares of  Preferred  Stock shall be made  without  charge to the
converting  holder of shares of Preferred Stock for such certificates or for any
tax in  respect  of  the  issuance  or  delivery  of  such  certificates  or the
securities  represented  thereby,  and  such  certificates  shall be  issued  or
delivered  in the  respective  names  of, or  (subject  to  compliance  with the
applicable provisions of federal and state securities laws) in such names as may
be  directed  by,  the  holders  of the  shares of  Preferred  Stock  converted;
provided,  however,  that the  Corporation  shall not be required to pay any tax
which may be payable in respect of any  transfer  involved in the  issuance  and
delivery of any such  certificate in a name other than that of the holder of the
shares of Preferred Stock converted,  and the Corporation  shall not be required
to issue or  deliver  such  certificate  unless or until the  Person or  Persons
requesting the issuance or delivery  thereof shall have paid to the  Corporation
the amount of such tax or shall have established to the reasonable  satisfaction
of the Corporation that such tax has been paid.

     (k) If an offer is made to purchase  Common  Stock and the offer  must,  by
reason of  applicable  securities  legislation  or the  requirements  of a stock
exchange on which the Common  Stock is listed,  be made to all or  substantially
all  holders  of  Common  Stock  located  in a  province  of Canada in which the
requirement  applies,  the  holders  of  Preferred  Stock  shall  be  given  the
opportunity  to  participate  in the offer  through  conversion of the Preferred
Stock into Common Stock; unless

          (i) an identical  offer (in terms of price per security and percentage
     of outstanding  securities to be taken upon,  exclusive of securities owned
     immediately prior to the bid by the offeror, or associates or affiliates of
     the offeror,  and in all other material  respects) is made  concurrently to
     purchase  Preferred Stock, which offer has no condition attached other than
     the right not to take up and pay for  securities  tendered if no securities
     are purchased pursuant to the offer for Common Stock; or

          (ii) less than 50% of the Common Stock  outstanding  immediately prior
     to the offer,  other than Common Stock owned by the offeror,  or associates
     or affiliates of the offeror, are deposited pursuant to the offer.

     Section 8. Certain Remedies.

     Any registered holder of Preferred Stock shall be entitled to an injunction
or  injunctions  to prevent  breaches of the  provisions of this  Certificate of
Designation  and to  enforce  specifically  the  terms  and  provisions  of this
Certificate  of  Designation  in any  court of the  United  States  or any state
thereof having jurisdiction, this being in addition to any other remedy to which
such holder may be entitled at law or in equity.


                                       10

<PAGE>



     Section 9. Additional Shares of Preferred Stock.

     While any shares of Preferred Stock are outstanding,  the Corporation shall
not issue any  additional  shares of  Common  Stock or  convertible  securities,
rights,  warrants,  options or other  commitments  to issue Common Stock unless,
prior to such  issuance,  the  Corporation  declares  and pays a dividend on the
Preferred  Stock of a number of shares of Preferred Stock equal to the number of
shares of Common  Stock being  issued or the maximum  number of shares of Common
Stock  which may be issued  pursuant  to such  convertible  securities,  rights,
warrants, options or commitments;  provided,  however, the Corporation shall not
be required to issue additional shares of Preferred Stock in connection with the
issuance of Common Stock  pursuant to agreements  described in a Schedule to the
Purchase Agreement.

     Section 10. Definitions.

     For the purposes of this Certificate of Designation of Preferred Stock, the
following terms shall have the meanings indicated:

     "Business  Day" shall mean any day other than a  Saturday,  Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law or executive order to close.

     "Common Stock" shall mean and include the Common Stock,  without par value,
of the Corporation and each other class of capital stock of the Corporation that
does not  have a  preference  over  any  other  class  of  capital  stock of the
Corporation  as to dividends or upon  liquidation,  dissolution or winding up of
the  Corporation  and,  in each case,  shall  include any other class of capital
stock of the Corporation into which such stock is reclassified or reconstituted.

     "Current  Market Price" per share shall mean, on any date specified  herein
for the determination  thereof, (a) the average daily Market Price of the Common
Stock for those days  during the period of 20 days,  ending on such date,  which
are Trading Days,  and (b) if the Common Stock is not then listed or admitted to
trading on any national  securities  exchange or quoted in the  over-the-counter
market, the Market Price on such date.

     "Junior  Stock"  shall mean any capital  stock of the  Corporation  ranking
junior (either as to dividends or upon  liquidation,  dissolution or winding up)
to the Preferred Stock including, without limitation, the Common Stock.

     "Liquidation  Amount" with respect to a share of Preferred Stock shall mean
the sum of (a) all declared and unpaid  dividends on such Preferred  Stock,  and
(b) the sum of  $10.00  divided  by the  number of  shares  of  Preferred  Stock
outstanding on the applicable date.



                                       11

<PAGE>



     "Market  Price" shall mean, per share of Common Stock on any date specified
herein: (a) the closing price per share of the Common Stock on the Alberta Stock
Exchange or other principal Canadian stock exchange on which the Common Stock is
traded,  stated in U.S.  dollars at the then current  exchange ratio of Canadian
dollars  into U.S.  dollars  or (b) if there  shall have been no trading on such
date or if the Common  Stock is not so  designated,  the average of the reported
closing  bid and asked  prices of the Common  Stock on such date as shown by any
reputable  dealer in Common  Stock as selected by the Board of  Directors of the
Corporation.  If none of (a) or (b) is  applicable,  Market  Price  shall mean a
market price per share determined at the  Corporation's  expense by an appraiser
chosen by the holders of a majority of the shares of  Preferred  Stock or, if no
such  appraiser is so chosen more than twenty  business days after notice of the
necessity of such  calculation  shall have been delivered by the  Corporation to
the holders of Preferred Stock, then by an appraiser chosen by the Corporation.

     "Person" shall mean any individual, firm, corporation,  partnership, trust,
incorporated or unincorporated  association,  limited liability  company,  joint
venture, joint stock company,  government (or an agency or political subdivision
thereof)  or other  entity of any kind,  and shall  include  any  successor  (by
merger) of such entity.

     "Purchase  Agreement" shall mean the Securities Purchase  Agreement,  dated
December 30, 1999, between the Corporation and Bellwether Exploration Company.

     "Trading Day" shall mean a day on which the national  securities  exchanges
are open for trading.

     IN WITNESS  WHEREOF,  PEASE OIL AND GAS COMPANY has caused this Certificate
to be duly executed in its corporate name on this [ ]th day of [ ], 2000.


                                      [PEASE OIL AND GAS COMPANY]


                                      By
                                        ----------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:    President
                                            ------------------------------------
ATTEST:



By
  -------------------------------------
Name:
     ---------------------------------
Title:    Secretary
      --------------------------------




                                       12