MEXCO ENERGY CORPORATION

                                     BYLAWS

                                   ARTICLE ONE

                                     OFFICES

     Section 1. The principal office of the corporation  shall be in the City of
Midland,  County of Midland,  State of Texas, and the name of the resident agent
in charge is Nicholas C. Taylor.

     Section 2. The  corporation may also have offices at such other places both
within and without the State of Texas as the Board of Directors may from time to
time determine or the business of the corporation may require.

                                   ARTICLE TWO

                            MEETINGS OF STOCKHOLDERS

     Section 1. All meetings of the  stockholders  for the election of Directors
shall be held at the office of the  corporation in Midland,  Texas.  Meetings of
stockholders for any other purpose may be held at such time and place, within or
without  the State of Texas,  as shall be stated in the notice of the meeting or
in a duly executed waiver of notice thereof.

     Section 2. An annual meeting of the stockholders,  commencing with the year
1993,  shall be held on the  second  Tuesday in July in each year if not a legal
holiday,  then on the next  secular day  following,  at which they shall elect a
Board of Directors,  and transact such other business as may be properly brought
before the meeting.

     Section 3.  Written  notice of the annual  meeting  shall be served upon or
mailed to each  stockholder  entitled to vote thereat at such address as appears
on the books of the corporation, at least ten (10) days prior to the meeting.

     Section 4. At least ten (10) days before  every  election of  Directors,  a
complete list of the stockholders entitled to vote at said election, arranged in
alphabetical  order,  with the residence of each and the number of voting shares
held by each, shall be prepared by the Secretary. Such list shall be open at the
place where the election is to be held for said ten days, to the  examination of
any  stockholder  and shall be kept at the time and place of the election during
the whole time thereof and subject to the inspection of any  stockholder who may
be present.

     Section  5.  Special  meetings  of the  stockholders,  for any  purpose  or
purposes,  unless  otherwise  prescribed  by  statute or by the  Certificate  of
Incorporation,  may be called by the  President  or  Secretary at the request in
writing  of a third of the Board of  Directors  or at the  request in writing of
stockholders  owning  twenty-five per cent (25%) or more in amount of the entire
capital stock of the  corporation  issued and  outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.

     Section 6. Written notice of a special meeting of stockholders, stating the
time and  place  and  object  thereof,  shall be  served  upon or mailed to each
stockholder  entitled to vote thereat at such address as appears on the books of
the corporation, at least ten (10) days before such meeting.

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     Section 7. Business transacted at all special meetings shall be confined to
the objects stated in the call.

     Section 8. The  holders of a majority of the stock  issued and  outstanding
and entitled to vote thereat,  present in person or represented by proxy,  shall
be requisite and shall  constitute a quorum at all meetings of the  stockholders
for the transaction of business except as otherwise provided by statute,  by the
Certificate of Incorporation or by these Bylaws. If, however,  such quorum shall
not  be  present  or  represented  at  any  meeting  of  the  stockholders,  the
stockholders  entitled  to vote  thereat,  present in person or  represented  by
proxy, shall have power to adjourn the meeting from time to time, without notice
other  than  announcement  at the  meeting,  until a quorum  shall be present or
represented.  At such  adjourned  meeting at which a quorum  shall be present or
represented,  any business may be transacted which might have been transacted at
the meeting as originally notified.

     Section 9. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or  represented
by proxy shall  decide any  question  brought  before such  meeting,  unless the
question  is one upon  which by  express  provision  of the  statutes  or of the
Certificate of Incorporation or of these Bylaws, a different vote is required in
which case such express  provision shall govern and control the decision of such
question.

     Section 10. At any meeting of the stockholders every stockholder having the
right to vote shall be entitled to vote in person,  or by proxy  appointed by an
instrument in writing subscribed by such stockholder and bearing a date not more
than eleven (11) months prior to said meeting.  Each stockholder  shall have one
(1) vote for each share of stock having voting power,  registered in his name on
the books of the corporation. Except where the transfer books of the corporation
shall have been  closed or a date shall have been fixed as a record date for the
determination of its  stockholders  entitled to vote, no share of stock shall be
voted on at any election for Directors which shall have been  transferred on the
books of the corporation within twenty (20) days next preceding such election of
Directors.

     Section  11.  Whenever  the vote of  stockholders  at a meeting  thereof is
required or permitted to be taken in connection with any corporate action by any
provisions of the statutes or of the  Certificate of  Incorporation  or of these
Bylaws,  the meeting and vote of stockholders  may be dispensed with, if all the
stockholders  who would  have  been  entitled  to vote  upon the  action if such
meeting  where held,  shall  consent in writing to such  corporate  action being
taken.

                                  ARTICLE THREE

                                    DIRECTORS

     Section 1. The number of Directors which shall  constitute the whole Board,
shall not be less than one nor more than ten. Within the limits above specified,
the  number of  Directors  shall be  determined  by  resolution  of the Board of
Directors or by the  stockholders at the annual meeting.  The Directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this  Article  and each  Director  elected  shall  hold  office  until  his
successor   shall  be  elected  and  shall   qualify.   Directors  need  not  be
stockholders.
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     Section  2. If any  vacancies  occur in the  Board of  Directors  caused by
death, resignation,  retirement,  disqualification or removal from office of any
Directors or otherwise,  a majority of the Directors then in office, though less
than a quorum,  may choose a successor or successors and the Directors so chosen
shall hold office until the next annual  election of  Directors  and until their
successors shall be duly elected and qualified, unless sooner displaced.

     Section 3. The property and business of the corporation shall be managed by
its 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 or by the  Certificate
of Incorporation or by these Bylaws directed or required to be exercised or done
by the stockholders.

                              MEETINGS OF THE BOARD

     Section 4. The Directors of the corporation  may hold their meetings,  both
regular and special, either within or without the State of Texas.

     Section 5. The first  meeting of each newly  elected Board shall be held at
such  time and  place as shall be fixed by the vote of the  stockholders  at the
annual  meeting and no notice of such  meeting  shall be  necessary to the newly
elected  Directors in order legally to constitute the meeting  provided a quorum
shall be  present,  or they may meet at such place and time as shall be fixed by
the consent in writing of all the Directors.

     Section 6. Regular meetings of the Board may be held without notice at such
time and place as shall from time to time be determined by the Board.

     Section 7. Special  meetings of the Board may be called by the President on
five  (5) days  notice  to each  Director,  either  personally  or by mail or by
telegram; special meetings shall be called by the President or Secretary in like
manner and on like notice on the written request of two Directors.

     Section 8. At all  meetings of the Board the  presence of a majority of the
Directors  shall be  necessary  and  sufficient  to  constitute a quorum for the
transaction  of business and the act of a majority of the  Directors  present at
any  meeting  at  which  there  is a  quorum  shall  be an act of the  Board  of
Directors, except as may be otherwise specifically provided by statute or by the
Certificate  of  Incorporation  or by these  Bylaws.  If a quorum  shall  not be
present at any meeting of Directors,  the Directors  present thereat may adjourn
the  meeting  of  Directors  from  time  to  time,  without  notice  other  than
announcement at the meeting, until a quorum shall be present.

                             COMMITTEES OF DIRECTORS

     Section 9. The Board of Directors  may, by resolution  passed by a majority
of the whole Board, designate one or more committees,  each committee to consist
of one or  more  of the  Directors  of the  corporation,  which,  to the  extent
provided in said resolution, shall have and may exercise the powers of the Board
of Directors in the  management  of the business and affairs of the  corporation
and may have power to authorize the seal of the corporation to be affixed to all
papers which may require it. Such  committee or committees  shall have such name
or names as may be  determined  from time to time by  resolution  adopted by the
Board of Directors.

     Section 10. The committees shall keep regular minutes of their  proceedings
and report the same to the Board when required.

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                            COMPENSATION OF DIRECTORS

     Section 11.  Directors,  as such,  shall not receive any stated  salary for
their  services,  but, by resolution  of the Board,  a fixed fee and expenses of
attendance,  if any,  may be allowed for  attendance  at each regular or special
meeting of the Board;  provided that nothing herein contained shall be construed
to preclude any Director from serving the  corporation in any other capacity and
receiving compensation  therefor.  Members of special or standing committees may
be allowed like compensation for attending committee meetings.

                      CONTRACTS WITH DIRECTORS AND OFFICERS

     Section 12. No contract or other  transaction  between the  corporation and
one or more of its  Directors or any other  corporation,  firm,  association  or
entity in which one or more of the Directors of the corporation are directors or
officers or are financially  interested  shall be either void or voidable solely
because such directors are present at the meeting of the Board of Directors or a
committee  thereof  which  authorizes,  approves  or ratifies  such  contract or
transaction or solely because their votes are counted for such purposes if:

     (i)  The fact of such relationship or interest is disclosed or known to the
          Board of Directors or committee which authorizes, approves or ratifies
          the contract or  transaction  by a vote or consent  sufficient for the
          purpose  without  counting  the votes or consents  of such  interested
          directors; or

     (ii) The fact such  relationship  or interest is  disclosed or known to the
          stockholders  entitled  to vote and the  authorize,  approve or ratify
          such contract or transaction by vote or written consent; and

     (iii)The  contract  or   transaction   is  fair  and   reasonable   to  the
          corporation.

                                  ARTICLE FOUR

                                     NOTICES

     Section 1. Whenever under the provisions of the statutes or the Certificate
of  Incorporation  or of these  Bylaws,  notice is  required  to be given to any
Director or stockholder,  it shall not be construed to mean personal notice, but
such  Director  or  stockholder  at such  address as appears on the books of the
corporation,  and such  notice  shall be deemed to be given at the time when the
same shall be thus mailed.

     Section 2. Whenever any notice is required to be given under the provisions
of the statutes or of the  Certificate of  Incorporation  or of these Bylaws,  a
waiver  thereof in writing  signed by the  person or  persons  entitled  to said
notice,  whether  before  or after  the time  stated  therein,  shall be  deemed
equivalent thereto.

                                  ARTICLE FIVE

                                    OFFICERS

     Section 1. The officers of the corporation shall be chosen by the Directors
and shall be, a President,  a Vice President,  a Secretary and a Treasurer.  The
Board of Directors may also constitute and choose additional vice presidents and
one or more assistant secretaries and assistant treasurers.  Two or more offices
may be held by the same person.
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     Section 2. The Board of  Directors at its first  meeting  after each annual
meeting of  stockholders  shall  choose a Chairman and shall choose a President,
one or more Vice Presidents, a Secretary and a Treasurer, none of whom need be a
member of the Board.

     Section 3. The Board may appoint such other officers and agents as it shall
deem  necessary,  who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined  from time to time by
the Board.

     Section 4. The salaries of all officers and agents of the corporation shall
be fixed by the Board of Directors.

     Section 5. The  officers of the  corporation  shall hold office until their
successors  are  chosen and  qualify  in their  stead.  Any  officer  elected or
appointed  by  the  Board  of  Directors  may be  removed  at  any  time  by the
affirmative vote of a majority of the whole Board of Directors. If the office of
any officer  becomes  vacant for any reason,  the vacancy shall be filled by the
Board of Directors.

                              CHAIRMAN OF THE BOARD

     Section 6. The  Chairman of the Board shall  preside at all meetings of the
Board of Directors and the  shareholders  and shall perform such other duties as
may be assigned to him by the Board of Directors from time to time.

                                  THE PRESIDENT

     Section  7. The  President  shall be the  chief  executive  officer  of the
corporation;  he shall be ex officio a member of all standing committees,  shall
have general and active  management of the business of the corporation and shall
see that all orders and resolutions of the Board are carried into effect.

     Section 8. He shall  execute  contracts,  sales  agreements,  licensing and
royalty agreements,  bonds, mortgages, deeds of trust, deeds, leases, agreements
and  instruments  necessary  or desired  in the  transaction  of the  authorized
business  of the  corporation  and, if  requiring a seal,  under the seal of the
corporation,  except where  required or permitted by law to be otherwise  signed
and  executed  and except  where the  signing  and  execution  thereof  shall be
expressly  delegated by the Board of Directors to some other officer or agent of
the corporation.

                                 VICE PRESIDENTS

     Section 9. The Vice  Presidents in the order of their  seniority  shall, in
the absence or disability of the President,  perform the duties and exercise the
powers of the  President  and shall  perform  such other  duties as the Board of
Directors shall prescribe.

                     THE SECRETARY AND ASSISTANT SECRETARIES

     Section 10. The  secretary  shall  attend all sessions of the Board and all
meetings  of the  stockholders  and  record  all  votes and the  minutes  of all
proceedings  in a book to be kept for that purpose and shall perform like duties
for the standing committees when required.  He shall give, or cause to be given,
notice of all meetings of the  stockholders and special meetings of the Board of
Directors  and shall perform such other duties as may be prescribed by the Board
of Directors or President,  under whose supervision he shall be acting. He shall
keep in safe custody the seal of the  corporation  and,  when  authorized by the
Board,  affix the same to any  instrument  requiring it and,  when so fixed,  it
shall be attested by his  signature or by the  signature of the  Treasurer or an
Assistant Secretary.
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     Section 11. The Assistant Secretaries in order of their seniority shall, in
the absence or disability of the Secretary,  perform the duties and exercise the
powers of the  Secretary  and shall  perform  such other  duties as the Board of
Directors shall prescribe.

                     THE TREASURER AND ASSISTANT TREASURERS

     Section 12. The Treasurer shall have the custody of the corporate funds and
securities   and  shall  keep  full  and  accurate   accounts  of  receipts  and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable  effects in the name and to the credit of the  corporation in
such depositories as may be designated by the Board of Directors.

     Section  13.  He shall  disburse  the  funds of the  corporation  as may be
ordered by the Board,  taking proper vouchers for such  disbursements  and shall
render to the President and Directors,  at the regular meetings of the Board, or
whenever  they may require it, an account of all his  transactions  as Treasurer
and of the financial condition of the corporation.

     Section  14. If  required  by the  Board of  Directors,  he shall  give the
corporation  a bond (which  shall be renewed  from time to time) in such sum and
with  such  surety or  sureties  as shall be  satisfactory  to the Board for the
faithful  performance of the duties of his office and for the restoration to the
corporation,  in case of his death,  resignation,  retirement  or  removal  from
office,  of all books,  papers,  vouchers,  money and other property of whatever
kind in his possession or under his control, belonging to the corporation.

     Section 15. The Assistant Treasurers in the order of their seniority shall,
in the absence or disability of the  Treasurer,  perform the duties and exercise
the powers of the  Treasurer and shall perform such other duties as the Board of
Directors shall prescribe.

                                   ARTICLE SIX

                              CERTIFICATES OF STOCK

     Section 1. The  certificates of stock of the corporation  shall be numbered
and shall be entered in the books of the  corporation  as they are issued.  They
shall  exhibit the holder's name and number of shares and shall be signed by the
President or Vice  President and either the Treasurer or Assistant  Treasurer or
the  Secretary or an Assistant  Secretary.  The  designations,  preferences  and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications,  limitations,  or restrictions of such
preferences  and/or  rights shall be set forth in full or summarized on the face
or back of the certificates  which the corporation shall issue to represent such
class or series of stock.  If any stock  certificate is signed (1) by a transfer
agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf
of the  corporation  and a registrar,  the  signature of any such officer may be
facsimile.
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                                LOST CERTIFICATES

     Section  2.  The  Board  of  Directors  may  direct  a new  certificate  or
certificates   to  be  issued  in  place  of  any  certificate  or  certificates
theretofore  issued by the  corporation  alleged to have been lost or destroyed,
upon  the  making  of an  affidavit  of that  fact by the  person  claiming  the
certificate of stock to be lost or destroyed.  When  authorizing such issue of a
new certificate or  certificates,  the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof,  require the owner of such
lost or destroyed certificate or certificates,  or his legal representative,  to
advertise  the  same  in  such  manner  as it  shall  require  and/or  give  the
corporation  a bond in such sum as it may direct as indemnity  against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.

                                TRANSFER OF STOCK

     Section 3. Upon  surrender to the  corporation or the transfer agent of the
corporation  of a certificate  for shares duly endorsed or accompanied by proper
evidence of  succession,  assignment  or authority to transfer,  it shall be the
duty of the  corporation  to  issue a new  certificate  to the  person  entitled
thereto, cancel the old certificate and record the transaction upon its books.

                            CLOSING OF TRANSFER BOOKS

     Section 4. The Board of Directors may close the stock transfer books of the
corporation for a period of not less than ten (10) days nor more than fifty (50)
days preceding the date of any meeting of  stockholders  or the date for payment
of any  dividend  or the date for the  allotment  of rights or the date when any
change or  conversion or exchange of capital stock shall go into effect or for a
period  of not less  than  ten  (10)  days nor  more  than  fifty  (50)  days in
connection with obtaining the consent of stockholders  for any purpose.  In lieu
of closing the stock transfer books as aforesaid, the Board of Directors may fix
in  advance a date,  not less than ten (10) days nor more than  fifty  (50) days
preceding the date of any meeting of  stockholders,  or the date for the payment
of any dividend,  or the date for the allotment of rights,  or the date when any
change or  conversion  or exchange of capital  stock shall go into effect,  or a
date in  connection  with  obtaining  such  consent,  as a  record  date for the
determination  of the  stockholders  entitled  to notice of, and to vote at, any
such meeting, and any adjournment thereof, or entitled to receive payment of any
such dividend,  or to any such allotment of rights, or to exercise the rights in
respect of any change,  conversion or exchange of capital stock, or to give such
consent,  and in such case such stockholders and only such stockholders as shall
be  stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, such  meeting  and any  adjournment  thereof,  or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights, or to give such consent,  as the case may be,  notwithstanding  any
transfer of any stock on the books of the corporation after any such record date
fixed as aforesaid.

                             REGISTERED STOCKHOLDERS

     Section 5. The corporation  shall be entitled to treat the holder of record
of any share or shares of stock as the holder in fact thereof, and, accordingly,
shall not be bound to recognized  any equitable or other claim to or interest in
such  share or shares on the part of any other  person,  whether or not it shall
have express or other notice thereof,  except as otherwise  provided by the laws
of the State of Texas.
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                                  ARTICLE SEVEN

                               GENERAL PROVISIONS

                                    DIVIDENDS

     Section 1. Dividends upon the capital stock of the corporation,  subject to
the provisions of the Certificate of  Incorporation,  if any, may be declared by
the Board of Directors at any regular or special  meeting,  pursuant to the law.
Dividends may be paid in cash, in property,  or in shares of the capital  stock,
subject to the provisions of the Certificate of Incorporation.

     Section 2. Before  payment of any  dividend,  there may be set aside out of
any funds of the  corporation  available for  dividends  such sum or sums as the
Directors  from time to time, in their  absolute  discretion,  think proper as a
reserve  fund  to  meet  contingencies,  or  for  equalizing  dividends,  or for
repairing  or  maintaining  any property of the  corporation,  or for such other
purpose  as  the  Directors  shall  think  conducive  to  the  interest  of  the
corporation,  and the  Directors  may modify or abolish any such  reserve in the
manner in which it was created.

                                ANNUAL STATEMENT

     Section 3. The Board of Directors  shall present at each annual meeting and
when  called  for by vote of the  stockholders  at any  special  meeting  of the
stockholders,  a full and clear  statement of the business and conditions of the
corporation.

                                     CHECKS

     Section  4. All checks or  demands  for money and notes of the  corporation
shall be signed by such  officer or officers or such other  person or persons as
the Board of Directors may from time to time designate.

                                   FISCAL YEAR

     Section  5.  The  fiscal  year of the  corporation  shall  be  fixed by the
resolution of the Board of Directors.

                                      SEAL

     Section 6. The corporate seal shall have inscribed  thereon the name of the
corporation and the words "Corporate Seal," so as to make an impression  similar
to that on the margin hereof. Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.

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                                  ARTICLE EIGHT

                                   AMENDMENTS

     Section 1. These  Bylaws may be altered or repealed at any regular  meeting
of the  stockholders  or at any special  meeting of the  stockholders at which a
quorum is present  or  represented  by proxy,  provided  notice of the  proposed
alteration or repeal be contained in the notice of such special meeting,  by the
affirmative vote of a majority of the stock entitled to vote at such meeting and
present or represented  thereat, or by the affirmative vote of a majority of the
Board of Directors at any regular meeting of the Board or at any special meeting
of the Board if notice of the proposed  alteration or repeal be contained in the
notice of such special meeting; provided, however, that no change of the time or
place of the meeting for the  election of  Directors  shall be made within sixty
(60) days next  before the day on which  such  meeting is to be held and that in
case of any change of such time or place,  notice thereof shall be given to each
stockholder  in person or by letter mailed to his last known post office address
at least twenty (20) days before the meeting is held.

                                  ARTICLE NINE

              INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES

     Section 1. 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 to the fullest extent  permitted by Section B of
Art. 2.02-1 of the Texas Business  Corporation Act (the "T.B.C.A."),  subject to
the  limitations  of Section C thereof.  Without  limiting the  foregoing,  such
indemnification  shall be against  judgments,  penalties  (including  excise and
similar taxes), fines, settlements, and reasonable expenses actually incurred by
the person in connection  with the  proceeding,  subject to the  limitations and
exceptions  contained  in  Section  E of Art.  2.02-1.  The  determination  that
indemnification  pursuant  to the  foregoing  provisions  is  required  and  the
authorization of  indemnification  and  determination as to reasonable  expenses
shall be made in the  manner set forth in  Section F and G at Art.  2.02-1.  The
corporation shall indemnify a director against  reasonable  expenses incurred by
him in  connection  with a  proceeding  in  which  he is a  named  defendant  or
respondent because he is or was a director if he has been wholly successful,  on
the merits or otherwise,  in the defense of the proceeding.  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  without any
of the  determinations  required  by  Sections  F and G of Art.  2.02-1,  if 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 Art.  2.02-1 and a written  undertaking by or on behalf of the director to
repay the amount paid or reimbursed if it is ultimately  determined  that he has
not met those  requirements.  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 2. The  corporation  shall  indemnify  and  advance  expenses to an
officer of the corporation to the same extent that it must indemnify and advance
expenses to a director under Section 1 hereof. In addition, the corporation may,
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,  indemnify and
advance  expenses to employees or agents of the  corporation  to the same extent
that it is required to indemnify and advance expenses to directors under Section
1 hereof.
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     Section 3. 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 of similar
functionary  of another  foreign or  domestic  corporation,  partnership,  joint
venture, sole proprietorship, trust, employee benefits plan, or other enterprise
to the same  extent that it is required  to  indemnify  and advance  expenses to
directors under Section 1 hereof if so authorized 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.

     Section 4. The  corporation  may  purchase and obtain  insurance  and other
arrangements  on  behalf  of  the  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, venturer, proprietor,  trustee,
employee,   agent  or  similar   functionary  of  another  foreign  or  domestic
corporation,  partnership,  joint venture, sole proprietorship,  trust, employee
benefits plan, or other enterprise,  against any liability  asserted against him
and incurred by him in such capacity arising out of the status of such a person,
whether or not the corporation would have the power to indemnify him against the
liability  under  Article  2.02-1 of the  T.B.C.A.,  subject to the  limitations
contained in Section R of Article 2.02-1.  Without  limiting the foregoing,  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 a 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.  Subject to the limitations of Section R of Art. 2.02-1, 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.

     Section 5. Any  indemnification  of or advance of expenses to a director in
accordance   with  Section  1  hereof  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 in lieu of a meeting  and,  in any case,  within the  12-month
period immediately following the date of the indemnification or advance.

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