<PAGE>

Robert D. Albergotti, State Bar No. 00969800          John A. Kazen
Judith Elkin, State Bar No. 06522200                  KAZEN, MEURER & PEREZ
S.D. Texas Bar No. 13043                              1619 Matamoros Street
Scott W. Everett, State Bar No. 00796522              P.O. Box 6237
S.D. Texas Bar No. 23318                              Laredo, Texas 78040
HAYNES AND BOONE, LLP                                 Telephone: (956) 712-1600
901 Main Street, Suite 3100
Telecopy:   (956) 712-1628
Dallas, Texas 75202
Telephone: (214) 651-5000
Telecopy: (214) 651-5940

CO-COUNSEL FOR DEBTORS-IN-POSSESSION

                      IN THE UNITED STATES BANKRUPTCY COURT
                       FOR THE SOUTHERN DISTRICT OF TEXAS
                                 LAREDO DIVISION

IN RE:                              )
                                    )
MICHAEL PETROLEUM                   )
CORPORATION,                        )    CASE NO. 99-50569-11
MICHAEL PETROLEUM                   )
ALPHA CORPORATION,                  )    CASE NO. 99-50570-11
MICHAEL HOLDINGS, INC.,             )    CASE NO. 99-50571-11
                                    )
         DEBTORS                    )    Jointly Administered under No. 99-50569

                  --------------------------------------------

             DEBTORS' "PLAN SUPPLEMENT" IN CONJUNCTION WITH DEBTORS'
         SECOND AMENDED JOINT PLAN OF REORGANIZATION DATED JUNE 12, 2000

--------------------------------------------------------------------------------

         Michael Petroleum Corporation ("MPC"), Michael Petroleum Alpha
Corporation ("MPA"), and Michael Holdings, Inc. ("MHI") (together, the
"Debtors," and each individually a "Debtor"), as Debtors and
Debtors-in-Possession, hereby file this Plan Supplement (hereinafter so
called) in Conjunction with the Debtors' Second Amended Joint Plan of
Reorganization Dated June 12, 2000,(1) and would show the Court as follows:

         1.       The Debtors began solicitation of the Plan on June 19, 2000
pursuant to the Order (i) Approving Disclosure Statement; (ii) Setting Date
for Confirmation Hearing and Fixing Deadlines for

--------

         (1)      Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in the Plan.

<PAGE>

Voting on and Objecting to the Plan; and (iii) Establishing and Approving
Procedures Relating to the Solicitation of Acceptances and Rejections of the
Plan (the "Disclosure Statement Order") entered June 15, 2000.

         2.       The Plan provides, at SECTION 1.59, for a "Plan Supplement"
to be filed by the Debtors with the Court no later than seven (7) days prior
to the Confirmation Hearing. Such Plan Supplement is contemplated to consist
of various plan implementation documents, as further described in the Plan.
The documents that constitute the Plan Supplement are attached hereto at
Exhibits A-E, and consist specifically of the following:

         Exhibit A -       The Acquisition Agreement by and among the Debtors
                           and MP Acquisition Company, LLC ("MPAC") (with the
                           Credit Agreement among Reorganized MPC, the Agent
                           Bank and the Banks attached as an exhibit).

         Exhibit B -       The Shareholders' Agreement between MPAC and CFSC
                           Wayland Advisers, Inc. ("Cargill").

         Exhibit C -       The List of Executory Contracts and Unexpired Leases
                           to be Assumed or Rejected by Reorganized MPC.

         Exhibit D -       The Articles of Merger of MHI and MPA with and into
                           MPC (with the Amended and Restated Articles of
                           Incorporation of the Reorganized MPC attached).

         Exhibit E -       The Amended and Restated By-Laws for the Reorganized
                           MPC.

         3.       The Plan Supplement shall for all purposes be deemed
incorporated into and become a part of the Plan as if fully set forth therein.

         4.       The Debtors reserve the right to supplement or amend this
Plan Supplement.

<PAGE>

         Dated this 20th day of July, 2000.

                            HAYNES AND BOONE, LLP
                            901 Main Street, Suite 3100
                            Dallas, Texas 75202
                            Telephone: (214) 651-5000
                            Telecopy: (214) 651-5940

                            /s/ Stacey Jernigan
                            ---------------------------------------------------
                            Robert D. Albergotti, State Bar No. 00969800
                            S.D. Texas Bar No. 24081
                            Judith Elkin, Attorney-in-Charge
                            State Bar No. 06522200
                            S.D. Texas Bar No. 13043
                            Charles A. Beckham, Jr., State Bar No. 02016600
                            S.D. Texas Bar No. 5306
                            Stacey Jernigan, State Bar No. 10652200
                            S.D. Texas Bar No. 13814

                            COUNSEL FOR THE DEBTORS


<PAGE>

                             CERTIFICATE OF SERVICE

         I, Stacey Jernigan, hereby certify that on the 20th day of July,
2000, I caused a copy of the foregoing Plan Supplement to be served on the
individuals on the attached list by regular mail, postage prepaid.

                            /s/ Stacey Jernigan
                            ---------------------------------------------------
                            Stacey Jernigan, Esq.
                            Texas State Bar No. 10652200
                            Haynes and Boone, LLP


<PAGE>

--------------------------------------------------------------------------------

                              ACQUISITION AGREEMENT

                                  BY AND AMONG

                             MICHAEL HOLDINGS, INC.,
                         MICHAEL PETROLEUM CORPORATION,

                       MICHAEL PETROLEUM ALPHA CORPORATION

                                       AND

                           MP ACQUISITION COMPANY, LLC

                                  JUNE 30, 2000

--------------------------------------------------------------------------------

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                              ----
<S>                                                                                                           <C>
AGREEMENT

ARTICLE I.
         TERMS OF THE TRANSACTION.................................................................................2
                  1.1      Agreement to Sell and Issue Shares.....................................................2
                  1.2      Purchase Price and Payment.............................................................2

ARTICLE II.
         CLOSING .................................................................................................2

ARTICLE III.
         REPRESENTATIONS AND WARRANTIES OF DEBTORS................................................................3
                  3.1      Corporate Organization.................................................................3
                  3.2      Corporate Records......................................................................3
                  3.3      Authority Relative to this Agreement...................................................3
                  3.4      Governmental Approvals.................................................................3
                  3.5      Subsidiaries...........................................................................3
                  3.6      Shares.................................................................................4
                  3.7      Financial Statements...................................................................4
                  3.8      Notice of Claims.......................................................................5
                  3.9      Tax Matters............................................................................5
                  3.10     Compliance With Laws...................................................................8
                  3.11     Legal Proceedings......................................................................8
                  3.12     Permits................................................................................8
                  3.13     Material Agreements Other than Basic Oil and Gas Documents.............................8
                  3.14     Employee Matters......................................................................10
                  3.15     ERISA.................................................................................11
                  3.16     Environmental Matters.................................................................11
                  3.17     Oil and Gas Interests.................................................................12
                  3.18     Reserve Report........................................................................14
                  3.19     Nature of Debtors' Assets.............................................................14
                  3.20     Marketing of Production...............................................................14
                  3.21     Material Personal Property............................................................15
                  3.22     Intellectual Property, Data and Other Records and Information.........................15
                  3.23     Disclosure............................................................................15

ARTICLE IV.
         REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................15
                  4.1      Organization and Formation............................................................15
                  4.2      Authority Relative to This Agreement..................................................16
                  4.3      Noncontravention......................................................................16
                  4.4      Governmental Approvals................................................................16
                  4.5      Legal Proceedings.....................................................................16
                  4.6      Investment Experience.................................................................16
                  4.7      Restricted Securities.................................................................17

<PAGE>

                  4.8      Legend................................................................................17
                  4.9      Accredited Investor; Investment Intent................................................17

ARTICLE V.
         CONDUCT OF DEBTORS PENDING CLOSING......................................................................17
                  5.1      Conduct and Preservation of Business..................................................17
                  5.2      Restrictions on Certain Actions.......................................................17
                  5.3      Executory Contracts...................................................................19

ARTICLE VI.
         ADDITIONAL AGREEMENTS...................................................................................19
                  6.1      Access to Information; Confidentiality................................................19
                  6.2      Reasonable Best Efforts...............................................................20
                  6.3      Public Announcements..................................................................21
                  6.4      Notice of Litigation..................................................................21
                  6.5      Notification of Certain Matters.......................................................21
                  6.6      Amendment of Schedules................................................................21
                  6.7      Use of Proceeds.......................................................................22
                  6.8      Taxes.................................................................................22

ARTICLE VII.
         CONDITIONS TO OBLIGATIONS OF THE DEBTORS................................................................22
                  7.1      Representations and Warranties True...................................................22
                  7.2      Covenants and Agreements Performed....................................................22
                  7.3      Legal Proceedings.....................................................................22
                  7.4.     Credit Facility.......................................................................22
                  7.5      The Plan..............................................................................22

ARTICLE VIII.
         CONDITIONS TO OBLIGATIONS OF BUYER......................................................................22
                  8.1      Representations and Warranties True...................................................23
                  8.2      Covenants and Agreements Performed....................................................23
                  8.3      Certificate...........................................................................23
                  8.4      Legal Proceedings.....................................................................23
                  8.5      No Material Adverse Change............................................................23
                  8.6.     Credit Facility.......................................................................23
                  8.7      Charter and Related Documents.........................................................23
                  8.8      The Plan, Disclosure Statement and Confirmation Order.................................23
                  8.9      Other Documents.......................................................................24

ARTICLE IX.
         TERMINATION, AMENDMENT, AND WAIVER......................................................................24
                  9.1      Termination...........................................................................24
                  9.2      Effect of Termination.................................................................25
                  9.3      Amendment.............................................................................25
                  9.4      Waiver................................................................................25
                  9.5      Remedies Not Exclusive................................................................25

ARTICLE X.
        MISCELLANEOUS............................................................................................25
                  10.1     No Survival...........................................................................25

<PAGE>

                  10.2     Notices...............................................................................26
                  10.3     Entire Agreement......................................................................27
                  10.4.    Binding Effect; Assignment; No Third Party Benefit....................................27
                  10.5     Severability..........................................................................27
                  10.6     GOVERNING LAW.........................................................................27
                  10.7     Further Assurances....................................................................27
                  10.8     Descriptive Headings..................................................................27
                  10.9     Gender................................................................................27
                  10.10    References............................................................................28
                  10.11    Counterparts..........................................................................28

ARTICLE XI.
        DEFINITIONS..............................................................................................28
                  11.1     Certain Defined Terms.................................................................28
</TABLE>

<PAGE>

                              ACQUISITION AGREEMENT

         This ACQUISITION AGREEMENT (this "Agreement") is dated as of June
30, 2000, by and among Michael Holdings, Inc., a Texas corporation
("Holdings"), Michael Petroleum Corporation, a Texas corporation ("MPC"),
Michael Petroleum Alpha Corporation, a Texas corporation ("Alpha"), and MP
Acquisition Company, LLC, a Texas limited liability company ("Buyer").

                                    RECITALS:

         A.       Holdings, MPC and Alpha are herein sometimes individually
called a "Debtor" and collectively called the "Debtors".

         B.       The Debtors filed petitions for relief under Chapter 11 of
the Bankruptcy Reform Act of 1978, as amended from time to time, and as
codified in Title 11 of the United States Code (the "Bankruptcy Code"), on
December 10, 1999, in the United States Bankruptcy Court for the Southern
District of Texas, Laredo Division (the "Bankruptcy Court"). Pursuant to an
Order entered by the Bankruptcy Court on December 22, 1999, the Debtors'
bankruptcy cases were administratively consolidated and are being jointly
administered under Case No. 99-50569 (the "Bankruptcy Case").

         C.       The Debtors have filed with the Bankruptcy Court Debtors'
Second Amended Joint Plan of Reorganization Dated June 12 , 2000 (the "Plan")
and Debtors' Second Amended Joint Disclosure Statement Under 11 U.S.C.
Section 1125 In Support of Debtors' Joint Plan of Reorganization Dated June
12, 2000 (the "Disclosure Statement").

         D.       The Plan provides, among other things, (i) that Debtors
will be substantively consolidated (with the resultant entity being herein
called "Reorganized MPC"), (ii) that Reorganized MPC will issue and sell, and
Buyer will purchase, common stock in Reorganized MPC, (iii) that the proceeds
from the purchase hereunder plus the proceeds of the Credit Facility (as
defined herein) will be distributed or set aside in a reserve in satisfaction
of outstanding creditors' claims and equity interests and (iv) that Electing
Class 4 Creditors (as such term is defined herein) will receive stock in
Reorganized MPC up to a maximum amount of $27,000,000.

         E.       The Debtors and Buyer deem it in their mutual best
interests to set forth the terms upon which Reorganized MPC will issue and
sell, and Buyer will purchase, common stock in Reorganized MPC.

                                   AGREEMENT:

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Debtors and Buyer hereby agree as follows:

                                   ARTICLE I.

                            TERMS OF THE TRANSACTION

         1.1      AGREEMENT TO SELL AND ISSUE SHARES. At the Closing, and on
the terms and subject to the conditions set forth in this Agreement,
Reorganized MPC shall sell and deliver to Buyer, and Buyer shall

<PAGE>

purchase and accept from Reorganized MPC, 100% of the issued and outstanding
shares of Reorganized MPC Common Stock save and except for shares of
Reorganized MPC Common Stock issued (or reserved for issue) to Electing Class
4 Creditors and Class 6C Interest Holders in accordance with the Plan. The
total number of shares of Reorganized MPC Common Stock to be issued to Buyer
and such other shareholders shall be one million. As used herein, the number
of shares of Reorganized Common Stock sold to Buyer hereunder shall be herein
called the "Shares".

         1.2      PURCHASE PRICE AND PAYMENT. In consideration of the sale of
the shares of Reorganized MPC Common Stock under Section 1.1, Buyer shall pay
to Reorganized MPC at the Closing $57,000,000 cash less the amount of the
distributions contributed (or estimated by Buyer and Reorganized Michael to
be contributed) by the Electing Class 4 Creditors under the Plan in exchange
for shares of Reorganized MPC Common Stock. Payment of the cash purchase
price under this Section shall be made by Buyer in immediately available
funds by confirmed wire transfer to a bank account designated by Debtors no
later than the third business day prior to the Closing Date. If such estimate
of contributed distributions is from time to time determined to be too large,
Buyer shall pay an appropriate additional portion of such $57,000,000 cash to
Reorganized MPC in exchange for additional shares of Reorganized MPC Common
Stock previously reserved for issuance to Electing Class 4 Creditors, and if
such estimate is from time to time determined to be too small, Buyer and
Reorganized MPC shall rescind an appropriate part of Buyer's purchase of
Reorganized MPC Common Stock and Reorganized MPC shall return to Buyer the
purchase price therefor.

                                   ARTICLE II.

                                     CLOSING

         The closing of the transactions contemplated hereby (the "Closing")
shall take place at the offices of Thompson & Knight L.L.P., 1200 Smith,
Suite 3600, Houston, TX 77002 at 10:00 a.m., local time, on the Effective
Date (as such term is defined in the Plan) or otherwise at such time or place
as directed by the Bankruptcy Court. The date on which the Closing is
required to take place is herein referred to as the "Closing Date." All
Closing transactions shall be deemed to have occurred simultaneously. At the
Closing, Reorganized MPC shall receive $57,000,000 from Buyer and/or Electing
Class 4 Creditors, plus $50,000,000 advanced under the Credit Facility, for a
total of $107,000,000. These funds shall be added to the other components of
"Net Plan Consideration" under the Plan for distribution under the Plan to
the Debtors' creditors.

                                  ARTICLE III.

                    REPRESENTATIONS AND WARRANTIES OF DEBTORS

         The Debtors jointly and severally represent and warrant to Buyer as
follows:

         3.1      CORPORATE ORGANIZATION. Each Debtor is a corporation duly
organized, validly existing, and in good standing under the laws of the state
of its incorporation and has all requisite corporate power and corporate
authority to own, lease, and operate its properties and to carry on its
business as now being conducted.

         3.2      CORPORATE RECORDS. Debtors have made available to Buyer
accurate and complete copies of (i) their respective articles of
incorporation, bylaws, and other charter documents as currently in effect and
(ii) their respective stock or other equity ownership interest records. Such
records accurately reflect

<PAGE>

in all material respects the stock or other equity ownership of the Debtors.
No Debtor is in violation of any provision of its charter or bylaws or other
charter documents.

         3.3      AUTHORITY RELATIVE TO THIS AGREEMENT. Each Debtor has full
corporate power and corporate authority to execute, deliver, and perform this
Agreement and the Ancillary Documents to which it is a party and, subject to
entry of the Confirmation Order and approval of this Agreement by the
Bankruptcy Court, to consummate the transactions contemplated hereby and
thereby. The execution, delivery, and performance by each Debtor of this
Agreement and the Ancillary Documents to which it is a party, and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action of such Debtor. This
Agreement has been duly executed and delivered by each Debtor. Each Ancillary
Document executed or to be executed by each Debtor has been, or when executed
will be, duly executed and delivered by such Debtor or Reorganized MPC (as
applicable). Subject to the entry of the Confirmation Order by the Bankruptcy
Court, this Agreement and each Ancillary Document constitutes, or when
executed and delivered will constitute, valid and legally binding obligations
of each Debtor, enforceable against such Debtor in accordance with their
respective terms, except that such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium, and similar
laws affecting creditors' rights generally and (ii) equitable principles
which may limit the availability of certain equitable remedies (such as
specific performance) in certain instances.

         3.4      GOVERNMENTAL APPROVALS. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity is required to be obtained or made by any Debtor in
connection with the execution, delivery, or performance by such Debtor of
this Agreement and the Ancillary Documents to which it is a party or the
consummation by it of the transactions contemplated hereby or thereby, other
than those required under the Bankruptcy Code.

         3.5      SUBSIDIARIES.

         (a)      Except as set forth in SCHEDULE 3.5, Holdings does not own,
directly or indirectly, any capital stock of, or other equity interest in,
any corporation or have any direct or indirect equity or ownership interest
in any other person, other than the Subsidiaries. SCHEDULE 3.5 lists each
Subsidiary, the jurisdiction of incorporation or formation of each
Subsidiary, and the authorized (in the case of capital stock) and outstanding
capital stock or other equity interests of each Subsidiary. Each Subsidiary
is duly incorporated or formed, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation or formation. As detailed
on SCHEDULE 3.5, each Subsidiary is duly qualified or licensed to do business
as a foreign corporation or other entity and is in good standing in each of
the jurisdictions in which it owns, leases, or operates property or in which
such qualification or licensing is required for the conduct of its business.
Each Subsidiary has all requisite corporate or other power and authority to
own, lease, and operate its properties and to carry on its business as now
being conducted. No actions or proceedings to dissolve any Subsidiary are
pending, or to the knowledge of Debtors, threatened.

         (b)      Except as otherwise indicated on SCHEDULE 3.5, all the
outstanding capital stock or other equity interests of each Subsidiary are
owned directly or indirectly by Holdings, free and clear of all Encumbrances.
All outstanding shares of capital stock of each Subsidiary have been validly
issued and are fully paid and nonassessable. No shares of capital stock or
other equity interests of any Subsidiary are subject to, nor have any been
issued in violation of, preemptive or similar rights.

         (c)      Except as set forth on SCHEDULE 3.5, there are (and as of
the Closing Date there will be) outstanding (i) no shares of capital stock or
other voting securities of any Subsidiary, (ii) no securities of Holdings or
any Subsidiary convertible into or exchangeable for shares of capital stock
or other voting securities of any Subsidiary, (iii) no options or other
rights to acquire from Holdings or any Subsidiary,

<PAGE>

and no obligation of Holdings or any Subsidiary to issue or sell, any shares
of capital stock or other voting securities of any Subsidiary or any
securities convertible into or exchangeable for such capital stock or voting
securities, and (iv) no equity equivalents, interests in the ownership or
earnings, or other similar rights of or with respect to any Subsidiary. There
are (and as of the Closing Date there will be) no outstanding obligations of
Holdings or any Subsidiary to repurchase, redeem, or otherwise acquire any of
the foregoing shares, securities, options, equity equivalents, interests, or
rights.

         3.6      SHARES. Upon consummation of the transactions contemplated
hereby and payment for the Shares, Buyer will acquire good and marketable
title to the Shares, free and clear of all Encumbrances. When acquired, the
Shares will represent 100% of the issued and outstanding shares of
Reorganized MPC Common Stock, on a fully-diluted basis, save and except the
shares of Reorganized MPC issued to Electing Class 4 Creditors and Class 6C
Interest Holders as provided in the Plan.

         3.7      FINANCIAL STATEMENTS. Debtors have delivered to Buyer
accurate and complete copies of:

                  (a)      MPC's audited consolidated balance sheet as of
         December 31, 1999, and the related audited consolidated statements of
         income, stockholder's equity, and cash flows for the year then ended,
         and the notes thereto (the "Audited Financial Statements"),

                  (b)      MPC's unaudited consolidated balance sheet as of
         March 31, 2000 (the "Latest Balance Sheet") and the related unaudited
         consolidated statements of income and cash flows for the quarter then
         ended (the "Unaudited Financial Statements"), certified by MPC's chief
         financial officer, and

                  (c)      Holding's unaudited consolidating balance sheet as of
         March 31, 2000 (the "Consolidating Balance Sheet") and the related
         unaudited consolidating statement of income for the quarter then ended
         (the "Consolidating Financial Statements"), certified by Holding's
         chief financial officer

(collectively, the "Financial Statements"). The Financial Statements have
been prepared from the books and records of Holdings and its consolidated
Subsidiaries in conformity with generally accepted accounting principles
applied on a basis consistent with preceding years throughout the periods
involved, except that the Unaudited Financial Statements are not accompanied
by notes or other textual disclosure required by generally accepted
accounting principles and accurately, completely, and fairly present in all
material respects MPC's and Holding's respective financial positions as of
the respective dates thereof and their results of operations and cash flows
for the periods then ended, except that the Unaudited Financial Statements
and Consolidating Financial Statements are subject to normal year-end
adjustments.

         3.8      NOTICE OF CLAIMS. Debtors have used their best efforts to
identify all holders of a claim against or interest in any of the Debtors and
have provided all necessary and appropriate notices of the Bankruptcy Case
and of the Plan to such holders.

         3.9      TAX MATTERS.  Except as disclosed on SCHEDULE 3.9:

         (a)      Debtors have (and as of the Closing Date will have) duly
filed all federal, state, local, and foreign Tax Returns required to be filed
by or with respect to them with the IRS or other applicable Taxing authority,
and as of the Closing Date no extensions with respect to such Tax Returns
will be outstanding, and all such Tax Returns are true, correct and complete
in all material respects and were prepared and filed in accordance with
applicable law.

<PAGE>

         (b)      Debtors have (and as of the Closing Date will have) paid,
or fully and specifically reserved against in the Financial Statements, all
Taxes due, or claimed by any Taxing authority to be due, from or with respect
to them, except Taxes that are being contested in good faith by appropriate
legal proceedings and for which adequate reserves have been set aside as
disclosed on SCHEDULE 3.9, and there are no liens for Taxes (other than for
Taxes not yet due and payable) upon any of the assets of any Debtor.

         (c)      There has been no issue raised or adjustment proposed (and
none is pending) by the IRS or any other Taxing authority in connection with
any of the Tax Returns, nor has Debtor received any notice from the IRS or
any such other Taxing authority that any Tax Return is being audited or may
be audited or examined.

         (d)      SCHEDULE 3.9 sets forth a list of states, territories and
jurisdictions (whether foreign or domestic) in which Debtors file Tax
Returns, including sales tax returns, and the Debtors have delivered to Buyer
true, correct and complete copies of all federal income Tax Returns, audit
and examination reports, and statements of deficiencies filed by, assessed
against or agreed to by the Debtors for all periods with respect to which the
applicable statute of limitations remains open and will deliver to Buyer any
such documents received on or before the Closing Date immediately upon
receipt.

         (e)      The Debtors have (and as of the Closing Date will have)
made all deposits required with respect to Taxes.

         (f)      [intentionally omitted]

         (g)      No waiver or extension of any statute of limitations as to
any federal, state, local, or foreign Tax matter has been given by or
requested from the Debtors.

         (h)      [intentionally omitted]

         (i)      No Debtor is required to make any material adjustments with
respect to a change in Tax accounting methods, and no Debtor has proposed
such adjustment or received written notice that the IRS or another taxing
authority has proposed such adjustment.

         (j)      No Debtor has any deferred income reportable for a current
tax period (or portion thereof) or a period (or portion thereof) beginning
after the Closing Date but that is attributable to a transaction (e.g., an
installment sale) occurring in a period (or portion thereof) ending on or
prior to the Closing Date.

         (k)      No Debtor has received written notice of a claim made by
any Taxing authority in a jurisdiction where such Debtor does not file Tax
Returns that such Debtor is or may be subject to Tax in such jurisdiction.

         (l)      No Debtor (i) is, or has ever been, a party to, bound by or
subject to any Tax allocation or Tax sharing agreement (or similar
agreement), (ii) has any current or potential contractual obligation to
indemnify any other person with respect to Taxes, or (iii) is a party to any
joint venture, partnership, contract or other arrangement which is treated as
a partnership for U.S. federal income Tax purposes.

         (m)      Each of the Debtors has validly adopted the calendar year
as its fiscal year for federal income tax purposes.

<PAGE>

         (n)      None of the assets of the Debtors (i) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code, (ii) is subject
to a tax benefit transfer lease subject to the provisions of former Section
168(f)(8) of the Internal Revenue Code of 1954, or (iii) secures any debt,
the interest of which is exempt from income Tax under Section 103 of the Code.

         (o)      The charges, accruals and reserves with respect to Taxes on
the Financial Statements of the Debtors (excluding any provision for deferred
income Taxes established to reflect timing differences between book and tax
income) for all tax periods (or portions thereof) ending on or before the
Closing Date (including any period for which no Tax Return has yet been
filed) are adequate and are at least equal to such corporations' liability
for Taxes.

         (p)      No Debtor has (i) applied for any tax ruling, (ii) entered
into a closing agreement with any taxing authority pursuant to Section 7121
of the Code or any predecessor provision thereof or any similar provision of
state, local or foreign law, (iii) filed an election under Sections 338(g) or
338(h)(10) of the Code, or (iv) been a party to any agreement or arrangement
that would result in the payment of any "excess parachute payment" within the
meaning of Section 280G of the Code, or the payment of any compensation that
is not deductible under Section 162(m) of the Code.

         (q)      [Intentionally omitted]

         (r)      The Debtors have been taxed as corporations under
Subchapter C of the Code.

         (s)      The Debtors have no elections in effect for federal income
tax purposes under Sections 108, 168, 441, 463, 472, 1017, 1033 or 4977 of
the Code.

         (t)      The Company has not utilized for income tax purposes any
investment tax credit which would be subject to recapture as a consequence of
this transaction.

         (u)      The Company has not engaged in any transaction described in
Section 355 of the Code at any time within two (2) years from the date of the
Agreement.

         (v)      No Debtor owns any interest in any (i) domestic
international sales corporation, (ii) foreign sales corporation, (iii)
controlled foreign corporation, or (iv) passive foreign investment company.

         (w)      During the previous two years, no Debtor has engaged in any
exchange under which the gain realized on such exchange was not recognized
due to Section 1031 of the Code.

         (x)      None of the property owned or used by the Debtors is
subject to a capitalized lease or other lease (other than a "true" lease) for
federal income tax purposes.

         (y)      [intentionally omitted]

         (z)      The Debtors have never been members of an "affiliated
group" within the meaning of Section 1504(a)(1) nor have the Debtors elected
or been required to join in any consolidated, combined or unitary Federal,
state, local or foreign Tax filings (other than the "affiliated group" of
which they currently are members).

         (aa)     The Debtors have complied with all Applicable Law, rules
and regulations relating to the payment and withholding of Taxes and complied
with all information reporting and backup withholding requirements, including
the maintenance of records with respect thereto, in connection with amounts
paid

<PAGE>

or owing to any employee, creditor, independent contractor or other third
party, and have duly and timely withheld from employee salaries, wages and
other compensation and have paid over to the appropriate Taxing authorities
all amounts required to be so withheld and paid over for all periods under
all Applicable Law.

         3.10     COMPLIANCE WITH LAWS. Since the Petition Date, Debtors have
complied in all material respects with all Applicable Laws. No Debtor has
received any written notice, which has not been dismissed or otherwise
disposed of, that such Debtor has not so complied. No Debtor is charged or,
to the knowledge of such Debtor, threatened with, or, to the best knowledge
of such Debtor, under investigation with respect to, any violation of any
Applicable Law relating to any aspect of the business of the Debtors, except
for such noncompliance which, individually or in the aggregate, does not and
will not result in a Material Adverse Effect.

         3.11     LEGAL PROCEEDINGS. There are no Proceedings pending or, to
the best knowledge of Debtors, threatened against or involving any Debtor (or
any of their respective directors or officers in connection with the business
or affairs of the Debtors) or any properties or rights of the Debtors, except
(i) as disclosed in the Disclosure Statement and (ii) for the Bankruptcy
Case. There are no Proceedings pending or, to the knowledge of the Debtors,
threatened seeking to restrain, prohibit, or obtain damages or other relief
in connection with this Agreement or the transactions contemplated hereby.

         3.12     PERMITS. The Debtors hold all Permits necessary or required
for the conduct of the business of the Debtors as currently conducted, except
where the failure to hold such Permits could not reasonably be expected to
have a Material Adverse Effect. Each of such Permits is in full force and
effect, each Debtor is in compliance in all material respects with all its
obligations with respect thereto, and, to the knowledge of the Debtors, no
event has occurred which permits, or with or without the giving of notice or
the passage of time or both would permit, the revocation or termination of
any thereof. No written notice has been issued by any Governmental Entity to
a Debtor and no Proceeding is pending or, to the knowledge of the Debtors,
threatened with respect to any alleged failure by a Debtor to have any Permit.

         3.13     MATERIAL AGREEMENTS OTHER THAN BASIC OIL AND GAS DOCUMENTS.

         (a)      Set forth on SCHEDULE 3.13 is a list of all the following
agreements, arrangements, and understandings (written or oral, formal or
informal) (collectively, for purposes of this Section, "agreements") which are
executory to which any Debtor is a party or by which such Debtor or any of its
properties is otherwise bound, exclusive of the Basic Oil and Gas Documents:

                  (i)      collective bargaining agreements and similar
         agreements with employees as a group;

                  (ii)     employee benefit agreements, trusts, plans, funds, or
         other arrangements of any nature, including those referred to in
         Section 5.2(e)(i);

                  (iii)    agreements with any current or former shareholder,
         director, officer, employee, consultant, or advisor or any affiliate of
         any such person;

                  (iv)     agreements between or among the Debtors;

                  (v)      indentures, mortgages, security agreements, notes,
         loan or credit agreements, or other agreements relating to the
         borrowing of money by any Debtor or to the direct or indirect guarantee
         or assumption by any Debtor of any obligation of others, including any
         agreement

<PAGE>

         (other than trade payables incurred in the ordinary course of business)
         that has the economic effect although not the legal form of any of the
         foregoing;

                  (vi)     agreements relating to the acquisition or disposition
         of assets, other than those entered into in the ordinary course of
         business consistent with past practice;

                  (vii)    agreements relating to the acquisition or disposition
         of any interest in any business enterprise;

                  (viii)   agreements containing any covenant limiting the
         freedom of any Debtor to engage in any line of business or compete with
         any other person in any geographic area or during any period of time;

                  (ix)     partnership, joint venture and profit sharing
         agreements;

                  (x)      contracts and other agreements under which any Debtor
         agrees to indemnify any party (exclusive of any standard and customary
         agreements to indemnify contained in operating or similar agreements);

                  (xi)     agreements with any Governmental Entity;

                  (xii)    agreements relating to the Release or Disposal of
         Hazardous Substances;

                  (xiii)   agreements in the nature of a settlement or a
         conciliation agreement arising out of any claim asserted by any other
         person;

                  (xiv)    agreements not made in the ordinary course of
         business; and

                  (xv)     other agreements, whether or not made in the ordinary
         course of business, that are material to the business, assets, results
         of operations, condition (financial or otherwise), or prospects of the
         Debtors considered as a whole (exclusive, however, of the Basic Oil and
         Gas Documents).

         (b)      The Debtors have made available to Buyer accurate and
complete copies of the agreements listed on SCHEDULE 3.13. Each of such
agreements is a valid and binding agreement of the Debtors (to the extent
each is a party thereto) and (to the knowledge of the Debtors) the other
party or parties thereto, enforceable against the Debtors (to the extent each
is a party thereto) and (to the knowledge of the Debtors) such other party or
parties in accordance with its terms, subject to any violations or defaults
thereof arising solely out of the filing of the Bankruptcy Case. To the
knowledge of the Debtors, no other party to any of such agreements is in
breach of or in default under such agreements, nor since the Petition Date
has any assertion been made by the Debtors of any such breach or default.

         (c)      No Debtor has received notice of any plan or intention of
any other party to any material agreement to exercise any right of offset
with respect to, or any right to cancel or terminate, any material agreement.
Except to the extent, if any, contemplated by the Plan, no Debtor currently
contemplates, or has reason to believe any other person currently
contemplates, any amendment or change to any agreement, which amendment or
change could have a Material Adverse Effect on the Debtors.

<PAGE>

         3.14     EMPLOYEE MATTERS.

         (a)      The Debtors have delivered to Buyer a complete and accurate
list of the names, titles and Cash Compensation (as defined below) of all
executive management of the Debtors, regardless of compensation levels, and
other employees who are currently compensated at a rate in excess of $50,000
per year or who earned in excess of $50,000 during the Debtors' preceding
fiscal year. In addition, the Debtors have delivered to Buyer a schedule
containing a complete and accurate description of (i) all increases in Cash
Compensation of such employees of the Debtors during the current and
immediately preceding fiscal years of the Debtors, (ii) any written promised
increases in Cash Compensation of such employees of the Debtors that have not
yet been effected and (iii) all increases in Cash Compensation of any other
employees which would cause such employees to be compensated at a rate in
excess of $50,000 per year, but which have not yet been effected. As used in
this Section, "Cash Compensation" shall mean wages, salaries, bonuses
(discretionary and formula) and other compensation paid or payable in cash.

         (b)      SCHEDULE 3.14(b) contains a complete and accurate list of
all Compensation Plans (as defined below) sponsored by any Debtor or to which
any Debtor contributes on behalf of its employees. The Compensation Plans
include, without limitation, plans, arrangements or practices that provide
for severance pay, deferred compensation, incentive, bonus or performance
awards, and stock ownership or stock options.

         (c)      SCHEDULE 3.14(c) contains a complete and accurate list of
all employment agreements to which any Debtor is a party with respect to its
employees. Such employment agreements include any noncompetition agreements.

         (d)      SCHEDULE 3.14(d) contains a complete and accurate list of
all employee manuals, policies, procedures and work related rules that apply
to employees of any Debtor (in this Section, "Employee Policies and
Procedures").

         (e)      No material unwritten amendments have been made, whether by
oral communication, pattern of conduct or otherwise, with respect to any
compensation plans, arrangements and practices, employment agreements to
which any Debtor is a party with respect to its employees or Employee
Policies and Procedures.

         (f)      Each Debtor has been and is in substantial compliance in
all material respects with all applicable laws, rules, regulations and
ordinances respecting employment and employment practices, terms and
conditions of employment and wages and hours.

         (g)      No Debtor has ever been a party to any written agreement
with any union, labor organization or collective bargaining unit. To the best
of Debtors' knowledge, no employees of any Debtor are represented by any
union, labor organization or collective bargaining unit. To the knowledge of
the Debtors, the employees of the Debtors have no intention to and have not
threatened to organize or join a union, labor organization or collective
bargaining unit.

         3.15     ERISA. Other than as disclosed on SCHEDULE 3.14(b), there
is no "employee benefit plan", as defined in Section 3(3) of ERISA, (i) which
is subject to any provision of ERISA, (ii) which is, or is required to be,
maintained, administered, or contributed to by the Debtors or any affiliate
of the Debtors, and (iii) which covers any employee or former employee of the
Debtors or any affiliate of the Debtors or under which any Debtor or any
affiliate of such Debtor has any liability. For purposes of this Section
only, an "affiliate" of any person means any other person which, together
with such person, would be treated as a single employer under Section 414 of
the Code.

<PAGE>

         3.16     ENVIRONMENTAL MATTERS.

         (a)      Except as disclosed on SCHEDULE 3.16:

                  (i)      the properties, operations, and activities of the
         Debtors comply with all Applicable Environmental Laws (as defined
         below), except for noncompliance that could not reasonably be expected
         to have a Material Adverse Effect;

                  (ii)     the Debtors and the properties, operations, and
         activities of the Debtors are not subject to any existing, pending, or,
         to the knowledge of the Debtors, threatened Proceeding under, or to any
         remedial obligations under, any Applicable Environmental Laws that
         could reasonably be expected to have a Material Adverse Effect;

                  (iii)    all Permits, if any, required to be obtained by any
         Debtor under any Applicable Environmental Laws in connection with any
         material aspect of the business of the Debtors, including without
         limitation those relating to the treatment, storage, disposal, or
         release of a hazardous material (as defined below), have been duly
         obtained and are in full force and effect, and the Debtors are in
         compliance with the material terms and conditions of all such Permits,
         except to the extent that non-compliance, either individually or in the
         aggregate, is not reasonably expected to have a Material Adverse
         Effect;

                  (iv)     the Debtors are currently in compliance with all
         financial responsibility requirements applicable to their respective
         operations and imposed by any Governmental Entity under any Applicable
         Environmental Laws; and, since the Petition Date, the Debtors, except
         for such noncompliance that could not reasonably be expected to have a
         Material Adverse Effect, have not received any notice of noncompliance
         with any such financial responsibility requirements;

                  (v)      there are no physical or environmental conditions
         existing on any property owned or leased by the Debtors or resulting
         from any Debtor's operations or activities, past or present, at any
         location, that would give rise to any on-site or off-site remedial
         obligations under any Applicable Environmental Laws, other than normal
         and ordinary remedial work associated with standard and customary
         operations and plugging and abandoning of oil and gas facilities;

                  (vi)     all hazardous materials generated by the Debtors or
         used in connection with their respective properties, operations, or
         activities have been transported only by carriers authorized under
         Applicable Environmental Laws to transport such materials, and have
         been disposed of only at treatment, storage, and disposal facilities
         authorized under Applicable Environmental Laws to treat, store, or
         dispose of such materials, and, such carriers and facilities, at the
         time of such transportation or disposal, were operating in compliance
         with such authorizations and were not the subject of any existing,
         pending, or threatened Proceeding in connection with any Applicable
         Environmental Laws;

                  (vii)    there has been no exposure of any person or property
         to hazardous materials, nor has there been any release of hazardous
         materials into the environment in violation of any Applicable
         Environmental Laws, by the Debtors or in connection with their
         respective properties, operations, or activities that could reasonably
         be expected to give rise to any claim for damages or compensation that
         could reasonably be expected to have a Material Adverse Effect; and

                  (viii)   the Debtors shall make available to Buyer all
         internal and external environmental audits and studies and all
         correspondence on substantial environmental matters in the possession

<PAGE>

         of the Debtors relating to any of the current or former properties,
         operations, or activities of the Debtors.

For purposes of the representations and warranties set forth in paragraphs
(v), (vi) and (vii) above, such representations and representations shall be
deemed made to the knowledge of the Debtors to the extent they relate to
operations or facilities where Debtors are not the operator.

         (b)      For purposes of this Agreement, "Applicable Environmental
Laws" means any and all Applicable Laws pertaining to health, safety, or the
environment in effect in any and all jurisdictions in which the Debtors have
conducted operations or activities or owned or leased property, including,
without limitation, the Clean Air Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
the Rivers and Harbors Act of 1899, as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976, as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. For purposes of this
Agreement, the term "hazardous material" means any substance which is listed
or defined as a hazardous substance, hazardous constituent, or solid waste
pursuant to any Applicable Environmental Laws.

         3.17     OIL AND GAS INTERESTS.

         (a)      Schedule 3.17 contains a complete and accurate list of the
Debtor's Oil and Gas Interests and sets forth the respective Working Interest
and Net Revenue Interests claimed by the Debtors therein.

         (b)      The oil, gas and/or mineral leases, interests in which
comprise part of the Debtors' Oil and Gas Interests, and all other material
contracts and agreements, licenses, permits and easements, rights-of-way and
other rights-of-surface use comprising any part of or otherwise relating to
the Debtors' Oil and Gas Interests (the "Basic Oil and Gas Documents") are in
full force and effect in all material respects and constitute valid and
binding obligations of the parties thereto. Except as set forth in SCHEDULE
3.17 (and except for violations or defaults which arise solely out of the
filing of the Bankruptcy Case), since the Petition Date no Debtor is in
breach or default (and, to the knowledge of Debtors, no situation currently
exists which with the passing of time or giving of notice would create a
breach or default) of its obligations under the Basic Oil and Gas Documents,
and (to the best of the Debtors' knowledge) no breach or default by any third
party (or situation which with the passage of time or giving of notice would
create a breach or default) exists, to the extent such breach or default
(whether by a Debtor or such a third party) could reasonably be expected to
materially adversely affect the ownership, operation, value or use of any
material Oil and Gas Interest after the Closing Date. All payments (including
all delay rentals, royalties, shut-in royalties and valid calls for payment
or prepayment under operating agreements) owing under the Basic Oil and Gas
Documents have been and are being made (timely, and before the same became
delinquent) by the Debtors in all material respects (and, where the
non-payment of same by a third party could materially adversely affect the
ownership, operation, value or use of an Oil and Gas Interest after the
Closing Date, have been and are being made, to the Debtors' knowledge, by
such third parties). For the purposes of the representations contained in
this Section (and without limitation of such representations), the
non-payment of an amount, or non-performance of an obligation, where such
non-payment, or non-performance, could result in the forfeiture or
termination of any material Oil and Gas Interest shall be considered material.

         (c)      Except as set forth in SCHEDULE 3.17 and authorizations for
expenditure under $5,000: (i) no Debtor has incurred any expenses, and has
made any commitments to make expenditures in connection with (and no other
obligations or liabilities have been incurred by the Debtors which would

<PAGE>

adversely affect) the ownership or operation of the Oil and Gas Interests
after the Closing Date, other than routine expenses incurred in the normal
operation of wells included in the Oil and Gas Interests; (ii) no Debtor has
abandoned any wells (or removed any material items of equipment, except those
replaced by items of materially equal suitability) included in the Oil and
Gas Interests since the effective date of the Reserve Report; and (iii) no
proposals are currently outstanding (whether made by a Debtor or by any other
party) to abandon any wells included in the Oil and Gas Interests.

         (d)      Except as set forth on SCHEDULE 3.17, to the knowledge of
Debtors there are no dry holes, or shut in or otherwise inactive wells,
included in the Oil and Gas Interests, except for wells that have been
plugged and abandoned.

         (e)      To the best of Debtors' knowledge, all proceeds from the
sale of each Debtor's share of the hydrocarbons being produced from its oil,
gas and mineral properties are currently being paid in full to such party by
the purchasers thereof on a timely basis and none of such proceeds are
currently being held in suspense by such purchaser or any other party.

         (f)      Except as set forth in SCHEDULE 3.17, there is no Oil and
Gas Interest with respect to which any Debtor (or, to Debtors' knowledge, its
predecessor in title) have collectively taken more or less production from
such Oil and Gas Interest than the ownership of the Debtors and such
predecessors in title would entitle them to receive.

         (g)      To Debtors' knowledge, none of the Oil and Gas Interests is
subject to having allowable production after the date hereof reduced below
the full and regular allowable because of any overproduction prior to the
date hereof.

         (h)      Except as set forth in SCHEDULE 3.17, no Debtor is
obligated, by virtue of a written prepayment arrangement, "take or pay"
arrangement, production payment or any other arrangement to deliver oil, gas
or other hydrocarbons produced from the Oil and Gas Interests at some future
time without then receiving full payment therefor.

         3.18     RESERVE REPORT. The Debtors have delivered to Buyer a copy
of the reserve report (the "Reserve Report") dated as of December 31, 1999,
prepared by the independent reserve engineering firm of Netherland Sewell &
Associates, Inc. (the "Reserve Engineers"), relating to the oil and gas
reserves of the Debtors. The factual information underlying the estimates of
the reserves of the Debtors, which was supplied by the Debtors to the Reserve
Engineers for the purpose of preparing the Reserve Report, including, without
limitation, production, volumes, sales prices for production, contractual
pricing provisions under oil or gas sales or marketing contracts, costs of
operations and development, and working interest and net revenue information
relating to the Debtors' ownership interests in properties, was true and
correct in all material respects on the dates of such Reserve Report; the
estimates of future capital expenditures and other future exploration and
development costs supplied to the Reserve Engineers were prepared in good
faith and with a reasonable basis; the information provided to the Reserve
Engineers for purposes of preparing the Reserve Report was prepared in
accordance with customary industry practices; each Reserve Engineer was, as
of the date of the Reserve Report prepared by it, and are, as of the date
hereof, independent petroleum engineers with respect to the Debtors; and
other than normal production of the reserves, intervening oil and gas price
fluctuations, and delays in the drilling and completion dates anticipated for
the purposes of the Reserve Report, the Debtors are not as of the date hereof
and as of the Closing Date will not be, aware of any facts or circumstances
that would result in a materially adverse change in the reserves in the
aggregate, or the aggregate present value of future net cash flows therefrom,
as described in the Reserve Report.

<PAGE>

         3.19 NATURE OF DEBTORS' ASSETS. The assets of the Debtors and any
other Subsidiary consist solely of (i) reserves of oil and gas, rights to
reserves of oil and gas and associated exploration and production assets with
a fair market value not exceeding $500 million and (ii) other assets with a
fair market value not exceeding $15 million. For purposes of this Section
3.19, the term "associated exploration and production assets" shall have the
meaning ascribed thereto in Section 802.3 of the Rules promulgated pursuant
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

         3.20     MARKETING OF PRODUCTION. Except for contracts listed on
SCHEDULE 3.20 (with respect to all of which contracts each Debtor represents
that it or its affiliates are receiving a price for all production sold
thereunder which is computed in accordance with the terms of the relevant
contract and are not having deliveries curtailed substantially below the
subject property's delivery capacity), there exist no material agreements for
the sale of production from the Debtors' Oil and Gas Interests (including
calls on, or other rights to purchase, production, whether or not the same
are currently being exercised) other than agreements or arrangements that are
cancelable on 90 days notice or less without penalty or detriment.

         3.21     MATERIAL PERSONAL PROPERTY. All pipelines, wells, gas
processing plants, platforms and other material improvements, fixtures and
equipment owned in whole or in part by the Debtors that are necessary to
conduct normal operations are being maintained in a state adequate to conduct
normal operations, and with respect to such of the foregoing which are
operated by any Debtor, in a manner consistent with such Debtor's or its
affiliates' past practices.

         3.22     INTELLECTUAL PROPERTY, DATA AND OTHER RECORDS AND
INFORMATION. The Debtors either own or have valid licenses or other rights to
use all patents, copyrights, trademarks, software, databases, geological
data, geophysical data, engineering data, maps, interpretations and other
technical information used in their businesses as presently conducted, lease,
land, title and other files, records and other similar information, subject
to the limitations contained in the agreements governing the use of the same,
which limitations are customary for companies engaged in the business of the
exploration and production of oil, gas, condensate and other hydrocarbons,
with such exceptions as would not result in a Material Adverse Effect. There
are no limitations contained in the agreements of the type described in the
immediately preceding sentence which, upon consummation of the transactions
contemplated by this Agreement, will alter or impair any such rights, breach
any such agreement with any third party vendor, or require payments of
additional sums thereunder, except any such limitations that would not have a
Material Adverse Effect. The Debtors are in compliance in all material
respects with such licenses and agreements and there are no pending or, to
the best knowledge of the Debtors, threatened Proceedings challenging or
questioning the validity or effectiveness of any license or agreement
relating to such property or the right of any Debtor to use, copy, modify or
distribute the same.

         3.23     DISCLOSURE. No representation or warranty made by the
Debtors in this Agreement, and no statement of the Debtors contained in any
document, certificate, or other writing furnished or to be furnished by
Debtors pursuant hereto or in connection with the transactions contemplated
hereby, contains or will contain, at the time of delivery, any untrue
statement of a material fact or omits or will omit, at the time of delivery,
to state any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they are made,
not misleading. The Debtors know of no matter (other than matters of a
general economic character, including commodity prices, not relating solely
to the Debtors in any specific manner) which has not been disclosed to Buyer
pursuant to this Agreement which has or is reasonably likely to have a
Material Adverse Effect on the Debtors or affect the ability of the Debtors
to consummate the transactions contemplated hereby.

<PAGE>

                                   ARTICLE IV.

                     REPRESENTATIONS AND WARRANTIES OF BUYER

         Buyer represents and warrants to the Debtors that:

         4.1      ORGANIZATION AND FORMATION. Buyer is duly organized,
validly existing, and in good standing under the laws of the State of Texas
and has all requisite limited liability company power and authority to own,
lease, and operate its properties and to carry on its business as now being
conducted.

         4.2      AUTHORITY RELATIVE TO THIS AGREEMENT. Buyer has full power
and authority to execute, deliver, and perform this Agreement and the
Ancillary Documents to which it is a party and, subject to entry of the
Confirmation Order by the Bankruptcy Court, to consummate the transactions
contemplated hereby and thereby. The execution, delivery, and performance by
Buyer of this Agreement and the Ancillary Documents to which it is a party,
and the consummation by it of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary limited liability company
action of Buyer. This Agreement has been duly executed and delivered by
Buyer. Each Ancillary Document executed or to be executed by Buyer has been,
or when executed will be, duly executed and delivered by Buyer. Subject to
the entry of the Confirmation Order by the Bankruptcy Court, this Agreement
and each Ancillary Document constitutes, or when executed and delivered will
constitute, valid and legally binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (ii) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain
instances.

         4.3      NONCONTRAVENTION. The execution, delivery, and performance
by Buyer of this Agreement and the Ancillary Documents to which Buyer is a
party and the consummation by it of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or result in a violation of any
provision of the governing documents of Buyer, (ii) conflict with or result
in a violation of any provision of, or constitute (with or without the giving
of notice or the passage of time or both) a default under, or give rise (with
or without the giving of notice or the passage of time or both) to any right
of termination, cancellation, or acceleration under, or require any consent,
approval, authorization, or waiver of any party to, any bond, debenture,
note, mortgage, indenture, lease, contract, agreement, or other instrument or
obligation to which Buyer is a party or by which Buyer or any of its
properties may be bound or any Permit held by Buyer, (iii) result in the
creation or imposition of any Encumbrance upon the properties of Buyer, or
(iv) violate any Applicable Law binding upon Buyer.

         4.4      GOVERNMENTAL APPROVALS. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity is required to be obtained or made by Buyer in connection
with the execution, delivery, or performance by Buyer of this Agreement and
the Ancillary Documents to which it is a party or the consummation by Buyer
of the transactions contemplated hereby or thereby, other than those required
under the Bankruptcy Code.

         4.5      LEGAL PROCEEDINGS. There are no Proceedings pending or, to
the best knowledge of Buyer, threatened seeking to restrain, prohibit, or
obtain damages or other relief in connection with this Agreement or the
transactions contemplated hereby.

         4.6      INVESTMENT EXPERIENCE. Buyer acknowledges that it can bear
the economic risk of its investment in the Shares, and has such knowledge and
experience in financial and business matters (including the oil and gas
business) that it is capable of evaluating the merits and risks of an
investment in the Shares.

<PAGE>

         4.7      RESTRICTED SECURITIES. Buyer understands that the Shares
will not have been registered pursuant to the Securities Act or any
applicable state securities laws, that the Shares will be characterized as
"restricted securities" under federal securities laws, and that under such
laws and applicable regulations the Shares cannot be sold or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom.

         4.8      LEGEND. It is agreed and understood by Buyer that the
certificates representing the Shares shall each conspicuously set forth on
the face or back thereof, in addition to any legends required by Applicable
Law or other agreement, a legend in substantially the following form:

         THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
         SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
         UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT AND APPLICABLE
         STATE SECURITIES LAWS OR UNLESS THE CORPORATION RECEIVES A WRITTEN
         OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE
         CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.

         4.9      ACCREDITED INVESTOR; INVESTMENT INTENT. Buyer is an accredited
investor as defined in Regulation D under the Securities Act. Buyer is acquiring
its portion of the Shares for its own account for investment and not with a view
to, or for sale or other disposition in connection with, any distribution of all
or any part thereof, except in compliance with applicable federal and state
securities laws.

                                   ARTICLE V.

                       CONDUCT OF DEBTORS PENDING CLOSING

         The Debtors jointly and severally covenant and agree with Buyer as
follows:

         5.1      CONDUCT AND PRESERVATION OF BUSINESS. Except as expressly
provided in this Agreement or in the Plan, during the period from the date
hereof to the Closing, the Debtors (i) shall operate their business and
affairs in all material respects in compliance with the Bankruptcy Code and
any orders entered by the Bankruptcy Court and shall use reasonable best
efforts to seek and obtain approval of the Bankruptcy Court to operate such
business and affairs consistent with prudent industry practices and in
compliance with all Applicable Laws; and (ii) shall each use reasonable best
efforts to preserve, maintain, and protect their properties consistent with
prudent industry practices.

         5.2      RESTRICTIONS ON CERTAIN ACTIONS. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in
this Agreement or in the Plan, prior to the Closing, no Debtor shall, without
the prior written consent of Buyer:

                  (a)      amend its charter or bylaws or other governing
         instruments;

                  (b)      (i) issue, sell, or deliver (whether through the
         issuance or granting of options, warrants, commitments, subscriptions,
         rights to purchase, or otherwise) any shares of its capital stock of
         any class or any other securities or equity equivalents; or (ii) amend
         in any respect any of the terms of any such securities outstanding as
         of the date hereof;

<PAGE>

                  (c)      (i) split, combine, or reclassify any shares of its
         capital stock; (ii) declare, set aside, or pay any dividend or other
         distribution (whether in cash, stock, or property or any combination
         thereof) in respect of its capital stock; or (iii) repurchase, redeem,
         or otherwise acquire any of its securities;

                  (d)      (i) except in the ordinary course of business
         consistent with past practice, create, incur, guarantee, or assume any
         indebtedness for borrowed money or otherwise become liable or
         responsible for the obligations of any other person; (ii) make any
         loans, advances, or capital contributions to, or investments in, any
         other person (other than to wholly owned Subsidiaries); (iii) pledge or
         otherwise encumber shares of capital stock; or (iv) except in the
         ordinary course of business consistent with past practice, mortgage or
         pledge any of its assets, tangible or intangible, or create or suffer
         to exist any lien thereupon;

                  (e)      (i) enter into, adopt, or (except as may be required
         by law) amend or terminate any bonus, profit sharing, compensation,
         severance, termination, stock option, stock appreciation right,
         restricted stock, performance unit, stock equivalent, stock purchase,
         pension, retirement, deferred compensation, employment, severance, or
         other employee benefit agreement, trust, plan, fund, or other
         arrangement for the benefit or welfare of any director, officer, or
         employee; (ii) increase in any manner the compensation or fringe
         benefits of any director, officer, or employee; or (iii) pay to any
         director, officer, or employee any benefit not required by any employee
         benefit agreement, trust, plan, fund, or other arrangement as in effect
         on the date hereof;

                  (f)      acquire, sell, lease, transfer, or otherwise dispose
         of, directly or indirectly, any assets outside the ordinary course of
         business consistent with past practice or any assets that in the
         aggregate are material to the Debtors taken considered as a whole;

                  (g)      acquire (by merger, consolidation, or acquisition of
         stock or assets or otherwise) any corporation, partnership, or other
         business organization or division thereof;

                  (h)      make any capital expenditure or expenditures which,
         individually, is in excess of $1,000,000 or, in the aggregate, are in
         excess of $3,500,000;

                  (i)      amend any Tax Return or make any Tax election or
         settle or compromise any federal, state, local, or foreign Tax
         liability material to the Debtors considered as a whole;

                  (j)      pay, discharge, or satisfy any claims, liabilities,
         or obligations (whether accrued, absolute, contingent, unliquidated, or
         otherwise, and whether asserted or unasserted), other than the payment,
         discharge, or satisfaction in the ordinary course of business
         consistent with past practice, or in accordance with their terms, of
         liabilities reflected or reserved against in the Financial Statements
         or incurred since December 31, 1999 in the ordinary course of business
         consistent with past practice; provided, however, that in no event
         shall any Debtor repay any long-term indebtedness except to the extent
         required by the terms thereof or the Plan or other order of the
         Bankruptcy Court;

                  (k)      enter into any lease, contract, agreement,
         commitment, arrangement, or transaction outside the ordinary course of
         business consistent with past practice;

                  (l)      amend, modify, or change in any material respect any
         existing lease, contract, or agreement, other than in the ordinary
         course of business consistent with past practice;

<PAGE>

                  (m)      waive, release, grant, or transfer any rights of
         value, other than in the ordinary course of business consistent with
         past practice;

                  (n)      change any of the accounting principles or practices
         used by it, except for any change required by reason of a concurrent
         change in generally accepted accounting principles and notice of which
         is given in writing by the Debtors to Buyer;

                  (o)      take any action which would or might make any of the
         representations or warranties of the Debtors contained in this
         Agreement untrue or inaccurate as of any time from the date of this
         Agreement to the Closing or would or might result in any of the
         conditions set forth in this Agreement not being satisfied; or

                  (p)      authorize or agree in writing or otherwise to take,
         any of the actions described in this Section.

         5.3      EXECUTORY CONTRACTS. On or before the earlier of the
Closing Date and the "Confirmation Date" under the Plan, the Debtors will
assume the executory contracts and unexpired leases listed as being assumed
on SCHEDULE 5.3 hereto and will reject the executory contracts and unexpired
leases listed as being rejected on SCHEDULE 5.3 hereto. Buyer covenants and
agrees to cooperate with Debtors in connection with furnishing information
pertaining to the satisfaction of the requirement of adequate assurances of
future performance as required under Section 365(f)(2)(B) of the Bankruptcy
Code.

                                   ARTICLE VI.

                              ADDITIONAL AGREEMENTS

         6.1      ACCESS TO INFORMATION; CONFIDENTIALITY.

         (a)      Between the date hereof and the Closing, the Debtors: (i)
shall, during normal business hours and upon reasonable prior notice, give
Buyer and its authorized representatives reasonable access to all employees,
all plants, offices, warehouses, and other facilities, and all books and
records, including work papers and other materials prepared by the Debtors'
independent public accountants, of the Debtors, (ii) shall, during normal
business hours and upon reasonable prior notice, permit Buyer and its
authorized representatives to make inspections as Buyer may reasonably
require, and (iii) shall cause the Debtors' officers to furnish Buyer and its
authorized representatives with such financial and operating data and other
information with respect to the Debtors as Buyer may from time to time
reasonably request; provided, however, that no investigation pursuant to this
Section shall affect any representation or warranty of the Debtors contained
in this Agreement or in any agreement, instrument, or document delivered
pursuant hereto or in connection herewith.

         (b)      Buyer agrees that all Confidential Information (as defined
below) shall be kept confidential by Buyer and Buyer Representatives and
shall not be disclosed by Buyer or Buyer Representatives in any manner
whatsoever; provided, however, that (i) any of such Confidential Information
may be disclosed to such directors, officers, employees, and authorized
representatives (including without limitation attorneys, accountants,
consultants, bankers, and financial advisors) of Buyer (collectively, for
purposes of this Section, "Buyer Representatives") as need to know such
information for the purpose of evaluating the transactions contemplated
hereby, (ii) any disclosure of Confidential Information may be made to the
extent to which the Debtors consent in writing, and (iii) Confidential
Information may be disclosed by Buyer or any Buyer Representative to the
extent that Buyer or Buyer Representative is legally compelled to do so,
provided that, prior to making such disclosure, Buyer or such Buyer
Representative, as the case may be, advises and consults with the

<PAGE>

Debtors regarding such disclosure and provided further that Buyer or such
Buyer Representative, as the case may be, discloses only that portion of the
Confidential Information as is legally required. Buyer agrees that none of
the Confidential Information will be used for any purpose other than in
connection with the transactions contemplated hereby. The term "Confidential
Information," as used herein, means all information obtained by or on behalf
of Buyer from the Debtors or their representatives pursuant to this Section
and all similar information obtained from the Debtors or their
representatives by or on behalf of Buyer prior to the date of this Agreement,
other than information which (i) was or becomes generally available to the
public other than as a result of disclosure by Buyer or any Buyer
Representative, (ii) was or becomes available to Buyer on a nonconfidential
basis from a person other than a Debtor or its representatives prior to
disclosure to Buyer by such Debtor or its representatives, or (iii) was or
becomes available to Buyer from a source other than a Debtor and its
representatives, provided that such source is not known by Buyer to be bound
by a confidentiality agreement with such Debtor.

         6.2      REASONABLE BEST EFFORTS. Each party hereto agrees that it
will not voluntarily undertake any course of action inconsistent with the
provisions or intent of this Agreement and will use its reasonable best
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things reasonably necessary, proper, or advisable under Applicable
Laws to consummate the transactions contemplated by this Agreement,
including, without limitation, (i) cooperation in determining whether any
consents, approvals, orders, authorizations, waivers, declarations, filings,
or registrations of or with any Governmental Entity or third party are
required in connection with the consummation of the transactions contemplated
hereby; (ii) reasonable best efforts to obtain any such consents, approvals,
orders, authorizations, and waivers and to effect any such declarations,
filings, and registrations; (iii) reasonable best efforts to cause to be
lifted or rescinded any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby; (iv) reasonable best efforts to defend, and cooperate in
defending, all lawsuits or other legal proceedings challenging this Agreement
or the consummation of the transactions contemplated hereby; and (v) the
execution of any additional instruments necessary to consummate the
transactions contemplated hereby.

         6.3      PUBLIC ANNOUNCEMENTS. Except as may be required by
Applicable Law or this Section 6.3, neither Buyer nor the Debtors shall issue
any press release or otherwise make any statement to the public generally
with respect to this Agreement or the transactions contemplated hereby
without the prior written consent of the other parties (which consent shall
not be unreasonably withheld). Any such press release or statement required
by Applicable Law shall only be made after reasonable notice to the other
parties.

         6.4      NOTICE OF LITIGATION. Until the Closing, (i) Buyer, upon
learning of the same, shall promptly notify the Debtors of any Proceeding
which is commenced or threatened against Buyer and which affects this
Agreement or the transactions contemplated hereby and (ii) each Debtor, upon
learning of the same, shall promptly notify Buyer of any Proceeding which is
commenced or threatened against such Debtor and which affects this Agreement
or the transactions contemplated hereby.

         6.5      NOTIFICATION OF CERTAIN MATTERS. Each Debtor shall give
prompt notice to Buyer of: (i) the occurrence or nonoccurrence of any event
the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in Article III to be untrue or
inaccurate at or prior to the Closing, (ii) any failure of such Debtor to
comply with or satisfy any covenant, condition, or agreement to be complied
with or satisfied by such Debtor hereunder, and (iii) any notice or other
communication from any person alleging that the consent or approval of such
person is or may be required in connection with the transactions contemplated
by this Agreement. Buyer shall give prompt notice to the Debtors of: (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in
Article IV to be untrue or inaccurate at or prior to the Closing, and (ii)
any failure of Buyer to comply with or

<PAGE>

satisfy any covenant, condition, or agreement to be complied with or
satisfied by it hereunder. The delivery of any notice pursuant to this
Section shall not be deemed to: (i) modify the representations or warranties
hereunder of the party delivering such notice, (ii) modify the conditions set
forth in Articles VII and VIII, or (iii) limit or otherwise affect the
remedies available hereunder to the party receiving such notice.

         6.6      AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing
to supplement or amend promptly the Schedules hereto with respect to any
matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or described
in the Schedules. For all purposes of this Agreement, including without
limitation for purposes of determining whether the conditions set forth in
Sections 7.1 and 8.1 have been fulfilled, the Schedules hereto shall be
deemed to include only that information contained therein on the date of this
Agreement and shall be deemed to exclude all information contained in any
supplement or amendment thereto.

         6.7      USE OF PROCEEDS. Reorganized MPC will use the cash proceeds
from the purchase of the Shares and the Credit Facility in accordance with
the Plan.

         6.8      TAXES. As of the Closing Date, the Debtors will terminate
and cancel (either by operation of the Plan or otherwise) all Tax sharing or
Tax allocation agreements or similar agreements, and all such agreements
shall be without future force and effect.

                                  ARTICLE VII.

                    CONDITIONS TO OBLIGATIONS OF THE DEBTORS

         The obligations of the Debtors to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions:

         7.1      REPRESENTATIONS AND WARRANTIES TRUE. All the
representations and warranties of Buyer contained in this Agreement, and in
any agreement, instrument, or document delivered pursuant hereto or in
connection herewith on or prior to the Closing Date, shall be true and
correct in all material respects as of the date made and (having been deemed
to have been made again on and as of the Closing Date in the same language)
shall be true and correct in all material respects on and as of the Closing
Date, except as affected by transactions permitted by this Agreement and
except to the extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have been
true and correct in all material respects as of such specified date.

         7.2      COVENANTS AND AGREEMENTS PERFORMED. Buyer shall have
performed and complied with in all material respects all covenants and
agreements required by this Agreement to be performed or complied with by it
on or prior to the Closing Date.

         7.3      LEGAL PROCEEDINGS. No Proceeding shall, on the Closing
Date, be pending or threatened seeking to restrain, prohibit, or obtain
damages or other relief in connection with this Agreement or the consummation
of the transactions contemplated hereby.

         7.4.     CREDIT FACILITY. Reorganized MPC shall have entered into
the Credit Facility.

<PAGE>

         7.5      THE PLAN. All conditions precedent under the Plan shall
have been satisfied or waived as provided in the Plan, and the Confirmation
Order shall have been entered by the Bankruptcy Court and shall not have been
reversed, stayed, modified or amended in any material respect.

                                  ARTICLE VIII.

                       CONDITIONS TO OBLIGATIONS OF BUYER

         The obligations of Buyer to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment on or prior to the
Closing Date of each of the following conditions:

         8.1      REPRESENTATIONS AND WARRANTIES TRUE. All the
representations and warranties of the Debtors contained in this Agreement,
and in any agreement, instrument, or document delivered pursuant hereto or in
connection herewith on or prior to the Closing Date, shall be true and
correct in all material respects as of the date made and (having been deemed
to have been made again on and as of the Closing Date in the same language)
shall be true and correct in all material respects on and as of the Closing
Date, except as affected by transactions permitted by this Agreement and
except to the extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have been
true and correct in all material respects as of such specified date.

         8.2      COVENANTS AND AGREEMENTS PERFORMED. The Debtors shall have
performed and complied with in all material respects all covenants and
agreements required by this Agreement to be performed or complied with by
them on or prior to the Closing Date.

         8.3      CERTIFICATE. Buyer shall have received a certificate
executed by the chief executive officer of Reorganized MPC, dated the Closing
Date, representing and certifying, in such detail as Buyer may reasonably
request, that the conditions set forth in Sections 8.1 and 8.2 have been
fulfilled.

         8.4      LEGAL PROCEEDINGS. No Proceeding shall, on the Closing
Date, be pending or threatened seeking to restrain, prohibit, or obtain
damages or other relief in connection with this Agreement or the consummation
of the transactions contemplated hereby.

         8.5      NO MATERIAL ADVERSE CHANGE. Since the date of this
Agreement, there shall not have occurred any adverse change or changes in the
business, assets, results of operations, condition (financial or otherwise),
or prospects of the Debtors or Reorganized MPC considered as a whole (other
than normal production of the Debtors' reserves, intervening oil and gas
price fluctuations, and possible employee attrition) that have the cumulative
effect of diminishing the value of Reorganized MPC by $10,000,000 or more.

         8.6.     CREDIT FACILITY. Reorganized MPC shall have entered into
the Credit Facility.

         8.7      CHARTER AND RELATED DOCUMENTS. Each of the final versions
of the Articles of Merger (including the Articles of Incorporation a part
thereof) with respect to Reorganized MPC and the Bylaws of Reorganized MPC
shall be in form and content satisfactory to Buyer.

         8.8      THE PLAN, DISCLOSURE STATEMENT AND CONFIRMATION ORDER. Each
of the final versions of the Plan, Disclosure Statement and Confirmation
Order shall be in form and content satisfactory to Buyer. All conditions
precedent under the Plan shall have been satisfied or waived by Buyer as
provided in the Plan, and the Confirmation Order shall have been entered into
by the Bankruptcy Court and shall not have been reversed, stayed, modified or
amended in any material respect.

<PAGE>

         8.9      OTHER DOCUMENTS. Buyer shall have received the
certificates, instruments, and documents listed below:

                  (a)      stock certificate(s) in definitive form and duly
         executed on behalf of the Reorganized MPC, representing the Shares
         registered in the name of Buyer.

                  (b)      A file-stamped copy of the Articles of Merger of
         Reorganized MPC and showing acceptance by the Texas Secretary of State.

                  (c)      Such other certificates, instruments, and documents
         as may be reasonably requested by Buyer to carry out the intent and
         purposes of this Agreement.

                                   ARTICLE IX.

                       TERMINATION, AMENDMENT, AND WAIVER

         9.1      TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing in
the following manner:

                  (a)      by mutual written consent of the Debtors and Buyer;
         or

                  (b)      by either the Debtors or Buyer, if:

                           (i)      the Closing shall not have occurred on or
                  before September 14, 2000, unless such failure to close shall
                  be due to a breach of this Agreement by the party seeking to
                  terminate this Agreement pursuant to this clause (i); or

                           (ii)     there shall be any statute, rule, or
                  regulation that makes consummation of the transactions
                  contemplated hereby illegal or otherwise prohibited or a
                  Governmental Entity shall have issued an order, decree, or
                  ruling or taken any other action permanently restraining,
                  enjoining, or otherwise prohibiting the consummation of the
                  transactions contemplated hereby, and such order, decree,
                  ruling, or other action shall have become final and
                  nonappealable; or

                  (c)      by the Debtors, if (i) any of the representations and
         warranties of Buyer contained in this Agreement shall not be true and
         correct in any respect which is material to Buyer or the ability of
         Buyer to consummate the transactions contemplated hereby, or (ii) Buyer
         shall have failed to fulfill in any material respect any of its
         obligations under this Agreement, and, in the case of each of clauses
         (i) and (ii), such misrepresentation, breach of warranty, or failure
         (provided it can be cured) has not been cured within ten days after
         written notice thereof from Debtors to Buyer; or

                  (d)      by Buyer, if (i) any of the representations and
         warranties of the Debtors contained in this Agreement shall not be true
         and correct in any respect which is material to the Debtors or
         Reorganized MPC considered as a whole or the ability of the Debtors or
         Reorganized MPC to consummate the transactions contemplated hereby, or
         (ii) the Debtors or Reorganized MPC shall have failed to fulfill in any
         material respect any of their respective obligations under this
         Agreement, and, in the case of each of clauses (i) and (ii), the effect
         of all such misrepresentations, breaches of warranty and failures,
         taken as a whole, is to diminish the value

<PAGE>

         of Reorganized MPC by $10,000,000 or more AND such misrepresentation,
         breach of warranty, or failure (provided it can be cured) has not been
         cured within ten days after written notice thereof from Buyer to the
         Debtors or Reorganized MPC.

         9.2      EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 9.1 by the Debtors, on the one hand, or
Buyer, on the other, written notice thereof shall forthwith be given to the
other party specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall become void and have no effect,
except that the agreements contained in this Section and in Sections 6.1(b),
10.2, 10.5, and 10.12 shall survive the termination hereof. Nothing contained
in this Section shall relieve any party from liability for damages actually
incurred as a result of any breach of this Agreement.

         9.3      AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of all the parties hereto.

         9.4      WAIVER. The Debtors, on the one hand, or Buyer, on the
other, may: (i) waive any inaccuracies in the representations and warranties
of the other contained herein or in any document, certificate, or writing
delivered pursuant hereto, or (ii) waive compliance by the other with any of
the other's agreements or fulfillment of any conditions to its own
obligations contained herein. Any agreement on the part of a party hereto to
any such waiver shall be valid only if set forth in an instrument in writing
signed by or on behalf of such party. No failure or delay by a party hereto
in exercising any right, power, or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power,
or privilege.

         9.5      REMEDIES NOT EXCLUSIVE. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law. The rights and remedies of any party based upon, arising out
of, or otherwise in respect of any inaccuracy in or breach of any
representation, warranty, covenant, or agreement contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence, or
other state of facts upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other representation, warranty,
covenant, or agreement contained in this Agreement (or in any other agreement
between the parties) as to which there is no inaccuracy or breach.

                                   ARTICLE X.

                                  MISCELLANEOUS

         10.1     NO SURVIVAL. All of the representations and warranties set
forth in this Agreement shall terminate and cease to be of any further force
and effect as of the Closing. The covenants and other agreements set forth
herein shall survive the Closing to the extent such covenants and agreements
specifically are to be performed after the Closing.

         10.2     NOTICES. All notices, requests, demands, and other
communications required or permitted to be given or made hereunder by any
party hereto shall be in writing and shall be deemed to have been duly given
or made if (i) delivered personally, (ii) transmitted by first class
registered or certified mail, postage prepaid, return receipt requested,
(iii) sent by prepaid overnight courier service, or (iv) sent by telecopy or
facsimile transmission, answer back requested, to the parties at the
following addresses (or at such other addresses as shall be specified by the
parties by like notice):

<PAGE>

                  If to Buyer:

                           MP Acquisition Company, LLC
                           c/o EnCap Investments L.L.C.
                           1100 Louisiana, Suite 3150
                           Houston, Texas  77002
                           Attention: Robert L. Zorich
                           Fax No.:  713-659-6130

                  with a copy to:

                           Thompson & Knight L.L.P.
                           1700 Pacific Avenue
                           Suite 3300
                           Dallas, TX  75201
                           Attention:  David M. Bennett
                           Fax No.: 214-969-1751

                  If to the Debtors:

                           c/o Michael Holdings, Inc.
                           13101 Northwest Freeway, Suite 320
                           Houston, Texas  77040
                           Attention: Glenn D. Hart
                           Fax No.: 713-895-9462

                  with a copy to:

                           Haynes and Boone LLP
                           901 Main Street, Suite 3100
                           Dallas, Texas  75202
                           Attention:  Judith Elkin
                           Fax No.:  214-651-5940

Such notices, requests, demands, and other communications shall be effective
(i) if delivered personally or sent by courier service, upon actual receipt
by the intended recipient, (ii) if mailed, upon the earlier of five days
after deposit in the mail or the date of delivery as shown by the return
receipt therefor, or (iii) if sent by telecopy or facsimile transmission,
when the answer back is received.

         10.3     ENTIRE AGREEMENT. This Agreement, together with the
Schedules, Exhibits, Annexes, and other writings referred to herein or
delivered pursuant hereto, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.

         10.4.    BINDING EFFECT; ASSIGNMENT; NO THIRD PARTY BENEFIT. This
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, legal representatives, successors, and
permitted assigns. Except as otherwise expressly provided in this Agreement
or in the Plan, neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of the other parties. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any person other than
the parties

<PAGE>

hereto, and their respective heirs, legal representatives, successors, and
permitted assigns, any rights, benefits, or remedies of any nature whatsoever
under or by reason of this Agreement.

         10.5     SEVERABILITY. If any provision of this Agreement is held to
be unenforceable, this Agreement shall be considered divisible and such
provision shall be deemed inoperative to the extent it is deemed
unenforceable, and in all other respects this Agreement shall remain in full
force and effect; provided, however, that if any such provision may be made
enforceable by limitation thereof, then such provision shall be deemed to be
so limited and shall be enforceable to the maximum extent permitted by
Applicable Law.

         10.6     GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
TEXAS, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

         10.7     FURTHER ASSURANCES. From time to time following the
Closing, at the request of any party hereto and without further
consideration, the other party or parties hereto shall execute and deliver to
such requesting party such instruments and documents and take such other
action (but without incurring any material financial obligation) as such
requesting party may reasonably request in order to consummate more fully and
effectively the transactions contemplated hereby.

         10.8     DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only, do not constitute a part of this
Agreement, and shall not affect in any manner the meaning or interpretation
of this Agreement.

         10.9     GENDER. Pronouns in masculine, feminine, and neuter genders
shall be construed to include any other gender, and words in the singular
form shall be construed to include the plural and vice versa, unless the
context otherwise requires.

         10.10    REFERENCES. All references in this Agreement to Articles,
Sections, and other subdivisions refer to the Articles, Sections, and other
subdivisions of this Agreement unless expressly provided otherwise. The words
"this Agreement", "herein", "hereof", "hereby", "hereunder", and words of
similar import refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. Whenever the words "include",
"includes", and "including" are used in this Agreement, such words shall be
deemed to be followed by the words "without limitation". The word "or" is not
intended to be exclusive. Each reference herein to a Schedule, Exhibit, or
Annex refers to the item identified separately in writing by the parties
hereto as the described Schedule, Exhibit, or Annex to this Agreement. All
Schedules, Exhibits, and Annexes are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. For purposes of the
representations, warranties, covenants and agreements of the Debtors herein,
any reference to the Debtors shall also include any other Subsidiary of
Holdings.

         10.11    COUNTERPARTS. This Agreement may be executed by the parties
hereto in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same agreement. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all, the parties hereto.

<PAGE>

                                   ARTICLE XI.

                                   DEFINITIONS

         11.1     CERTAIN DEFINED TERMS. As used in this Agreement, each of
the following terms has the meaning given it below:

                  "affiliate" means, with respect to any person, any other
         person that, directly or indirectly, through one or more
         intermediaries, controls, is controlled by, or is under common control
         with, such person. For the purposes of this definition, "control" when
         used with respect to any person means the possession, directly or
         indirectly, of the power to direct or cause the direction of the
         management and policies of such person, whether through the ownership
         of voting securities, by contract, or otherwise; and the terms
         "controlling" and "controlled" have meanings correlative to the
         foregoing.

                  "Alpha" has the meaning assigned to it in the preamble to this
         Agreement.

                  "Ancillary Documents" means each agreement, instrument, and
         document (other than this Agreement) executed or to be executed in
         connection with the transactions contemplated by this Agreement.

                  "Applicable Law" means any statute, law, rule, or regulation
         or any judgment, order, writ, injunction, or decree of any Governmental
         Entity to which a specified person or property is subject.

                  "Bankruptcy Case" has the meaning assigned to it in paragraph
         B of the Recitals hereto.

                  "Bankruptcy Code" has the meaning assigned to it in paragraph
         B of the Recitals hereto.

                  "Bankruptcy Court" has the meaning assigned to it in paragraph
         B of the Recitals hereto.

                  "Buyer" has the meaning assigned to it in the preamble to this
         Agreement.

                  "Class 6C Interest Holder" means the holder of an interest in
         Class 6C under the Plan.

                  "Code" means the Internal Revenue Code of 1986, as amended.

                  "Confirmation Order" means the final, nonappealable order
         entered into by the Bankruptcy Court in the Bankruptcy Case confirming
         the Plan in accordance with the provisions of Chapter 11 of the
         Bankruptcy Code.

                  "Credit Facility" means a Credit Agreement substantially in
         the form attached hereto as Exhibit 7.4.

                  "Debtor" or "Debtors" has the meaning assigned to it in
         paragraph A of the Recitals hereto.

                  "Disclosure Statement" has the meaning assigned to it in
         paragraph C of the Recitals hereto.

                  "Electing Class 4 Creditor" has the meaning assigned to such
         term in the Plan.

<PAGE>

                  "Encumbrances" means Liens, charges, pledges, options,
         mortgages, deeds of trust, security interests, claims, restrictions
         (whether on voting, sale, transfer, disposition, or otherwise),
         easements, and other encumbrances of every type and description,
         whether imposed by law, agreement, understanding, or otherwise.

                  "ERISA" means the Employee Retirement Income Security Act of
         1974, as amended.

                  "GAAP" means generally accepted accounting principles in the
         United States of America from time to time.

                  "Governmental Entity" means any court or tribunal in any
         jurisdiction (domestic or foreign) or any federal, state, municipal, or
         other governmental body, agency, authority, department, commission,
         board, bureau, or instrumentality (domestic or foreign).

                  "Holdings" has the meaning assigned to it in paragraph C of
         the Recitals hereto.

                  "Lien" means any lien, mortgage, security interest, pledge,
         charge, or encumbrance of any kind.

                  "Material Adverse Effect" means any change, development, or
         effect (individually or in the aggregate) which is, or is reasonably
         likely to be, materially adverse (i) to the business, assets, results
         of operations or condition (financial or otherwise) of a party, or (ii)
         to the ability of a party to perform on a timely basis any material
         obligation under this Agreement or any agreement, instrument, or
         document entered into or delivered in connection herewith.

                  "MPC" has the meaning assigned to it in the preamble to this
         Agreement.

                  "Net Revenue Interest" mean the percentage share in all oil,
         gas and other hydrocarbons produced from a well, lease, unit or other
         Oil and Gas Interest after satisfaction of applicable lessor royalties,
         overriding royalties, oil payments and other payments out of or
         measured by the production of oil, gas and other hydrocarbons from such
         well, lease, unit or other Oil and Gas Interest.

                  "Oil and Gas Interest(s)" means (i) all interests in and
         rights with respect to oil, gas, mineral and related properties and
         assets of any kind and nature, direct or indirect, including working,
         royalty and overriding royalty interests, production payments,
         operating rights, net profits interests, fee minerals, fee royalties,
         other non-working interests and non-operating interests; (ii) interests
         in and rights with respect to Hydrocarbons and other minerals or
         revenues therefrom and contracts in connection therewith and claims and
         rights thereto (including oil and gas leases, operating agreements,
         unitization and pooling agreements and orders, division order, transfer
         orders, mineral deeds, royalty deeds, oil and gas sales, exchange and
         processing contracts and agreements and, in each case, interests
         thereunder), surface interests, fee interests, reversionary interests,
         reservations and concessions; (iii) easements, rights of way, licenses,
         permits, leases, and other interests associated with, appurtenant to,
         or necessary for the operation of any of the foregoing; and (iv)
         interests in equipment and machinery (including well equipment and
         machinery), oil and gas production, gathering, transmission,
         compression, treating, processing and storage facilities (including
         tanks, tank batteries, pipelines and gathering systems), pumps, water
         plants, electric plants, gasoline and gas processing plants, refineries
         and other tangible personal property and fixtures associated with,
         appurtenant to, or necessary for the operation of any of the foregoing.

<PAGE>

                  "Permits" means licenses, permits, franchises, consents,
         approvals, variances, exemptions, and other authorizations of or from
         Governmental Entities.

                  "Permitted Encumbrances" means (i) Liens for Taxes which are
         not yet delinquent or which are being contested in good faith and for
         which adequate reserves have been established as may be required by
         GAAP; (ii) Liens under operating agreements, unitization agreements,
         pooling orders and mechanic's, supplier's, repairman's, materialman's
         and similar liens relating to the party's Oil and Gas Interests, which
         obligations are not yet due and pursuant to which the party is not in
         default; (iii) Liens in the ordinary course of business consisting of
         minor defects and irregularities in title or other restrictions
         (whether created by or arising out of joint operating agreements,
         farm-out agreements, leases and assignments, contracts for purchases of
         Hydrocarbons or similar agreements, or otherwise in the ordinary course
         of business) that are of the nature customarily accepted by prudent
         purchasers of oil and gas properties and do not materially affect the
         value of any property encumbered thereby or materially impair the
         ability of the obligor to use any such property in its operations;
         provided, the effect thereof on such Oil and Gas Interest of such party
         has been properly reflected in the Net Revenue Interest and Working
         Interest attributable to such Oil and Gas Interest; (iv) all rights to
         consent by, required notices to, filings with, or other actions of
         Governmental Authorities to the extent customarily obtained subsequent
         to closing; (v) Liens arising under or created pursuant to that certain
         Credit Agreement dated May 15, 1998, between MPC, as borrower,
         Christiania Bank, as agent, and certain financial institutions, as
         lenders, as heretofore amended (provided, that all such Liens must be
         terminated at Closing or transferred to the agent lender or the lenders
         under the Credit Facility); and (vi) preferential rights to purchase
         and consent to transfer requirements of any person other than a party
         hereto or any Governmental Authority (to the extent not triggered by
         the consummation of the transactions contemplated herein).

                  "person" means any individual, corporation, partnership, joint
         venture, association, joint-stock company, trust, enterprise,
         unincorporated organization, or Governmental Entity.

                  "Petition Date" has the meaning assigned to it in the Plan.

                  "Plan" has the meaning assigned to it in paragraph C of the
         Recitals hereto.

                  "Proceedings" means all proceedings, actions, claims, suits,
         investigations, and inquiries by or before any arbitrator or
         Governmental Entity.

                  "reasonable best efforts" means a party's reasonable best
         efforts in accordance with reasonable commercial practice and without
         the incurrence of unreasonable expense.

                  "Reorganized MPC" has the meaning assigned to it in paragraph
         D of the Recitals hereto.

                  "Reorganized MPC Common Stock" means common stock of
         Reorganized MPC, par value $0.001 per share.

                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Subsidiary" means any corporation more than 50% of whose
         outstanding voting securities, or any general partnership, joint
         venture, or similar entity more than 50% of whose total equity
         interests, is owned, directly or indirectly, by Holdings, or any
         limited partnership of which Holdings or any Subsidiary is a general
         partner.

<PAGE>

                  "Tax" means any federal, state, local or foreign tax
         (including, without limitation, any income tax, franchise tax, doing
         business tax, branch profits tax, capital gains tax, value-added tax,
         ad valorem tax, excise tax, transfer tax, employment tax, social
         security tax, payroll tax, severance tax, production tax, sales tax,
         use tax, property tax, or any other kind of tax or payment in lieu of
         tax no matter how denominated), levy, assessment, tariff, duty
         (including any customs duty), deficiency or other fee, and any related
         charge or amount, deficiency or other fee, and any related charge or
         amount (including any fine, penalty, interest or addition to tax),
         imposed, assessed or collected by or under the authority of any
         Governmental Entity or payable pursuant to any tax-sharing agreement or
         any other contract relating to the sharing of payment of any such tax,
         levy, assessment, tariff, duty, deficiency or fee.

                  "Tax Return" means any return (including any information
         return), report, statement, schedule, notice, form or other document or
         information filed with or submitted to or required to be filed with or
         submitted to, any Governmental Entity in connection with the
         determination, assessment, collection or payment of any Tax or in
         connection with the administration, implementation or enforcement of or
         compliance with any legal requirement relating to any Tax.

                  "to the best knowledge" of a specified person (or similar
         references to a person's knowledge) means all information to be
         attributed to such person actually or constructively known to (a) such
         person in the case of an individual or (b) in the case of a corporation
         or other entity, an executive officer or employee who devoted
         substantive attention to matters of such nature during the ordinary
         course of his employment by such person. A person has "constructive
         knowledge" of those matters which the individual involved could
         reasonably be expected to have as a result of undertaking an
         investigation of such a scope and extent as a reasonably prudent man
         would undertake concerning the particular subject matter.

                  "Working Interest" means the percentage share of all of the
         costs, expenses, burdens and other obligations of any type attributable
         to the Debtors' interests in a well, lease, unit or other Oil and Gas
         Interest.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement, or
caused this Agreement to be executed by their duly authorized
representatives, all as of the day and year first above written.

                          MICHAEL HOLDINGS, INC.

                          By: /s/ Glenn D. Hart
                              --------------------------------------------------
                              Glenn D. Hart, Chief Executive Officer

                          MICHAEL PETROLEUM CORPORATION

                          By: /s/ Glenn D. Hart
                              --------------------------------------------------
                              Glenn D. Hart, Chief Executive Officer

                          MICHAEL PETROLEUM ALPHA CORPORATION

                          By: /s/ Glenn D. Hart
                              --------------------------------------------------
                              Glenn D. Hart, Chief Executive Officer

                          MP ACQUISITION COMPANY, LLC

                          By: EnCap Investments L.L.C., Manager

                              By: /s/ Robert L. Zorich
                                  ----------------------------------------------
                                  Robert L. Zorich, Chief Executive Officer

<PAGE>

                 AMENDED AND RESTATED ARTICLES OF INCORPORATION
                                       OF
                          MICHAEL PETROLEUM CORPORATION
                              (A TEXAS CORPORATION)

                                   ARTICLE ONE

         This instrument amends and restates the Articles of Incorporation of
Michael Petroleum Corporation pursuant to Article 4.14 of the Texas Business
Corporation Act (the "TBCA").

                                   ARTICLE TWO

         The name of the corporation is Michael Petroleum Corporation (the
"Corporation").

                                  ARTICLE THREE

         These Amended and Restated Articles of Incorporation have been approved
by the following court in its decree dated as of August 11, 2000:

         COURT:            United States Bankruptcy Court for the Southern
                           District of Texas, Laredo Division

         STYLE:            In re Michael Petroleum Corporation, Michael
                           Petroleum Alpha Corporation, Michael Holdings, Inc.,
                           Debtors

         CASE NOS.:        99-50569-11, 99-50570-11, and 99-50571-11
                           (jointly administered under 99-50569-11)

                                  ARTICLE FOUR

         The United States Bankruptcy Court for the Southern District of Texas,
Laredo Division had jurisdiction of the case pursuant to Title 28 of the United
States Code, Sections 157 and 1334 at the time of the approval of these Amended
and Restated Articles of Incorporation.

                                  ARTICLE FIVE

         The Articles of Incorporation of Michael Petroleum Corporation and all
amendments and supplements thereto are hereby superseded in their entirety by
the following Amended and Restated Articles of Incorporation:

                                   "ARTICLE I
                                      NAME

         The name of the corporation is Michael Petroleum Corporation (the
"Corporation").

                                   ARTICLE II
                           REGISTERED OFFICE AND AGENT

         The address of its registered office in the State of Texas is 13101
Northwest Freeway, Suite 320, Houston, Texas 77040. The name of its registered
agent at such address is Glenn D. Hart.

                                   ARTICLE III
                                    PURPOSES

<PAGE>

         The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the Texas Business Corporation Act (the "TBCA").

                                   ARTICLE IV
                                    EXISTENCE

         The existence of the Corporation is to be perpetual.

                                    ARTICLE V
                            AUTHORIZED CAPITAL STOCK

         The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is eleven million shares, consisting
of: (i) ten million shares of common stock, par value $.001 per share (the
"Common Stock"), and (ii) one million shares of preferred stock, par value $.001
per share (the "Preferred Stock"). Shares of any class of capital stock of the
Corporation may be issued for such consideration and for such corporate purposes
as the Board of Directors of the Corporation (the "Board of Directors") may from
time to time determine; PROVIDED, HOWEVER, that from and after the date of
filing with the Secretary of State of Texas of these Amended and Restated
Articles of Incorporation, the Corporation shall be prohibited from issuing
non-voting equity securities in accordance with and to the extent required by
Section 1123(a)(6) of the United States Bankruptcy Code (11 U.S.C. Section
1123(a)(6)).

         A. COMMON STOCK. Each share of Common Stock of the Corporation shall
have identical rights and privileges in every respect. The holders of shares of
Common Stock shall be entitled to vote upon all matters submitted to a vote of
the shareholders of the Corporation and shall be entitled to one vote for each
share of Common Stock held. Subject to the prior rights and preferences, if any,
applicable to shares of any Preferred Stock or any series thereof, the holders
of shares of the Common Stock shall be entitled to receive such dividends
(payable in cash, stock, or otherwise) as may be declared thereon by the Board
of Directors at any time and from time to time out of any funds of the
Corporation legally available therefor. Subject to the prior rights and
preferences, if any, applicable to shares of any Preferred Stock or any series
thereof, in the event of any voluntary or involuntary liquidation, dissolution,
or winding-up of the Corporation, the holders of shares of the Common Stock
shall be entitled to receive all of the remaining assets of the Corporation
available for distribution to its shareholders, ratably in proportion to the
number of shares of the Common Stock held by them. A liquidation, dissolution,
or winding-up of the Corporation, as such terms are used in this Section, shall
not be deemed to be occasioned by or to include any consolidation or merger of
the Corporation with or into any other corporation or corporations or other
entity or a sale, lease, exchange, or conveyance of all or a part of the assets
of the Corporation.

         B. PREFERRED STOCK. The Preferred Stock may be divided into and
issued from time to time in one or more series as may be fixed and determined
by the Board of Directors. The relative rights and preferences of the
Preferred Stock of each series shall be as stated in any resolution or
resolutions adopted by a majority vote of the Board of Directors setting
forth the designation of the series and fixing and determining the relative
rights and preferences thereof (a "Directors' Resolution"). The Board of
Directors is hereby authorized to fix and determine the powers, designations,
preferences, and relative, participating, optional or other rights, as
between series and as between the Preferred Stock or any series thereof and
the Common Stock, and the qualifications, limitations or restrictions
thereof, if any, including, without limitation, full or limited voting
powers, preferential rights to receive dividends or assets upon liquidation,
rights of conversion or exchange into Common Stock, Preferred Stock or any
series of other

<PAGE>

securities, any right of the Corporation to exchange or convert shares into
Common Stock, Preferred Stock or any series of other securities, or any
redemption provision or sinking fund provisions, all as shall be stated in a
Directors' Resolution. The shares of Preferred Stock or any series thereof
may have full or limited voting powers, or be without voting powers, all as
shall be stated in a Directors' Resolution. Except where otherwise set forth
in the Directors' Resolution providing for the issuance of any series of
Preferred Stock, the number of shares comprising such series may be increased
or decreased (but not below the number of shares then outstanding) from time
to time by like action of the Board of Directors. The shares of Preferred
Stock of any one series shall be identical with the other shares in the same
series in all respects except as to the dates from and after which dividends
thereon shall cumulate, if cumulative.

         C. REACQUIRED SHARES OF PREFERRED STOCK. Shares of any series of any
Preferred Stock that have been redeemed (whether through the operation of a
sinking fund or otherwise), purchased by the Corporation, or which, if
convertible or exchangeable, have been converted into, or exchanged for,
shares of stock of any other class or classes or any evidences of
indebtedness shall have the status of authorized and unissued shares of
Preferred Stock and may be reissued as a part of the series of which they
were originally a part or may be reclassified and reissued as part of a new
series of Preferred Stock or as part of any other series of Preferred Stock,
all subject to the conditions or restrictions on issuance set forth in the
Directors' Resolution providing for the issuance of any series of Preferred
Stock and to any filing required by law.

         D. INCREASE IN AUTHORIZED PREFERRED STOCK. The number of authorized
shares of Preferred Stock may only be increased or decreased by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote thereon without the separate vote of holders of Preferred
Stock as a class.

         E. GENERAL. Subject to the foregoing provisions of these Amended and
Restated Articles of Incorporation, the Corporation may issue shares of its
Common Stock and Preferred Stock from time to time for such consideration
(not less than the par value thereof) as may be fixed by the Board of
Directors of the Corporation, which is expressly authorized to fix the same
in its absolute and uncontrolled discretion subject to the foregoing
conditions. Shares so issued for which the full consideration shall have been
paid or delivered to the Corporation shall be deemed fully paid shares and
shall not be liable to any further call or assessment thereon, and the
holders of such shares shall not be liable for any further payments in
respect of such shares. The Corporation shall have authority to create and
issue rights and options entitling their holders to purchase shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the Board of Directors of the Corporation. The Board of Directors
of the Corporation shall be empowered to set the exercise price, duration,
times for exercise, and other terms of such options or rights; provided,
however, that the consideration to be received for any shares of capital
stock subject thereto shall not be less than the par value thereof.

                                   ARTICLE VI
                              NO PREEMPTIVE RIGHTS

         No shareholder shall be entitled, as a matter of right, to subscribe
for or acquire additional, unissued or treasury shares of any class of
capital stock of the Corporation whether now or hereafter authorized, or any
bonds, debentures or other securities convertible into, or carrying a right
to subscribe to or acquire such shares, but any shares or other securities
convertible into, or carrying a right to subscribe to or acquire such shares
may be issued or disposed of by the Board of Directors to such persons and on
such terms as in its discretion it shall deem advisable.

<PAGE>

                                   ARTICLE VII
                              NO CUMULATIVE VOTING

         At each election of directors, every shareholder entitled to vote at
such election shall have the right to vote in person or by proxy the number
of shares owned by him for as many persons as there are directors to be
elected and for whose election he has a right to vote. No shareholder shall
have the right to cumulate his votes in any election of directors.

                                  ARTICLE VIII
                      SHAREHOLDER ACTION BY WRITTEN CONSENT

         Any action required or permitted to be taken at any annual or special
meeting of the shareholders may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing setting forth
the action so taken, shall be signed by the holder or holders of shares having
not less than the minimum number of votes that would be necessary to take such
action at a meeting at which the holders of all shares entitled to vote on the
action were present and voted.

                                   ARTICLE IX
                                  VOTE REQUIRED

         Directors shall be elected by a plurality of the votes cast by the
holders of shares entitled to vote in the election of directors at a meeting of
shareholders at which a quorum is present. For any corporate action other than
the election of directors that requires the approval of the shareholders of the
Corporation, including, but not limited to, any merger, share exchange, or
reorganization, dissolution or liquidation of the Corporation, the act of the
shareholders shall be the affirmative vote of the holders of a majority of the
shares entitled to vote on that matter and represented in person or by proxy at
a meeting of shareholders at which a quorum is present, provided that amendment
of these Amended and Restated Articles of Incorporation shall require the
affirmative vote of the holders of seventy-five percent (75%) of the shares
entitled to vote on that matter and represented in person or by proxy at a
meeting of shareholders at which a quorum is present.

                                    ARTICLE X
                               BOARD OF DIRECTORS

         The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In addition to the authority and
powers conferred upon the Board of Directors by the TBCA or by the other
provisions of these Amended and Restated Articles of Incorporation, the Board of
Directors is hereby authorized and empowered to exercise all such powers and do
all such acts and things as may be exercised or done by the Corporation, subject
to the provisions of the TBCA, these Amended and Restated Articles of
Incorporation and the Bylaws of the Corporation (the "Bylaws").

                                   ARTICLE XI
                               BOARD OF DIRECTORS

         The Board of Directors shall number five until changed in accordance
with the manner prescribed by the Bylaws. The name and mailing address of the
initial members of the Board of Directors who are to serve until the first
annual meeting of shareholders following the filing of these Amended and
Restated Articles of Incorporation, or until their successors are elected and
qualified, are as follows:

                  F. Fox Benton                1100 Louisiana, Suite 3150
                                               Houston, TX 77002

<PAGE>

                  Robert L. Zorich             1100 Louisiana, Suite 3150
                                               Houston, TX 77002

                  Gary R. Petersen             1100 Louisiana, Suite 3150
                                               Houston, TX 77002

                  Charles M. Strain            12700 Whitewater Drive
                                               Minnetonka, MN 55343

                  Blake M. Carlson             12700 Whitewater Drive
                                               Minnetonka, MN 55343

                                   ARTICLE XII

                                 INDEMNIFICATION

         A. MANDATORY INDEMNIFICATION. Each person who at any time is or was
a director or officer of the Corporation, and is threatened to be or is made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative (a
"Proceeding"), by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, member,
employee, trustee, agent or similar functionary of another domestic or
foreign corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other for-profit or non-profit enterprise, whether
the basis of a Proceeding is an alleged action in such person's official
capacity or in another capacity while holding such office, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the TBCA, or any other applicable law as may from time to time
be in effect (but, in the case of any such amendment or enactment, only to
the extent that such amendment or law permits the Corporation to provide
broader indemnification rights than such law prior to such amendment or
enactment permitted the Corporation to provide), against all expense,
liability and loss (including, without limitation, court costs and attorneys'
fees, judgments, fines, excise taxes or penalties, and amounts paid or to be
paid in settlement) actually and reasonably incurred or suffered by such
person in connection with a Proceeding, and such indemnification shall
continue as to a person who has ceased to be a director or officer of the
Corporation or a director, officer, partner, venturer, proprietor, member,
employee, trustee, agent or similar functionary of another domestic or
foreign corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other for-profit or non-profit enterprise, and shall
inure to the benefit of such person's heirs, executors and administrators.
The Corporation's obligations under this Section A include, but are not
limited to, the convening of any meeting, and the consideration of any matter
thereby, required by statute in order to determine the eligibility of any
person for indemnification.

         B. PREPAYMENT OF EXPENSES. Expenses incurred by a director or
officer of the Corporation in defending a Proceeding shall be paid by the
Corporation in advance of the final disposition of such Proceeding to the
fullest extent permitted by, and only in compliance with, the TBCA or any
other applicable laws as may from time to time be in effect, including,
without limitation, any provision of the TBCA which requires, as a condition
precedent to such expense advancement, the delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under Section A of this Article
XII or otherwise. Repayments of all amounts so advanced shall be upon such
terms and conditions, if any, as the Corporation's Board of Directors deems
appropriate.

         C. VESTING. The Corporation's obligation to indemnify and to prepay
expenses under Sections A and B of this Article XII shall arise, and all
rights granted to the Corporation's directors and officers

<PAGE>

hereunder shall vest, at the time of the occurrence of the transaction or
event to which a Proceeding relates, or at the time that the action or
conduct to which such Proceeding relates was first taken or engaged in (or
omitted to be taken or engaged in), regardless of when such Proceeding is
first threatened, commenced or completed. Notwithstanding any other provision
of these Amended and Restated Articles of Incorporation or the Bylaws, no
action taken by the Corporation, either by amendment of these Amended and
Restated Articles of Incorporation or the Bylaws or otherwise, shall diminish
or adversely affect any rights to indemnification or prepayment of expenses
granted under Sections A and B of this Article XII which shall have become
vested as aforesaid prior to the date that such amendment or other corporate
action is effective or taken, whichever is later.

         D. ENFORCEMENT. If a claim under Section A or Section B or both
Sections A and B of this Article XII is not paid in full by the Corporation
within sixty (60) days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit in a court of
competent jurisdiction against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall also
be entitled to be paid the expense of prosecuting such claim. It shall be a
defense to any such suit (other than a suit brought to enforce a claim for
expenses incurred in defending any Proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the TBCA or other applicable law to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. The failure of the Corporation
(including its Board of Directors, independent legal counsel, or
shareholders) to have made a determination prior to the commencement of such
suit as to whether indemnification is proper in the circumstances based upon
the applicable standard of conduct set forth in the TBCA or other applicable
law shall neither be a defense to the action nor create a presumption that
the claimant has not met the applicable standard of conduct. The termination
of any Proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
such person reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal Proceeding, had
reasonable cause to believe that his conduct was unlawful.

         E. NONEXCLUSIVE. The indemnification provided by this Article XII
shall not be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under any statute, bylaw, other provisions of
these Amended and Restated Articles of Incorporation, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office.

         F. PERMISSIVE INDEMNIFICATION. The rights to indemnification and
prepayment of expenses which are conferred to the Corporation's directors and
officers by Sections A and B of this Article XII may be conferred upon any
employee or agent of the Corporation if, and to the extent, authorized by the
Board of Directors.

         G. INSURANCE. The Corporation shall have power to purchase and
maintain insurance, at its expense, on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, partner, venturer,
proprietor, member, employee, trustee, agent or similar functionary of
another domestic or foreign corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other for-profit or
non-profit enterprise against any expense, liability or loss asserted against
such person and incurred by such person in any such capacity, or arising out
of such person's status as such, whether or not the Corporation would have
the power to indemnify such person against such expense, liability or loss
under the provisions of this Article XII, the Bylaws, the TBCA or other
applicable law.

<PAGE>

         H. IMPLEMENTING ARRANGEMENTS. Without limiting the power of the
Corporation to procure or maintain insurance or other arrangement on behalf
of any of the persons as described in Section G of this Article XII, the
Corporation may, for the benefit of persons eligible for indemnification by
the Corporation, (i) create a trust fund, (ii) establish any form of
self-insurance, (iii) secure its indemnity obligation by grant of a security
interest or other lien on the assets of the Corporation, or (iv) establish a
letter of credit, guaranty or surety arrangement.

                                  ARTICLE XIII
                           LIMITED DIRECTOR LIABILITY

         No director of the Corporation shall be personally liable to the
Corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, provided that this Article XIII shall not eliminate or limit
the liability of a director: (i) for any breach of the director's duty of
loyalty to the Corporation or its shareholders, (ii) for acts or omissions not
in good faith that constitute a breach of duty of the director of the
Corporation or which involve intentional misconduct or a knowing violation of
law, (iii) an act or omission for which the liability of a director is expressly
provided by an applicable statute, or (iv) for any transaction from which the
director derived an improper personal benefit.

         If the TBCA, the Texas Miscellaneous Corporation Laws Act or any other
applicable law is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by such laws, as so amended. No amendment to or repeal of this Article
XIII will apply to, or have any effect on, the liability or alleged liability of
any director of the Corporation for or with respect to any acts or omissions of
the director occurring prior to such amendment or repeal.

                                   ARTICLE XIV
                                     BYLAWS

         Except as otherwise required by law, the Board of Directors is
expressly authorized to adopt, amend or repeal the Bylaws, or adopt new
Bylaws, without any action on the part of the shareholders (except to the
extent that the Bylaws, as so adopted and in effect from time to time, may
require such action on the part of the shareholders).

                                   ARTICLE XV
                  INITIAL CONSIDERATION FOR ISSUANCE OF SHARES

         The Corporation shall not commence business until it has received for
the issuance of its shares consideration of at least $1,000, consisting of
money, labor done or property actually received.

Dated: August 11, 2000                    MICHAEL PETROLEUM
                                          CORPORATION

                                          By: /s/ Glenn D. Hart
                                              ----------------------------------
                                              Glenn D. Hart
                                              Chief Executive Officer

<PAGE>

                              AMENDED AND RESTATED

                                     BYLAWS

                                       OF

                          MICHAEL PETROLEUM CORPORATION

                                   ARTICLE ONE

                                     OFFICES

         Section 1.1. OFFICES. Michael Petroleum Corporation (hereinafter
referred to as the"Corporation"), may have, in addition to its registered office
in the State of Texas, such other offices and places of business at such
locations, both within and without the State of Texas, as the Board of Directors
may from time to time determine or the business and affairs of the Corporation
may require.

                                   ARTICLE TWO

                             SHAREHOLDERS' MEETINGS

         Section 2.1. ANNUAL MEETINGS. An annual meeting of the shareholders
shall be held each year beginning in 2001 on such date and at such time as may
be selected by the Board of Directors. At the meeting, the shareholders shall
elect the Board of Directors and transact such other business as may properly be
brought before the meeting.

         Section 2.2. SPECIAL MEETINGS. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by statute, the
Articles of Incorporation or these Bylaws, may be called by the Chairman of
the Board, the President, the Board of Directors or the holders of at least
30% of all the shares entitled to vote at the proposed special meeting,
unless the Articles of Incorporation provide for a number of shares greater
than or less than 10%, but not greater than 50%, in which event special
meetings of the shareholders may be called by the holders of at least the
percentage of shares so specified in the Articles of Incorporation. Only
business within the purpose or purposes described in the notice of special
meeting of shareholders may be conducted at the meeting.

         Section 2.3. PLACE OF MEETINGS. Meetings of shareholders shall be
held at such places, within or without the State of Texas, as may from time
to time be fixed by the Board of Directors or as shall be specified or fixed
in the respective notices or waivers of notice thereof.

         Section 2.4. VOTING LIST. The officer or agent having charge of the
share transfer records for shares of the Corporation shall make, at least 10
days before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by
each, which list, for a period of 10 days prior to such meeting, shall be
kept on file at the registered office or principal place of business of the
Corporation and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection
of any shareholder during the whole time of the meeting. The original share
transfer records shall be prima facie evidence as to who are the shareholders
entitled to examine such list or transfer records or to vote at any meeting
of shareholders.

<PAGE>

         Section 2.5. NOTICE OF MEETINGS. Written or printed notice stating
the place, day and hour of each meeting of the shareholders and, in case of a
special meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than 10 nor more than 60 days before the date of
the meeting, either personally or by mail, by or at the direction of the
President, the Secretary or the body, officer or person calling the meeting,
to each shareholder entitled to vote at the meeting.

         Section 2.6. QUORUM OF SHAREHOLDERS. With respect to any matter, the
holders of a majority of the shares entitled to vote on that matter, present
in person or represented by proxy, shall be requisite to and shall constitute
a quorum at each meeting of shareholders for the transaction of business with
respect to that matter, except as otherwise provided by statute, the Articles
of Incorporation or these Bylaws. Unless otherwise provided in the Articles
of Incorporation or these Bylaws, the shareholders represented in person or
by proxy at a meeting of shareholders at which a quorum is not present may
adjourn the meeting until such time and to such place as may be determined by
a vote of the holders of a majority of the shares represented in person or by
proxy at that meeting. At any such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted that might have
been transacted at the meeting as originally convened. With respect to any
matter, other than the election of directors or a matter for which the
affirmative vote of the holders of a specified portion of the shares entitled
to vote is required by statute, the Articles of Incorporation or these
Bylaws, in which case the vote of such specified portion shall be requisite
to constitute the act of the meeting, the affirmative vote of the holders of
a majority of the shares entitled to vote on that matter and represented in
person or by proxy at a meeting of shareholders at which a quorum is present
shall be the act of the shareholders. Unless otherwise provided in the
Articles of Incorporation or these Bylaws, once a quorum is present at a
meeting of shareholders the shareholders represented in person or by proxy at
the meeting may conduct such business as may be properly brought before the
meeting until it is adjourned, and the subsequent withdrawal from the meeting
of any shareholder or the refusal of any shareholder represented in person or
by proxy to vote shall not affect the presence of a quorum at the meeting.

         Section 2.7. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders, except as and to the extent otherwise provided by
statute or by the Articles of Incorporation or as otherwise provided in these
Bylaws. At any meeting of the shareholders, every shareholder having the
right to vote shall be entitled to vote either in person or by proxy executed
in writing by such shareholder. A telegram, telex, cablegram or similar
transmission by the shareholder, or a photographic, photostatic, facsimile or
similar reproduction of a writing executed by the shareholder, shall be
treated as an execution in writing for purposes of this Section 2.7. No proxy
shall be valid after 11 months from the date of its execution unless
otherwise provided in the proxy. Each proxy shall be revocable unless the
proxy form conspicuously states that the proxy is irrevocable and the proxy
is coupled with an interest. Proxies coupled with an interest include the
appointment as proxy of: (1) a pledgee; (2) a person who purchased or agreed
to purchase, or owns or holds an option to purchase, the shares; (3) a
creditor of the Corporation who extended it credit under terms requiring the
appointment; (4) an employee of the Corporation whose employment contract
requires the appointment; or (5) a party to a voting agreement created under
Section B, Article 2.30 of the Texas Business Corporation Act. Each proxy
shall be filed with the Secretary of the Corporation prior to or at the time
of the meeting.

         Section 2.8. ACTION WITHOUT A MEETING. Any action required by the
Texas Business Corporation Act to be taken at any annual or special meeting
of shareholders, or any action which may be taken at any annual or special
meeting of shareholders, may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holder or holders of shares
having not less than the minimum number of votes that would be necessary to
take such action at a meeting at which the holders of all shares entitled to
vote on the action were present and voted. Prompt notice of the taking of any
action by shareholders without a meeting by less than unanimous written
consent shall be given to those shareholders who did not consent in writing
to the action. Every written consent

<PAGE>

signed by the holders of less than all the shares entitled to vote with
respect to the action that is the subject of the consent shall bear the date
of signature of each shareholder who signs the consent. No written consent
signed by the holders of less than all the shares entitled to vote with
respect to the action that is the subject of the consent shall be effective
to take the action that is the subject of the consent unless, within 60 days
after the date of the earliest dated consent delivered to the Corporation in
the manner required by law, a consent or consents signed by the holder or
holders of shares having not less than the minimum number of votes that would
be necessary to take the action that is the subject of the consent are
delivered to the Corporation by delivery to its registered office, registered
agent, principal place of business, transfer agent, registrar, exchange agent
or an officer or agent of the Corporation having custody of the books in
which proceedings of meetings of shareholders are recorded. Delivery shall be
by hand or certified or registered mail, return receipt requested. Delivery
to the Corporation's principal place of business shall be addressed to the
President or principal executive officer of the Corporation. A telegram,
telex, cablegram or similar transmission by a shareholder, or a photographic,
photostatic, facsimile or similar reproduction of a writing signed by a
shareholder, shall be regarded as signed by the shareholder for purposes of
this Section 2.8.

         Section 2.9. TELEPHONE MEETINGS. Subject to the provisions of
applicable law and these Bylaws regarding notice of meetings, shareholders
may, unless otherwise restricted by the Articles of Incorporation or these
Bylaws, participate in and hold a meeting by using conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting pursuant
to this Section shall constitute presence in person at such meeting, except
when a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting
was not lawfully called or convened.

                                  ARTICLE THREE

                               BOARD OF DIRECTORS

         Section 3.1. MANAGEMENT OF THE CORPORATION. The powers of the
Corporation shall be exercised by or under the authority of, and the business
and affairs of the Corporation shall be managed under the direction of, the
Board of Directors, which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by statute, the Articles of
Incorporation or these Bylaws directed or required to be exercised or done by
the shareholders.

         Section 3.2. NUMBER AND QUALIFICATIONS. The Board of Directors shall
consist of five directors. None of the directors need be shareholders of the
Corporation or residents of the State of Texas. For purposes of these Bylaws,
the term"Supermajority Approval" shall mean the approval of at least four
members of the Board of Directors.

         Section 3.3. ELECTION AND TERM OF OFFICE. At each annual meeting of
shareholders, the shareholders shall elect directors to hold office until the
next succeeding annual meeting. At each election, the persons receiving the
greatest number of votes shall be the directors. Each director elected shall
hold office for the term for which he is elected and until his successor
shall have been elected and qualified or until his earlier death,
resignation, retirement, disqualification or removal.

         Section 3.4. REMOVAL; FILLING OF VACANCIES. Any or all of the
directors may be removed, either for or without cause, at any meeting of
shareholders called expressly for that purpose, by the affirmative vote, in
person or by proxy, of the holders of a majority of the shares then entitled
to vote at an election of directors. Any vacancy occurring in the Board of
Directors, whether resulting from the death, resignation, retirement,
disqualification or removal from office of any director, or otherwise, shall
by election by the shareholders. A director elected to fill a vacancy shall
be elected for the unexpired term of his predecessor in office.

<PAGE>

         Section 3.5. PLACE OF MEETINGS. Meetings of the Board of Directors,
annual, regular or special, may be held either within or without the State of
Texas.

         Section 3.6. ANNUAL MEETINGS. The first meeting of each newly
elected Board of Directors shall be held for the purpose of organization and
the transaction of any other business, without notice, immediately following
the annual meeting of shareholders, and at the same place, unless by
unanimous consent of the directors then elected and serving such time or
place shall be changed.

         Section 3.7. REGULAR MEETINGS. Regular meetings of the Board of
Directors, of which no notice shall be necessary, shall be held at such times
and places as may be fixed from time to time by resolution adopted by the
Board and communicated to all directors. Except as otherwise provided by
statute, the Articles of Incorporation or these Bylaws, any and all business
may be transacted at any regular meeting.

         Section 3.8. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President on 24
hours' notice to each director, either personally or by mail or by telegram,
telex, cablegram, facsimile transmission, or other electronic mail or
transmission. Special meetings shall be called by the President or Secretary
in like manner and on like notice on the written request of two directors.
Except as may be otherwise expressly provided by statute, the Articles of
Incorporation or these Bylaws, neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of Directors need
be specified in the notice or waiver of notice of such meeting.

         Section 3.9. QUORUM OF AND ACTION BY DIRECTORS. At all meetings of
the Board of Directors the presence of a majority of the number of directors
fixed by or in the manner provided in these Bylaws (but in no event fewer
than two directors, unless there is only one director serving on the Board of
Directors) shall be necessary and sufficient to constitute a quorum for the
transaction of business, except as otherwise provided by statute, the
Articles of Incorporation or these Bylaws. The act of a majority of the
number of directors fixed by or in the manner provided in these Bylaws (but
in no event fewer than two directors, unless there is only one director
serving on the Board of Directors) shall be the act of the Board of
Directors, unless the act of a greater number is required by statute, the
Articles of Incorporation or these Bylaws, in which case the act of such
greater number shall be requisite to constitute the act of the Board. If a
quorum shall not be present at any meeting of the directors, the directors
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present. At
any such adjourned meeting any business may be transacted that might have
been transacted at the meeting as originally convened. If the Articles of
Incorporation provide that any directors of the Corporation shall be entitled
to more or less than one vote on all or any specified matters, then every
reference in the Articles of Incorporation and these Bylaws (unless expressly
stated otherwise therein) to a specified portion of the directors shall mean
such portion of the votes entitled to be cast by the directors to which such
reference is applicable.

         Notwithstanding anything to the contrary herein, Supermajority
Approval will be required for any of the following listed actions; provided
that, by Supermajority Approval, the Board of Directors may also delegate to
any officers of the Corporation, or to any special committee of the Board of
Directors, the authority to take or approve any of the following listed
actions:

         (a)      amendment or modification of the Corporation's Articles of
                  Incorporation or Bylaws;

         (b)      changes in the business purpose and objectives of the
                  Corporation that would extend its businesses beyond exploring
                  for, producing, transporting, processing and marketing oil,
                  gas and other liquid or gaseous hydrocarbons in Webb or Zapata
                  Counties, Texas and carrying out all activities ancillary
                  thereto;

<PAGE>

         (c)      approval of the Corporation's annual business plan and annual
                  budget for operating costs and material capital expenditures;

         (d)      issuance, or agreement to issue, any equity securities of the
                  Corporation or any rights, warrants, options, convertible
                  securities or exchangeable securities or indebtedness, or
                  other rights, exercisable for or convertible or exchangeable
                  into, directly or indirectly, equity securities of the
                  Corporation or securities convertible or exchangeable into
                  equity securities of the Corporation, whether at the time of
                  issuance or upon the passage of time or the occurrence of some
                  future event;

         (e)      a public offering of any securities of the Corporation
                  pursuant to a registration statement under the Securities Act
                  of 1933, as amended;

         (f)      investment in any other person or entity (excluding
                  investments in cash equivalents, but including any loan to any
                  person or entity, or any series of loans to the same person or
                  entity, in excess of $50,000);

         (g)      incurrence of any financial indebtedness by the Corporation,
                  or any changes in contracts of the Corporation with respect
                  thereto, excluding any borrowings under any revolving credit
                  facility of the Corporation that was authorized by
                  Supermajority Approval, provided that such borrowings do not
                  cause the aggregate outstanding amounts borrowed to exceed
                  $55,000,000 (or such higher limit as may from time to time be
                  authorized by Supermajority Approval);

         (h)      the granting of any mortgages or security interests to secure
                  any such financial indebtedness, excluding any such mortgages
                  or security interests to secure the Corporation's obligations
                  under its revolving credit facility;

         (i)      guaranteeing the indebtedness or other obligations of any
                  person or entity other than a subsidiary of the Corporation;

         (j)      any Restricted Transaction between the Corporation or any of
                  its subsidiaries and any shareholder of the Corporation or any
                  of its affiliates. "Restricted Transaction" means any
                  transaction not in the ordinary course of business of owning
                  and operating oil and gas leases, royalties, mineral fee and
                  similar interests. Examples of transactions that are not
                  Restricted Transactions include the sale of production by the
                  Corporation to any shareholder or any shareholder's marketing
                  affiliates in arm's length transactions in the ordinary course
                  of business and the use by the Corporation of any
                  shareholder's (or any shareholder's affiliate's) pipelines and
                  transportation facilities or gas processing facilities in
                  arm's length transactions in the ordinary course of business;

         (k)      distributions of assets, additional shares of capital stock or
                  evidences of indebtedness to shareholders, or the repurchase
                  or redemption of any equity interests or other securities of
                  the Corporation;

         (l)      any material long-term production sales contract or any
                  material modification of any such contract (where"long-term"
                  means any contract that has a term of one year or more unless
                  such contract can be canceled without penalty in excess of
                  $500,000 on three months' notice or less);

         (m)      approval of strategies and policies for hedging and/or swap
                  arrangements;

<PAGE>

         (n)      employment of any elected officer of the Corporation,
                  agreements for the compensation of any elected officer of the
                  Corporation, and alteration of the compensation of any elected
                  officer of the Corporation;

         (o)      the filing or commencement of any proceeding under any
                  provision of the Bankruptcy Code for the Corporation as a
                  debtor, or any decision not to contest any involuntary
                  bankruptcy proceeding filed against the Corporation;

         (p)      the selection of independent accountants for the Corporation
                  or the agreement to any material change in the accounting
                  methods used by the Corporation that is not required by
                  generally accepted accounting principles;

         (q)      settlement of any litigation in which the Corporation is a
                  party that gives rise or potentially gives rise to a liability
                  or obligation of the Corporation to pay $500,000 or more;

         (r)      the dissolution or liquidation of the Corporation;

         (s)      merger or consolidation of the Corporation with or into any
                  other person; and

         (t)      any material acquisition or any material sale or exchange of
                  assets of the Corporation (where"material" means any single
                  acquisition or sale or exchange of assets for $3,000,000 or
                  more and any acquisition, sale or exchange that, in the
                  aggregate with any other such similar acquisitions or sales or
                  exchanges occurring in the six months prior to such proposed
                  acquisition or sale or exchange, is for $7,000,000 or more).

         Section 3.10. MERGER OR SALE OF THE CORPORATION. With Supermajority
Approval, including Supermajority Approval as provided for in that certain
Shareholders' Agreement dated as of August 11, 2000 (as from time to time
amended, the "Specified Shareholders' Agreement"), between MP Acquisition
Company L.L.C. and CFSC Wayland Advisers, Inc. as Manager of Wayland
Investment Fund, LLC, the Board of Directors of the Corporation (or the
Auction Committee of the Board, in the circumstances specified therefor in
the Specified Shareholders' Agreement) has the power and authority to
negotiate and approve a sale of the Corporation, subject to the requirements
set forth in subsections (a), (b), (c) and (d) below. The form of the
transaction (the "Sale Transaction") may be an asset sale by the Corporation,
a merger or other consolidation of the Corporation, or a sale or exchange of
all of the outstanding shares of the Corporation's capital stock. If a Sale
Transaction is negotiated and approved by the Board of Directors (or by the
Auction Committee of the Board, in the circumstances specified in the
Specified Shareholders' Agreement) in the form of a merger or sale of all or
substantially all of the Corporation's assets or in the form of another
transaction requiring shareholder approval in accordance with applicable law,
then all shareholders will be obligated to vote their shares to approve the
transaction, and, if such negotiated and approved Sale Transaction is in the
form of a sale or exchange by shareholders of their shares, then all
shareholders will be obligated to sell their shares in such sale. The
requirements for a Sale Transaction in which all shareholders must
participate are:

         (a)      the Sale Transaction must be an auction conducted with the
                  advice and assistance of independent investment bankers;

         (b)      the consideration received by the shareholders from the Sale
                  Transaction must be in the form of cash or highly liquid
                  securities;

         (c)      any shareholder and its affiliates will be entitled (but not
                  obligated) to bid at the auction; and

<PAGE>

         (d)      no shareholder will be required to make any representation or
                  warranty, or give any indemnity or undertaking, to any
                  purchaser in a Sale Transaction, except a representation and
                  warranty to any purchaser of such shareholder's shares in the
                  Corporation that such shareholder owns such shares free of any
                  lien, encumbrance or security interest.

By its acceptance at any time of any shares issued by the Corporation, and as
provided in Section XII.C.3 of the Corporation's Disclosure Statement dated
June 12, 2000, as amended July 6, each shareholder of any outstanding shares
of the Corporation shall be deemed to have granted an irrevocable proxy and
durable power of attorney, which proxy and power of attorney shall be deemed
coupled with an interest, to the Board of Directors (or to the Auction
Committee of the Board, in the circumstances specified therefor in the
Specified Shareholders' Agreement) to vote such shareholder's shares (in the
case of the proxy) or to sell and deliver such shareholder's shares (in the
case of the power of attorney) to facilitate a Sale Transaction negotiated
and approved by the Board of Directors (or by the Auction Committee of the
Board, in the circumstances specified therefor in the Specified Shareholders'
Agreement) in compliance with the foregoing requirements.

         Section 3.11. ACTION WITHOUT A MEETING. Unless otherwise restricted
by the Articles of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or
committee. A telegram, telex, cablegram or similar transmission by a
director, or a photographic, photostatic, facsimile or similar reproduction
of a writing signed by a director, shall be regarded as signed by the
director for purposes of this Section 3.11.

         Section 3.12. TELEPHONE MEETINGS. Subject to the provisions of
applicable law and these Bylaws regarding notice of meetings, members of the
Board of Directors or members of any committee designated by such Board may,
unless otherwise restricted by the Articles of Incorporation or these Bylaws,
participate in and hold a meeting of such Board of Directors or committee by
using conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 3.shall constitute
presence in person at such meeting, except when a person participates in the
meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting was not lawfully called or convened.

         Section 3.13. INTERESTED DIRECTORS AND OFFICERS. No contract or
transaction between the Corporation and one or more of its directors or
officers or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or transaction,
or solely because his or their votes are counted for such purpose, if: (1)
the material facts as to his relationship or interest and as to the contract
or transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than
a quorum; or (2) the material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the shareholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the shareholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified by the Board of Directors, a committee thereof or the
shareholders. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.

<PAGE>

         Section 3.14. DIRECTORS' COMPENSATION. The Board of Directors shall
have authority to determine, from time to time, the amount of compensation,
if any, which shall be paid to its members for their services as directors
and as members of standing or special committees. The Board of Directors
shall also have power in its discretion to provide for and to pay to
directors rendering services to the Corporation not ordinarily rendered by
directors as such, special compensation appropriate to the value of such
services as determined by the Board of Directors from time to time. Nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.

         Section 3.15. ADVISORY DIRECTORS. The Board of Directors may appoint
such number of advisory directors as it shall from time to time determine.
Each advisory director appointed shall hold office for the term for which he
is elected or until his earlier death, resignation, retirement or removal by
the Board of Directors. The advisory directors may attend and be present at
the meetings of the Board of Directors, although a meeting of the Board of
Directors may be held without notice to the advisory directors and the
advisory directors shall not be considered in determining whether a quorum of
the Board of Directors is present. The advisory directors shall advise and
counsel the Board of Directors on the business and operations of the
Corporation as requested by the Board of Directors; however, the advisory
directors shall not be entitled to vote on any matter presented to the Board
of Directors.

                                  ARTICLE FOUR

                                     NOTICES

         Section 4.1. MANNER OF GIVING NOTICE. Whenever under the provisions
of the statutes, the Articles of Incorporation or these Bylaws, notice is
required to be given to any committee member, director or shareholder of the
Corporation, and no provision is made as to how such notice shall be given,
it shall not be construed to mean personal notice, but any such notice may be
given in writing by mail, postage prepaid, addressed to such member, director
or shareholder at his address as it appears on the records or (in the case of
a shareholder) the share transfer records of the Corporation. Any notice
required or permitted to be given by mail shall be deemed to be delivered
when the same shall be thus deposited in the United States mail as aforesaid.

         Section 4.2. WAIVER OF NOTICE. Whenever any notice is required to be
given to any committee member, director or shareholder of the Corporation
under the provisions of the statutes, the Articles of Incorporation or these
Bylaws, a waiver thereof in writing signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be
deemed equivalent to the giving of such notice. Attendance of a director at a
meeting of the Board of Directors shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened.

         Section 4.3. WHEN NOTICE NOT REQUIRED. Any notice required to be
given to any shareholder under any provision of the statutes, the Articles of
Incorporation or these Bylaws need not be given to the shareholder if: (1)
notice of two consecutive annual meetings and all notices of meetings held
during the period between those annual meetings, if any, or (2) all (but in
no event less than two) payments (if sent by first class mail) of
distributions or interest on securities during a twelve-month period have
been mailed to that person, addressed at his address as shown on the records
of the Corporation, and have been returned undeliverable. Any action or
meeting taken or held without notice to such a person shall have the same
force and effect as if the notice had been duly given and, if the action
taken by the Corporation is reflected in any articles or document filed with
the Secretary of State, those articles or that document may state that notice
was duly given to all persons to whom notice was required to be given. If
such a person delivers to the Corporation a written notice setting forth his
then current address, the requirement that notice be given to that person
shall be reinstated.

<PAGE>

                                  ARTICLE FIVE

                               EXECUTIVE COMMITTEE

         Section 5.1. CONSTITUTION AND POWERS. The Board of Directors, by
resolution adopted by Supermajority Approval, may designate two or more
directors (with such alternates, if any, as may be deemed desirable) to
constitute an Executive Committee, which Executive Committee shall have and
may exercise, when the Board of Directors is not in session, all the
authority and powers of the Board of Directors in the business and affairs of
the Corporation, even though such authority and powers be herein provided or
directed to be exercised by a designated officer of the Corporation;
PROVIDED, HOWEVER, that the foregoing shall not be construed as authorizing
action by the Executive Committee with respect to any action which by the
Texas Business Corporation Act or other applicable law, the Articles of
Incorporation or these Bylaws is required or specified to be taken by
Supermajority Approval or any other vote of a specified proportion of the
number of directors fixed by or in the manner provided in these Bylaws, or by
the Board of Directors, as such, or as authorizing the Executive Committee to:

         (a)      amend the Articles of Incorporation, except that the Executive
                  Committee may, to the extent provided in the resolutions
                  designating that committee or in the Articles of Incorporation
                  or the Bylaws, exercise the authority of the Board of
                  Directors vested in it in accordance with Article 2.13 of the
                  Texas Business Corporation Act relating to the issuance of
                  certain shares,

         (b)      propose a reduction of the stated capital of the Corporation,

         (c)      approve a plan of merger or share exchange of the Corporation,

         (d)      recommend to the shareholders the sale, lease, or exchange of
                  all or substantially all of the property and assets of the
                  Corporation,

         (e)      recommend to the shareholders a voluntary dissolution of the
                  Corporation or revocation thereof,

         (f)      amend, alter or repeal the Bylaws of the Corporation or adopt
                  new Bylaws of the Corporation,

         (g)      fill vacancies in the Board of Directors,

         (h)      fill vacancies in or designate alternate members of the
                  Executive Committee,

         (i)      fill any directorship to be filled by reason of an increase in
                  the number of directors,

         (j)      elect or remove officers of the Corporation or members or
                  alternate members of the Executive Committee,

         (k)      fix the compensation of any member or alternate member of the
                  Executive Committee, or

         (l)      alter or repeal any resolution of the Board of Directors that
                  by its terms provides that it shall not be so amendable or
                  repealable.

Unless the resolution designating the Executive Committee, the Articles of
Incorporation or the Bylaws so provide, the Executive Committee shall not have
the authority to authorize a distribution or to authorize the issuance of
shares. The designation of the Executive Committee and the delegation thereto of
authority shall

<PAGE>

not operate to relieve the Board of Directors or any member thereof of any
responsibility imposed upon it or him by law. Any members of the Executive
Committee and any alternates for such members shall, if appointed by the
Board of Directors, hold office until their respective successors are
appointed and qualify or until their earlier respective deaths, resignations,
retirements or disqualifications.

         Section 5.2. MEETINGS. Regular meetings of the Executive Committee,
of which no notice shall be necessary, shall be held at such times and places
as may be fixed from time to time by resolution adopted by affirmative vote
of a majority of the whole Committee and communicated to all the members
thereof. Special meetings of the Executive Committee may be called by the
Chairman of the Board, the President or any two members thereof at any time
on 24 hours' notice to each member, either personally or by mail or telegram.
Except as may be otherwise expressly provided by statute, the Articles of
Incorporation or these Bylaws, neither the business to be transacted at, nor
the purpose of, any meeting of the Executive Committee need be specified in
the notice or waiver of notice of such meeting. A majority of the Executive
Committee shall constitute a quorum for the transaction of business, and the
act of a majority of those present at any meeting at which a quorum is
present shall be the act of the Executive Committee. The members of the
Executive Committee shall act only as a committee, and the individual members
shall have no power as such. The Committee, at each meeting thereof, may
designate one of its members to act as chairman and preside at the meeting
or, in its discretion, may appoint a chairman from among its members to
preside at all its meetings held during such period as the Committee may
specify.

         Section 5.3. RECORDS. The Executive Committee shall keep a record of
its acts and proceedings and shall report the same, from time to time, to the
Board of Directors. The Secretary of the Corporation, or, in his absence, an
Assistant Secretary, shall act as secretary of the Executive Committee, or
the Committee may, in its discretion, appoint its own secretary.

                                   ARTICLE SIX

                   OTHER COMMITTEES OF THE BOARD OF DIRECTORS

         Section 6.1. AUCTION COMMITTEE. The Board of Directors, by
resolution adopted by Supermajority Approval, may designate two or more
directors (with such alternates, if any, as may be deemed desirable) to
constitute an Auction Committee, which Auction Committee shall have and may
exercise the powers specified in Section 3.10. The members of the Auction
Committee shall act only as a committee, and only unanimously, and the
individual members shall have no power as such. The Auction Committee, at
each meeting thereof, may designate one of its members to act as chairman and
preside at the meeting or, in its discretion, may appoint a chairman from
among its members to preside at all its meetings held during such period as
the Committee may specify. The Auction Committee shall keep a record of its
acts and proceedings and shall report the same, from time to time, to the
Board of Directors.

         Section 6.2. OTHER COMMITTEES. The Board of Directors may, by
resolution adopted by Supermajority Approval, designate one or more directors
(with such alternates, if any, as may be deemed desirable) to constitute
another committee or committees for any purpose; provided, that any such
other committee or committees shall have and may exercise only the power of
recommending action to the Board of Directors and the Executive Committee and
of carrying out and implementing any instructions or any policies, plans and
programs theretofore approved, authorized and adopted by the Board of
Directors or the Executive Committee.

<PAGE>

                                  ARTICLE SEVEN

                         OFFICERS, EMPLOYEES AND AGENTS;
                                POWERS AND DUTIES

         Section 7.1. ELECTED OFFICERS. The permitted officers of the
Corporation shall be a Chairman of the Board, a Chief Executive Officer, one
or more Vice Presidents as may be determined from time to time by the Board
(and in case of each such Vice President, with such descriptive title, if
any, as the Board of Directors shall deem appropriate), a Treasurer and such
other officers or agents with such titles and such duties as the Board of
Directors may from time to time determine. The required elected officers
shall be a President and a Secretary. The Board of Directors shall determine
which, if any, of the permitted officers shall be elected. If any one or more
of the permitted officers is not elected by the Board of Directors, the Board
of Directors may either delegate the duties of the officers that were not
elected to the President or delegate them to the Secretary. If the Board of
Directors does not delegate such duties, the President shall either assume
those duties or delegate them to the Secretary or any other officer that was
elected by the Board of Directors. None of the elected officers, with the
exception of the Chairman of the Board, need be a member of the Board of
Directors.

         Section 7.2. ELECTION. So far as is practicable, all elected
officers shall be elected by the Board of Directors at its first meeting
after each annual meeting of shareholders.

         Section 7.3. APPOINTIVE OFFICERS. The Board of Directors may also
appoint one or more Assistant Secretaries and Assistant Treasurers and such
other officers and assistant officers and agents (none of whom need be a
member of the Board) as it shall from time to time deem necessary, who shall
exercise such powers and perform such duties as shall be set forth in these
Bylaws or determined from time to time by the Board or by the Executive
Committee.

         Section 7.4. TWO OR MORE OFFICES. Any two or more offices may be
held by the same person.

         Section 7.5. COMPENSATION. The compensation of all officers of the
Corporation shall be fixed from time to time by the Board of Directors, which
must be by Supermajority Approval in the case of elected officers; provided
that the Board of Directors may delegate to the Chairman or the President the
authority to fix the compensation of any or all appointed officers of the
Corporation.

         Section 7.6. TERM OF OFFICE; REMOVAL; FILLING OF VACANCIES. Each
elected officer of the Corporation shall hold office until his successor is
chosen and qualified in his stead or until his earlier death, resignation,
retirement, disqualification or removal from office. Each appointive officer
shall hold office at the pleasure of the Board of Directors without the
necessity of periodic reappointment. Any officer or agent elected or
appointed by the Board of Directors may be removed at any time by the Board
of Directors whenever in its judgment the best interests of the Corporation
will be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Any such removal of an
officer must be by Supermajority Approval if the election of such officer
required Supermajority Approval. Election or appointment of an officer or
agent shall not of itself create contract rights. If the office of any
officer becomes vacant for any reason, the vacancy may be filled by the Board
of Directors.

         Section 7.7. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
there is one, shall preside when present at meetings of the shareholders and
of the Board of Directors. He shall advise and counsel the President and
other officers of the Corporation and shall exercise such powers and perform
such duties as shall be assigned to or required of him from time to time by
the Board of Directors or the Executive Committee.

<PAGE>

         Section 7.8. PRESIDENT. The President shall be the chief executive
officer of the Corporation and, subject to the provisions of these Bylaws and
to the direction and control of the Board of Directors, shall have general
supervision of the affairs of the Corporation and shall have general and
active management and control of all its business. In the event of the
absence or disability of the Chairman of the Board, or if such officer shall
not have been elected or be serving, the President shall preside when present
at meetings of the shareholders and of the Board of Directors. He shall have
power and general authority to execute bonds, deeds and contracts in the name
of the Corporation and to affix the corporate seal thereto; to sign stock
certificates; to cause the employment or appointment of such employees and
agents of the Corporation as the proper conduct of operations may require and
to fix their compensation, subject to the provisions of these Bylaws; to
remove or suspend any employee or agent who shall have been employed or
appointed under his authority or under authority of an officer subordinate to
him; to suspend for cause, pending final action by the authority which shall
have elected or appointed him, any officer subordinate to the President; and
in general to exercise all the powers usually appertaining to the office of
president of a corporation, except as otherwise provided by statute, the
Articles of Incorporation or these Bylaws. In the event of the absence or
disability of the President, his duties shall be performed and his powers may
be exercised by the Vice Presidents in the order of their seniority, unless
otherwise determined by the President, the Executive Committee or the Board
of Directors.

         Section 7.9. VICE PRESIDENTS. Each Vice President, if there are any,
shall generally assist the President and shall have such powers and perform
such duties and services as shall from time to time be prescribed or
delegated to him by the President, the Executive Committee or the Board of
Directors.

         Section 7.10. SECRETARY. The Secretary shall see that notice is
given of all meetings of the shareholders and special meetings of the Board
of Directors and shall keep and attest true records of all proceedings at all
meetings thereof. He shall have charge of the corporate seal and have
authority to attest any and all instruments or writings to which the same may
be affixed. He shall keep and account for all books, documents, papers and
records of the Corporation except those for which some other officer or agent
is properly accountable. He shall have authority to sign stock certificates
and shall generally perform all duties usually appertaining to the office of
secretary of a corporation. In the event of the absence or disability of the
Secretary, his duties shall be performed and his powers may be exercised by
the Assistant Secretaries in the order of their seniority, unless otherwise
determined by the Secretary, the President, the Executive Committee or the
Board of Directors.

         Section 7.11. ASSISTANT SECRETARIES. Each Assistant Secretary, if
there are any, shall generally assist the Secretary and shall have such
powers and perform such duties and services as shall from time to time be
prescribed or delegated to him by the Secretary, the President, the Executive
Committee or the Board of Directors.

         Section 7.12. TREASURER. The Treasurer, if there is one, shall be
the chief accounting and financial officer of the Corporation and shall have
active control of and shall be responsible for all matters pertaining to the
accounts and finances of the Corporation. He shall audit all payrolls and
vouchers of the Corporation and shall direct the manner of certifying the
same; shall supervise the manner of keeping all vouchers for payments by the
Corporation and all other documents relating to such payments; shall receive,
audit and consolidate all operating and financial statements of the
Corporation and its various departments; shall have supervision of the books
of account of the Corporation, their arrangement and classification; shall
supervise the accounting and auditing practices of the Corporation and shall
have charge of all matters relating to taxation. The Treasurer shall have the
care and custody of all monies, funds and securities of the Corporation;
shall deposit or cause to be deposited all such funds in and with such
depositories as the Board of Directors or the Executive Committee shall from
time to time direct or as shall be selected in accordance with procedures
established by the Board of Directors or the Executive Committee; shall
advise upon all terms of credit granted by the Corporation; shall be
responsible for the collection of all its accounts and shall

<PAGE>

cause to be kept full and accurate accounts of all receipts and disbursements
of the Corporation. He shall have the power to endorse for deposit or
collection or otherwise all checks, drafts, notes, bills of exchange and
other commercial paper payable to the Corporation and to give proper receipts
or discharges for all payments to the Corporation. The Treasurer shall
generally perform all duties usually appertaining to the office of treasurer
of a corporation. In the event of the absence or disability of the Treasurer,
his duties shall be performed and his powers may be exercised by the
Assistant Treasurers in the order of their seniority, unless otherwise
determined by the Treasurer, the President, the Executive Committee or the
Board of Directors.

         Section 7.13. ASSISTANT TREASURERS. Each Assistant Treasurer, if
there are any, shall generally assist the Treasurer and shall have such
powers and perform such duties and services as shall from time to time be
prescribed or delegated to him by the Treasurer, the President, the Executive
Committee or the Board of Directors.

         Section 7.14. ADDITIONAL POWERS AND DUTIES. In addition to the
foregoing especially enumerated duties, services and powers, the several
elected and appointed officers of the Corporation shall perform such other
duties and services and exercise such further powers as may be provided by
statute, the Articles of Incorporation or these Bylaws, or as the Board of
Directors or the Executive Committee may from time to time determine or as
may be assigned to them by any competent superior officer.

                                  ARTICLE EIGHT

                         SHARES AND TRANSFERS OF SHARES

         Section 8.1. ISSUANCE OF SHARES. The Board of Directors, acting in
accordance with Article Three of these Bylaws, shall have the sole power and
authority to authorize the issuance of shares of capital stock of the
Corporation and to reserve shares of such capital stock for future issuance
for a particular purpose from time to time, up to the maximum number of
shares authorized for issuance in the Articles of Incorporation of the
Corporation and not then outstanding or already reserved for issuance for a
particular purpose.

         Section 8.2. CERTIFICATES REPRESENTING SHARES. Certificates in such
form as may be determined by the Board of Directors and as shall conform to
the requirements of the statutes, the Articles of Incorporation and these
Bylaws shall be delivered representing all shares to which shareholders are
entitled. Such certificates shall be consecutively numbered and shall be
entered in the books of the Corporation as they are issued. Each certificate
shall state on the face thereof that the Corporation is organized under the
laws of Texas, the holder's name, the number and class or series of shares,
and the par value of such shares or a statement that such shares are without
par value. Each certificate shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary and may be sealed with
the seal of the Corporation or a facsimile thereof. The signatures of such
officers may be facsimiles.

         Section 8.3. LOST CERTIFICATES. The Board of Directors, the
Executive Committee, the President or such other officer or officers or any
agent of the Corporation as the Board of Directors may from time to time
designate, in its or his discretion, may direct a new certificate
representing shares to be issued in place of any certificate theretofore
issued by the Corporation and alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost, stolen or destroyed. When authorizing such issue of a
new certificate, the Board of Directors, the Executive Committee, the
President or any such other officer or agent in its or his discretion and as
a condition precedent to the issuance thereof may require the owner of such
lost, stolen or destroyed certificate, or his legal representative, to
advertise the same in such manner as it or he shall require and/or give the
Corporation a bond in such form, in such

<PAGE>

sum, and with such surety or sureties as it or he may direct, as indemnity
against any claim that may be made against the Corporation with respect to
the certificate alleged to have been lost, stolen or destroyed.

         Section 8.4. TRANSFERS OF SHARES. Shares of the Corporation shall be
transferable only on the books of the Corporation by the holder thereof in
person or by his duly authorized attorney. If a certificate representing
shares is presented to the Corporation or the transfer agent of the
Corporation with a request to register transfer, it shall be the duty of the
Corporation or the transfer agent of the Corporation to register the
transfer, cancel the old certificate and issue a new certificate if:

         (a)      the certificate is duly endorsed;

         (b)      reasonable assurance is given that those endorsements are
                  genuine and effective;

         (c)      the Corporation has no duty as to adverse claims or has
                  discharged the duty;

         (d)      any applicable law relating to the collection of taxes has
                  been complied with; and

         (e)      the transfer is in fact rightful or is to a bona fide
                  purchaser.

         Section 8.5.  REGISTERED SHAREHOLDERS.

         (a)      Unless otherwise provided in the Texas Business Corporation
Act or other applicable law, (1) the Corporation may regard the person in whose
name any shares issued by the Corporation are registered in the share transfer
records of the Corporation at any particular time as the owner of those shares
at that time for purposes of voting or giving proxies with respect to those
shares, receiving distributions thereon or notices in respect thereof,
transferring those shares, exercising rights of dissent, exercising or waiving
any preemptive right or entering into any agreements with respect to those
shares, and (2) neither the Corporation nor any of its directors, officers,
employees or agents shall be liable for regarding that person as the owner of
those shares at that time for those purposes, regardless of whether that person
does not possess a certificate for those shares.

         (b)      When shares are registered in the share transfer records of
the Corporation in the names of two or more persons as joint owners with the
right of survivorship, after the death of a joint owner and before the time that
the Corporation receives actual written notice that a party or parties other
than the surviving joint owner or owners claim an interest in the shares or any
distributions thereon, the Corporation may record on its books and otherwise
effect the transfer of those shares to any person, firm or corporation
(including the surviving joint owner or owners individually) and pay any
distributions made in respect of those shares, in each case as if the surviving
joint owner or owners were the absolute owners of the shares.

                                  ARTICLE NINE

                                 INDEMNIFICATION

         Section 9.1. INDEMNIFICATION OF DIRECTORS. The Corporation shall
indemnify a person who was, is, or is threatened to be made, a named
defendant or respondent in a proceeding because the person is or was a
director against any judgments, penalties (including excise and similar
taxes), fines, settlements and reasonable expenses actually incurred by the
person in connection with the proceeding if it is determined, in the manner
described below, that the person (a) conducted himself in good faith, (b)
reasonably believed, in the case of conduct in his official capacity as a
director of the Corporation, that his conduct was in the Corporation's best
interests, and in all other cases, that his conduct was at least not opposed
to the Corporation's best interests and (c) in the case of any criminal
proceeding, had no reasonable cause to believe

<PAGE>

his conduct was unlawful; provided that if the person is found liable to the
Corporation or is found liable on the basis that personal benefit was
improperly received by the person, the indemnification (i) shall be limited
to reasonable expenses actually incurred by the person in connection with the
proceeding and (ii) shall not be made in respect of any proceeding in which
the person shall have been found liable for willful or intentional misconduct
in the performance of his duty to the Corporation.

         The determinations required above that the person has satisfied the
prescribed conduct and belief standards must be made (1) by a majority vote
of a quorum consisting of directors who at the time of the vote are not named
defendants or respondents in the proceeding, (2) if such a quorum cannot be
obtained, by a majority vote of a committee of the Board of Directors,
designated to act in the matter by a majority vote of all directors,
consisting solely of two or more directors who at the time of the vote are
not named defendants or respondents in the proceeding, (3) by special legal
counsel selected by the Board of Directors or a committee of the Board by
vote as set forth in clause (1) or (2) of this sentence, or, if such a quorum
cannot be obtained and such a committee cannot be established, by a majority
vote of all directors, or (4) by the shareholders in a vote that excludes the
shares held by directors who are named defendants or respondents in the
proceeding. The determination as to reasonableness of expenses must be made
in the same manner as the determination that the person has satisfied the
prescribed conduct and belief standards, except that if the determination
that the person has satisfied the prescribed conduct and belief standards is
made by special legal counsel, the determination as to reasonableness of
expenses must be made by the Board of Directors or a committee of the Board
by vote as set forth in clause (1) or (2) of the immediately preceding
sentence or, if such a quorum cannot be obtained and such a committee cannot
be established, by a majority vote of all directors.

         The termination of a proceeding by judgment, order, settlement or
conviction, or on a plea of nolo contendere or its equivalent is not of
itself determinative that the person did not meet the requirements for
indemnification set forth above. A person shall be deemed to have been found
liable in respect of any claim, issue or matter only after the person shall
have been so adjudged by a court of competent jurisdiction after exhaustion
of all appeals therefrom.

         Notwithstanding any other provision of these Bylaws, the Corporation
shall pay or reimburse expenses incurred by a director in connection with his
appearance as a witness or other participation in a proceeding at a time when
he is not a named defendant or respondent in the proceeding.

         Section 9.2. ADVANCEMENT OF EXPENSES TO DIRECTORS. Reasonable
expenses incurred by a director who was, is, or is threatened to be made, a
named defendant or respondent in a proceeding shall be paid or reimbursed by
the Corporation, in advance of the final disposition of the proceeding and
without any of the determinations specified in Section 9.1 of this Article,
after the Corporation receives a written affirmation by the director of his
good faith belief that he has met the standard of conduct necessary for
indemnification under Section 9.1 of this Article and a written undertaking
by or on behalf of such director to repay the amount paid or reimbursed if it
is ultimately determined that he has not met that standard or if it is
ultimately determined that indemnification of the director against expenses
incurred by him in connection with that proceeding is prohibited by law. The
written undertaking described in the immediately preceding sentence to repay
the amount paid or reimbursed to the director by the Corporation must be an
unlimited general obligation of the director but need not be secured and it
may be accepted without reference to financial ability to make repayment.

         Section 9.3. OFFICERS. The Corporation shall indemnify and advance
expenses to an officer of the Corporation to the same extent that it is
required to indemnify and advance expenses to directors under these Bylaws or
by statute. In addition, the Corporation may indemnify and advance expenses
to an officer of the Corporation to such further extent, consistent with law,
as may be provided by the Articles of Incorporation,

<PAGE>

these Bylaws, general or specific action of the Board of Directors, or
contract or as permitted or required by common law.

         Section 9.4. OTHERS. The Corporation may indemnify and advance
expenses to an employee or agent of the Corporation to the same extent that
it is required to indemnify and advance expenses to directors under these
Bylaws or by statute. The Corporation may indemnify and advance expenses to
persons who are not or were not officers, employees or agents of the
Corporation but who are or were serving at the request of the Corporation as
a director, officer, partner, venturer, proprietor, trustee, employee, agent
or similar functionary of another corporation for profit subject to the
provisions of the Texas Business Corporation Act, corporation for profit
organized under laws other than the laws of Texas, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other
enterprise to the same extent that it is required to indemnify and advance
expenses to directors under this Article or by statute. The Corporation may
indemnify and advance expenses to an employee, agent or other person serving
at the request of the Corporation (as described above in this Section 9.4)
who is not a director to such further extent, consistent with law, as may be
provided by the Articles of Incorporation, these Bylaws, general or specific
action of the Board of Directors, or contract or as permitted or required by
common law.

         Section 9.5. INSURANCE AND OTHER ARRANGEMENTS. The Corporation may
purchase and maintain insurance or establish and maintain another arrangement
on behalf of any person who is or was a director, officer, employee or agent
of the Corporation or who is or was serving at the request of the Corporation
as a director, officer, partner, member, venturer, proprietor, trustee,
employee, agent or similar functionary of another corporation for profit
subject to the provisions of the Texas Business Corporation Act, corporation
for profit organized under laws other than the laws of Texas, partnership,
limited liability company, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise, against or in respect of any
liability asserted against him and incurred by him in such a capacity or
arising out of his status as such a person, whether or not the Corporation
would have the power to indemnify him against that liability under these
Bylaws or by statute. If the insurance or other arrangement is with a person
or entity that is not regularly engaged in the business of providing
insurance coverage, the insurance or arrangement may provide for payment of a
liability with respect to which the Corporation would not have the power to
indemnify the person only if including coverage for the additional liability
has been approved by the shareholders of the Corporation.

         Without limiting the power of the Corporation to purchase, procure,
establish or maintain any kind of insurance or other arrangement, the
Corporation may, for the benefit of persons indemnified by the Corporation,
(1) create a trust fund; (2) establish any form of self-insurance; (3) secure
its indemnity obligation by grant of a security interest or other lien on the
assets of the Corporation; or (4) establish a letter of credit, guaranty or
surety arrangement. The insurance or other arrangement may be purchased,
procured, maintained or established within the Corporation or with any
insurer or other person deemed appropriate by the Board of Directors
regardless of whether all or part of the stock or other securities of the
insurer or other person are owned in whole or part by the Corporation. In the
absence of fraud, the judgment of the Board of Directors as to the terms and
conditions of the insurance or other arrangement and the identity of the
insurer or other person participating in an arrangement shall be conclusive
and the insurance or arrangement shall not be voidable and shall not subject
the directors approving the insurance or arrangement to liability, on any
ground, regardless of whether directors participating in the approval are
beneficiaries of the insurance or arrangement.

         Section 9.6. REPORT TO SHAREHOLDERS. Any indemnification of or
advance of expenses to a director in accordance with this Article or the
provisions of any statute shall be reported in writing to the shareholders
with or before the notice or waiver of notice of the next shareholders'
meeting or with or before the next submission to shareholders of a consent to
action without a meeting and, in any case, within the twelve-month period
immediately following the date of the indemnification or advance.

<PAGE>

         Section 9.7. ENTITLEMENT. These indemnification provisions shall
inure to each of the directors, officers, employees and agents of the
Corporation, and other persons serving at the request of the Corporation (as
provided in this Article), whether or not the claim asserted against him is
based on matters that antedate the adoption of this Article, and in the event
of his death shall extend to his legal representatives; but such rights shall
not be exclusive of any other rights to which he may be entitled.

         Section 9.8.  DEFINITIONS.  For purposes of this Article Nine:

         (a)      The term"expenses" includes court costs and attorneys' fees;

         (b)      The term"proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an action,
suit or proceeding, and any inquiry or investigation that could lead to such
an action, suit or proceeding;

         (c)      The term"director" means any person who is or was a
director of the Corporation and any person who, while a director of the
Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, member, venturer, proprietor, trustee, employee,
agent or similar functionary of another corporation for profit subject to the
provisions of the Texas Business Corporation Act, corporation for profit
organized under laws other than the laws of Texas, partnership, limited
liability company, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise;

         (d)      The term"Corporation" includes any domestic or foreign
predecessor entity of the Corporation in a merger, consolidation or other
transaction in which the liabilities of the predecessor are transferred to
the Corporation by operation of law and in any other transaction in which the
Corporation assumes the liabilities of the predecessor but does not
specifically exclude liabilities that are the subject matter of this Article;

         (e)      The term"official capacity" means, when used with respect
to a director, the office of director in the Corporation and, when used with
respect to a person other than a director, the elective or appointive office
in the Corporation held by the officer or the employment or agency
relationship undertaken by the employee or agent on behalf of the
Corporation, but does not include service for any other corporation for
profit subject to the provisions of the Texas Business Corporation Act or
corporation for profit organized under laws other than the laws of Texas or
any partnership, limited liability company, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise; and

         (f)      The Corporation is deemed to have requested a director to
serve an employee benefit plan whenever the performance by him of his duties
to the Corporation also imposes duties on or otherwise involves services by
him to the plan or participants or beneficiaries of the plan. Excise taxes
assessed on a director with respect to an employee benefit plan pursuant to
applicable law are deemed fines. Action taken or omitted to be taken by a
director with respect to an employee benefit plan in the performance of his
duties for a purpose reasonably believed by him to be in the interest of the
participants and beneficiaries of the plan is deemed to be for a purpose
which is not opposed to the best interests of the Corporation.

         Section 9.9. SEVERABILITY. The provisions of this Article are
intended to comply with Articles 2.02A(16) and 2.02-1 of the Texas Business
Corporation Act. To the extent that any provision of this Article authorizes
or requires indemnification or the advancement of expenses contrary to such
statutes or the Articles of Incorporation, the Corporation's power to
indemnify or advance expenses under such provision shall be limited to that
permitted by such statutes and the Articles of Incorporation and any
limitation required by such statutes or the Articles of Incorporation shall
not affect the validity of any other provision of this Article.

<PAGE>

                                   ARTICLE TEN

                                  MISCELLANEOUS

         Section 10.1. DISTRIBUTIONS AND SHARE DIVIDENDS. Distributions in
the form of dividends and share dividends on the outstanding shares of the
Corporation, subject to any restrictions in the Articles of Incorporation or
these Bylaws and to the limitations imposed by the statutes, may be declared
by the Board of Directors at any regular or special meeting. Distributions in
the form of dividends may be declared and paid in cash, in property, or in
evidences of the Corporation's indebtedness, or in any combination thereof,
and may be declared and paid in combination with share dividends.
Distributions made by the Corporation, including those that were payable but
not paid to a holder of shares, or to his heirs, successors or assigns, and
have been held in suspense by the Corporation or were paid or delivered by it
into an escrow account or to a trustee or custodian, shall be payable by the
Corporation, escrow agent, trustee or custodian to the holder of the shares
as of the record date determined for the distribution or to his heirs,
successors or assigns.

         Section 10.2. RESERVES. The Corporation may, by resolution of the
Board of Directors, create a reserve or reserves out of its surplus or
designate or allocate any part or all of its surplus in any manner for any
proper purpose or purposes, and may increase, decrease or abolish any such
reserve, designation or allocation in the same manner.

         Section 10.3. SIGNATURE OF NEGOTIABLE INSTRUMENTS. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officer, officers, agent or agents, and in such manner,
as are permitted by these Bylaws and as from time to time may be prescribed
by resolution (whether general or special) of the Board of Directors or the
Executive Committee.

         Section 10.4. FISCAL YEAR. The fiscal year of the Corporation shall
be fixed by resolution of the Board of Directors.

         Section 10.5. SEAL. The seal of the Corporation, if there is one,
shall be in such form as shall be adopted and approved from time to time by
the Board of Directors. The seal may be used by causing it, or a facsimile
thereof, to be impressed, affixed, imprinted or in any manner reproduced. The
Corporation shall not be required to have a seal.

         Section 10.6. LOANS AND GUARANTIES. Subject to the other provisions
of these Bylaws, The Corporation may lend money to, guaranty obligations of
and otherwise assist its directors, officers and employees if the Board of
Directors determines that such a loan, guaranty or assistance reasonably may
be expected to benefit, directly or indirectly, the Corporation.

         Section 10.7. CLOSING OF SHARE TRANSFER RECORDS AND RECORD DATE. For
the purpose of determining shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or entitled to
receive a distribution by the Corporation (other than a distribution
involving a purchase or redemption by the Corporation of any of its own
shares) or a share dividend, or in order to make a determination of
shareholders for any other proper purpose (other than determining
shareholders entitled to consent to action by shareholders proposed to be
taken without a meeting of shareholders), the Board of Directors may provide
that the share transfer records of the Corporation shall be closed for a
stated period but not to exceed, in any case, 60 days. If the share transfer
records shall be closed for the purpose of determining shareholders entitled
to notice of or to vote at a meeting of shareholders, such records shall be
closed for at least 10 days immediately preceding such meeting. In lieu of
closing the share transfer records, the Board of Directors may fix in advance
a date as the record date for any such determination of shareholders, such
date in any case not to be more than 60 days and, in case of a meeting of
shareholders, not less than 10 days prior to the date on which the particular
action requiring such determination of

<PAGE>

shareholders is to be taken. If the share transfer records are not closed and
no record date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders, or entitled to receive a
distribution (other than a distribution involving a purchase or redemption by
the Corporation of any of its own shares) or a share dividend, the date on
which notice of the meeting is mailed or the date on which the resolution of
the Board of Directors declaring such distribution or share dividend is
adopted, as the case may be, shall be the record date for such determination
of shareholders. The record date for determining shareholders entitled to
call a special meeting is the date the first shareholder signs the notice of
that meeting. When a determination of shareholders entitled to vote at any
meeting has been made as provided in this Section, such determination shall
apply to any adjournment thereof except where the determination has been made
through the closing of the share transfer records and the stated period of
closing has expired.

         Unless a record date shall have previously been fixed or determined
pursuant to this Section 10.7, whenever action by shareholders is proposed to
be taken by consent in writing without a meeting of shareholders, the Board
of Directors may fix a record date for the purpose of determining
shareholders entitled to consent to that action, which record date shall not
precede, and shall not be more than 10 days after, the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors and the prior action of
the Board of Directors is not required by the Texas Business Corporation Act,
the record date for determining shareholders entitled to consent to action in
writing without a meeting shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered
to the Corporation by delivery to its registered office, registered agent,
principal place of business, transfer agent, registrar, exchange agent or an
officer or agent of the Corporation having custody of the books in which
proceedings of meetings of shareholders are recorded. Delivery shall be by
hand or by certified or registered mail, return receipt requested. Delivery
to the Corporation's principal place of business shall be addressed to the
President or the principal executive officer of the Corporation. If no record
date shall have been fixed by the Board of Directors and prior action of the
Board of Directors is required by the Texas Business Corporation Act, the
record date for determining shareholders entitled to consent to action in
writing without a meeting shall be at the close of business on the date on
which the Board of Directors adopts a resolution taking such prior action.

         Section 10.8. SURETY BONDS. Such officers and agents of the
Corporation (if any) as the Board of Directors may direct from time to time
shall be bonded for the faithful performance of their duties and for the
restoration to the Corporation, in case of their death, resignation,
retirement, disqualification or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in their possession or
under their control belonging to the Corporation, in such amounts and by such
surety companies as the Board of Directors may determine. The premiums on
such bonds shall be paid by the Corporation, and the bonds so furnished shall
be in the custody of the Secretary.

         Section 10.9. GENDER. Words of any gender used in these Bylaws shall
be construed to include each other gender, unless the context requires
otherwise.

                                 ARTICLE ELEVEN

                                   AMENDMENTS

         These Bylaws may be amended or repealed by Supermajority Approval of
the Board of Directors in accordance with Article Three of these Bylaws.
Unless the Articles of Incorporation or a bylaw adopted by the shareholders
provides otherwise as to all or some portion of the Corporation's Bylaws, the
shareholders holding seventy-five percent (75%) or more of the common stock
of the Corporation may amend, repeal or adopt the Corporation's Bylaws even
though the Corporation's Bylaws may also be amended, repealed or adopted by
the Board of Directors.