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                                                                     EXHIBIT 3.1

                              AMENDED AND RESTATED
                            ARTICLES OF INCORPORATION
                                       OF
                                 GREY WOLF, INC.


                                    ARTICLE 1
                                      NAME

         The name of the corporation is Grey Wolf, Inc. (the "Corporation").

                                    ARTICLE 2
                                    DURATION

         The period of the Corporation's duration is perpetual.

                                    ARTICLE 3
                                     PURPOSE

         The purpose for which the Corporation is organized is to engage in any
lawful business for which corporations may be organized under the laws of the
State of Texas.

                                    ARTICLE 4
                            AUTHORIZED CAPITAL STOCK

         The Corporation shall have the authority to issue an aggregate of
301,000,000 shares, consisting of 1,000,000 shares of Preferred Stock, par value
$1.00 per share ("Preferred Stock") and 300,000,000 shares of Common Stock, par
value $0.10 per share ("Common Stock").

         The following is a statement of the voting powers, designations,
preferences, and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, of the classes of stock of
the Corporation and of the authority with respect thereto expressly vested in
the Board of Directors of the Corporation.

A.       PREFERRED STOCK

                  (a) The Preferred Stock may be issued from time to time in one
         or more series and in such amounts as may be determined by the Board of
         Directors. The voting powers, designations, preferences and relative,
         participating, optional or other special rights, if any, or the
         qualifications, limitations or restrictions thereof, if any, of the
         Preferred Stock of each series shall be such as are fixed by the Board
         of Directors, authority so to do being hereby expressly granted, and as
         are stated and expressed in a resolution or resolutions adopted by

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         the Board of Directors providing for the issue of such series of
         Preferred Stock (herein called "Directors' Resolution"). The Directors'
         Resolution as to any series shall (i) designate the series, (ii) fix
         the dividend rate, if any, of such series, the payment dates for
         dividends on shares of such series and the date or dates, or the method
         of determining the date or dates, if any, from which dividends on
         shares of such series shall be cumulative, (iii) fix the amount or
         amounts payable on shares of such series upon voluntary or involuntary
         liquidation, dissolution or winding up and (iv) state the price or
         prices or rate or rates, and adjustments, if any, at which, the time or
         times, and the terms and conditions on which, the shares of such series
         may be redeemed at the option of the Corporation; and such Directors'
         Resolution may (i) limit the number of shares of such series that may
         be issued, (ii) provide for a sinking fund for the purchase or
         redemption of shares of such series and determine the terms and
         conditions governing the operations of any such fund, (iii) grant
         voting rights to the holders of shares of such series, (iv) impose
         conditions or restrictions upon the creation of indebtedness of the
         Corporation or upon the issuance of additional Preferred Stock or other
         capital stock ranking on a parity therewith, or prior thereto, with
         respect to dividends or distribution of assets upon liquidation, (v)
         impose conditions or restrictions upon the payment of dividends upon,
         or the making of other distributions to, or the acquisition of, shares
         ranking junior to the Preferred Stock or to any series thereof with
         respect to dividends or distributions of assets upon liquidation, (vi)
         state the price or prices or the rate or rates of exchange and other
         terms, conditions and adjustments upon which shares of any such series
         may be made convertible into, or exchangeable for shares of any other
         class or classes or of any other series of Preferred Stock or any other
         class or classes of stock and (vii) grant such other special rights and
         impose such qualifications, limitations or restrictions thereon as
         shall be fixed by the Board of Directors.

                  (b) Except as by law expressly provided, or except as may be
         provided in any Directors' Resolution, the Preferred Stock shall have
         no right or power to vote on any question or in any proceeding or to be
         represented at, or to receive notice of, any meeting of shareholders.

                  (c) Preferred Stock redeemed, purchased or retired by the
         Corporation assumes the status of authorized but unissued Preferred
         Stock and may thereafter, subject to the provisions of any Directors'
         Resolution providing for the issue of any particular series of
         Preferred Stock, be reissued in the same manner as authorized but
         unissued Preferred Stock.

B.       COMMON STOCK

                  (a) The Common Stock is junior to the Preferred Stock and is
         subject to all the powers, rights, privileges, preferences and
         priorities of the Preferred Stock as herein set forth and as may be
         stated in any Directors' Resolution or Resolutions.

                  (b) Subject to all rights of the Preferred Stock, dividends
         may be paid on the Common Stock as and when declared by the Board of
         Directors of the Corporation out of any funds of the Corporation
         legally available for the payment thereof.

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                  (c) After payment shall have been made in full to the holders
         of the Preferred Stock in the event of any liquidation, dissolution or
         winding up of the affairs of the Corporation, the remaining assets and
         funds of the Corporation shall be distributed to the holders of Common
         Stock according to their respective shares.

                  (d) Except as otherwise provided by law and subject to the
         voting rights conferred on the Preferred Stock or any series thereof by
         any Directors' Resolution, the holders of shares of Common Stock shall
         possess exclusive voting rights for the election of directors and for
         all other purposes, each holder of Common Stock on the date fixed for
         determining the shareholders entitled to vote being entitled to one
         vote for each share of Common Stock held of record by such holder.

C.       CONVERTIBLE REDEEMABLE PREFERRED STOCK

         I.   Designation. This series of Preferred Stock shall consist of
         200,000 shares and is designated and shall be issued as "Convertible
         Redeemable Preferred Stock" (the "Series A Preferred")

         II.  Redemption.

         A.       Mandatory Redemption.

                  1.       Quarterly Redemption.  Commencing with the date 
                           which is the 75th day after the end of the first full
                           fiscal quarter of the Company after the issuance of 
                           the Series A Preferred (and on the 75th day after 
                           the end of each fiscal quarter of the Company 
                           thereafter) and ending on the date which is the 75th
                           day after the end of the tenth full fiscal quarter 
                           of the Company, the Company shall redeem in cash at
                           the Redemption Price the number of Series A 
                           Preferred shares determined by dividing (x) by (y), 
                           where (x) is equal to 50% of the Available Cumulative
                           Venezuelan Net Cash Flow for such fiscal quarter, 
                           and where (y) is the Redemption Price; provided, 
                           that in no event shall the amount of shares of
                           Series A Preferred redeemed pursuant to this II.A.1 
                           exceed the amount of the Unredeemed Shares).

                  2.       Put Right. The Company shall redeem the number of
                           shares of Series A Preferred specified in a written
                           notice given by the holder thereof, provided that
                           such notice is given during the period commencing on
                           the date which is five years after the original
                           issuance of the Series A Preferred and ending ten
                           days thereafter.


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         B.       Optional Redemption.

                  1.       General. Subject to III.A.2 below, the Company, at
                           the option of the Board of Directors, may, at any
                           time, redeem up to 50% of the Series A Preferred or,
                           with the consent of the holders of the Series A
                           Preferred up to 100% of the Series A Preferred,
                           outstanding by paying in cash therefor the sum of the
                           Redemption Price per share.

                  2.       Upon Election to Convert. If a holder of Series A
                           Preferred has given written notice pursuant to III.A
                           hereof of its election to convert all or a portion of
                           such Series A Preferred into Common Stock, the
                           Company, at the option of the Board of Directors, may
                           redeem up to 50% of the Series A Preferred
                           outstanding by paying in cash therefor the sum of the
                           Redemption Price.

         C.       Notice of Redemption.  Notice of each redemption of Series A 
                  Preferred pursuant to II.A or II.B above, specifying the
                  date and place of redemption and the number of shares and
                  the certificate numbers thereof which are to be redeemed,
                  shall be mailed to each holder of record of shares to be
                  redeemed at its address as shown by the records of the
                  Company not more than 60 days nor less than 20 days prior to
                  the date on which such redemption is to be made (and, in the
                  instance of a redemption pursuant to II.B.2, within ten days
                  after receipt by the Company of written notice of a holder
                  of Series A Preferred of its election to convert). Should
                  only a part of the outstanding Series A Preferred be
                  redeemed, such redemption shall be affected pro rata. On or
                  after the date fixed for redemption, each holder of shares
                  called for redemption shall, subject to III.A.2 below,
                  surrender its certificate for such shares to the Company at
                  the place designated in the redemption notice and shall
                  thereupon be entitled to receive payment of the redemptive
                  price. Should less than all of the shares represented by any
                  surrendered certificate be redeemed, a new certificate for
                  the unredeemed shares shall be issued. If the redemption
                  notice is duly given and if sufficient funds are available
                  therefor on the date fixed for redemption, then, whether or
                  not the certificates evidencing the shares to be redeemed
                  are surrendered, all right with respect to such shares shall
                  terminate on the date fixed for redemption, except for the
                  right of the holders to receive the redemptive price,
                  without interest, on surrender of their certificates
                  therefor. If, on or prior to any date fixed for redemption
                  of the Series A Preferred, the Company deposits with any
                  bank or trust company in the United States duly appointed
                  and acting as transfer agent for the Company, as a trust
                  fund, a sum sufficient to redeem, on the date fixed for
                  redemption, the shares called for redemption, with
                  irrevocable instructions and authority to the bank or trust
                  company to publish the notice of redemption, or to complete
                  such publication if already commenced, and to pay, on and
                  after the date fixed for redemption or prior to such date,
                  the

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                  redemptive price of the shares to their respective holders on
                  surrender of their share certificates, then from and after the
                  date of the deposit, even though such date may be prior to the
                  date fixed for redemption, the shares so called shall be
                  deemed to be redeemed. The deposit shall be deemed to
                  constitute full payment of the shares to their holders and
                  from and after the date of the deposit the shares shall be
                  deemed to be no longer outstanding, and the holders of the
                  shares shall cease to be shareholders with respect to such
                  shares and shall have no rights with respect to such shares,
                  except the right to receive from the bank or trust company
                  payment of the redemption price of the shares, without
                  interest, on surrender of the certificates, or the right to
                  convert such shares to Common Stock as provided in III.A.2
                  below. Any money so deposited on account of the redemptive
                  price of Series A Preferred converted after the making of the
                  deposit shall be repaid immediately to the Company on the
                  conversion of such shares. All shares of the Series A
                  Preferred redeemed by the Company shall be cancelled and none
                  of such shares shall thereafter be reissued.

III.     Conversion.

         A.       Conversion Rights and Rate.

                  1.       General.  At any time after the expiration of the 
                           period commencing on the date of which the Series A
                           Preferred is originally issued and ending 12 months
                           thereafter, the holder of any Series A Preferred 
                           shall, at its option on delivery to the Company of 
                           its written notice electing to convert all or, with 
                           the consent of the Company, a portion of such shares
                           into shares of Common Stock and therein stating the 
                           name or names in which he wishes the certificate of 
                           certificates for the Common Stock to be issued and 
                           the address and social security or tax
                           identification number for such person, and on 
                           surrender at the office of the Company or office of 
                           the transfer agent for such shares of the 
                           certificate or certificates for such shares of 
                           Series A Preferred, duly endorsed to the Company,
                           be entitled to convert its shares of Series A 
                           Preferred into fully paid and nonassessable shares 
                           of Common Stock, at the rate of eight shares of 
                           Common Stock for each share of Series A Preferred 
                           so surrendered for conversion.

                  2.       Upon Optional Election to Redeem. If the Company
                           gives a notice of redemption pursuant to II.B.1
                           above, the recipient of such notice shall have the
                           right, exercisable within 10 days after receipt of
                           such redemption notice, to give written notice to the
                           Company of its election to convert up to 50% of the
                           Series A Preferred outstanding held by such recipient
                           into shares of Common Stock, which notice shall
                           therein state the name or names in which it wishes
                           the certificate

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                           or certificates for the Common Stock to be issued and
                           the address and social security or tax identification
                           number for such person. On surrender at the office of
                           the Company or office of the transfer agent for such
                           shares of the certificate or certificates for such
                           shares of Series A Preferred, duly endorsed to the
                           Company, the holder shall be entitled to convert its
                           shares of Series A Preferred into fully paid and
                           non-assessable shares of Common Stock, at the rate of
                           eight shares of Common Stock for each share of Series
                           A Preferred so surrendered for conversion.
                           Notwithstanding the foregoing, or anything else
                           herein to the contrary, the conversion rights
                           described in this III.A.2 shall be null and void
                           during the period of time in which an Indemnification
                           Claim is outstanding.

                  3.       Effective Date of Conversion. A conversion affected
                           pursuant hereto shall be deemed to have been made as
                           of the date the shares of Series A Preferred are
                           surrendered for conversion, and the person or persons
                           entitled to receive the shares of Common Stock
                           issuable on such conversion shall be deemed to be
                           record holder or holders of such shares of Common
                           Stock from and after such date.

         B.       Adjustment of Conversion Rate. The number of shares of Common
                  Stock to which shares of Series A Preferred may be converted
                  shall be subject to adjustment from time to time as follows:

                  1.       Recapitalization. On any recapitalization of the
                           Company through the subdivision or combination of its
                           outstanding shares of Common Stock into a greater or
                           smaller number of shares, the number of shares of
                           Common Stock into which the shares of Series A
                           Preferred may be converted shall be increased or
                           reduced in the same proportion.

                  2.       Dividends or Distributions Payable With Common Stock.
                           If the Company takes a record of the holders of its 
                           shares of Common Stock for the purpose of entitling 
                           them to receive a dividend or other distribution 
                           payable in shares of Common Stock, or in securities
                           convertible into or exchangeable for shares of 
                           Common Stock, the maximum number of shares of Common
                           Stock issuable in payment of such dividend or 
                           distribution, or on conversion of or in exchange
                           for the securities convertible into or exchangeable 
                           for shares of Common Stock, shall be deemed to have 
                           been issued and to be outstanding as of such record 
                           date, and the number of shares of Common Stock into 
                           which the shares of Series A Preferred may be
                           converted shall be increased in proportion to the 
                           increase of the number of outstanding shares of 
                           Common Stock resulting therefrom.


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                  3.       Reorganization.  On any capital reorganization, 
                           reclassification of the capital stock, consolidation,
                           merger, or sale or conveyance of all or substantially
                           all of the assets of the Company to another 
                           corporation or other entity, each share of Series A 
                           Preferred shall be convertible into the same kind 
                           and amounts of securities, including shares or other
                           assets, or both, to which the number of shares of 
                           Common Stock of the Company which would have been 
                           deliverable on conversion of such shares of Series
                           A Preferred immediately prior to such reorganization,
                           reclassification, consolidation, merger, sale or 
                           conveyance would have been entitled. Appropriate 
                           adjustments, as determined by the Board of Directors
                           of the Company, shall be made in the application of 
                           the provisions herein set forth with respect to the 
                           rights and interests thereafter of holders of the 
                           Series A Preferred so that such provisions,
                           including the provisions with respect to changes in,
                           and other adjustments of, the conversion rate, shall
                           thereafter be applicable, as nearly as reasonably 
                           may be, in relation to any securities or other 
                           assets thereafter deliverable on conversion of the 
                           Series A Preferred.

         C.       Statement of Adjusted Amount.  Whenever the amount of shares 
                  of Common Stock deliverable on the conversion of Series A
                  Preferred shall be adjusted pursuant to the provisions
                  hereof, the Company shall maintain at its office and file
                  with the transfer agent or agents for the Series A Preferred
                  and for the shares of Common Stock, a statement signed by
                  the President or a Vice President of the Company and by its
                  Treasurer or an Assistant Treasurer, stating the adjusted
                  amount of the shares of Common Stock, calculated to the
                  nearest 1/100 share, and setting forth in reasonable detail
                  the method of calculation and the facts requiring such
                  adjustment and on which the calculation is based. Each
                  adjustment shall remain in effect until a subsequent
                  adjustment hereunder is required.

         D.       Reservation of Shares of Common Stock. The Company shall at
                  all times reserve and keep available out of its authorized but
                  unissued shares of Common Stock solely for the purposes of
                  effecting conversion of its shares of Series A Preferred a
                  full number of shares of Common Stock deliverable on
                  conversion of all shares of Series A Preferred from time to
                  time outstanding.

         E.       Fractional Shares. No fractional shares shall be issued upon
                  conversion of any Series A Preferred, and the number of shares
                  of Common Stock to be issued upon such conversion shall be
                  only the whole shares resulting from application of the then
                  applicable conversion rate. The Company shall remit to the
                  holder of Series A Preferred converted the fair market value
                  on the conversion date of the fractional shares not issued.

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          IV.  Voting Rights. Except as otherwise required by law and the
               Articles, the holders of the Series A Preferred shall have no
               right to vote on any matter to be voted on by the stockholders of
               the Company.

          V.   Liquidation. On any voluntary or involuntary liquidation,
               dissolution or winding up of the Company, each holder of the
               Series A Preferred shall be entitled to receive an amount equal
               to the product of (x) and (y) where (x) is the number of
               Unredeemed Shares owned by such holder and where (y) is the
               Redemption Price, before any payment to the holders of the Common
               Stock. A consolidation or merger of the Company with or into any
               other corporation or other entity, or a sale of all or
               substantially all of the assets of the Company shall not be
               deemed a liquidation, dissolution or winding up of the Company
               within the meaning of this Paragraph.

          VI.  Certain Definitions. As used herein, the following terms shall
               have the respective meanings assigned to them below:

               "Acquisition Agreement" shall mean that certain Acquisition
               Agreement dated as of September 1994, among (i) DI Industries,
               Inc., (ii) An-Son Drilling Co. of Columbia S.A., (iii)
               Perforaciones Andinas S.A., and (iv) P.A.P. Tratamiento Y
               Perforaciones De Pozos S.A.

               "Available Cumulative Venezuelan Net Cash Flow" for any fiscal
               quarter shall mean (a) the net income of the Company for the
               period commencing on September 1, 1994 and ending on the last day
               of such fiscal quarter attributable to the Contract Drilling
               Operations calculated in accordance with GAAP plus, the Company's
               expenses attributable to the Contract Drilling Operations for
               such period that were taken into account in determining such net
               income but which did not involve the current expenditure of funds
               (e.g., depreciation), plus up to $300,000 of the Company's
               exchange losses attributable to the Contract Drilling Operations
               for such period that were taken into account in determining such
               net income, minus the Company's capital expenditures for such
               period attributable to the Contract Drilling Operations, minus
               all revenues of the Company attributable to the Contract Drilling
               Operations for such period that were taken into account in
               determining such net income which did not involve the current
               receipt of cash minus (b) the sum of all amounts theretofore paid
               to redeem any shares of the Series A Preferred.

               "Buyer" shall have the meaning assigned to it in the Acquisition
               Agreement.

               "Contract Drilling Operations" shall mean the operations of
               P.A.P. Tratamiento Y Perforaciones De Pozos S.A. in existence on
               September 1, 1994.

               "GAAP" shall mean generally accepted accounting principles as in
               effect from time to time in the United States of America.


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               "Indemnification Claim" shall mean a claim made by the Buyer
               pursuant to the Acquisition Agreement for matters for which Buyer
               is entitled to be indemnified under Section 10.1 of the
               Acquisition Agreement.

               "Redemption Price" shall mean $10.00 per share; provided,
               however, that if an Indemnification Claim is made and
               outstanding, the Redemption Price for such number of outstanding
               shares of Series A Preferred shall be reduced to $0.01 per share
               as shall be necessary so that the amount of reduction of the
               Redemption Price is equal to the Indemnification Claim. For
               purposes of the foregoing, an Indemnification Claim shall be
               deemed satisfied at that point in time when either (a) the
               Company has received a cash payment or payments pursuant to the
               Acquisition Agreement in the amount of such Indemnification
               Claim, (b) the Company has redeemed Series A Preferred in an
               amount such that the difference (a "Redemption Difference")
               between what the holder of such Series A Preferred would have
               received upon redemption at the original Redemption Price (i.e.,
               $10 per share) and the amount the holder of such Series A
               Preferred actually receives upon redemption at the reduced
               Redemption Price (i.e., $0.01 per share) is equal to the amount
               of such Indemnification Claim, (c) upon voluntary or involuntary
               liquidation, dissolution or winding up of the Company, the
               difference (a "Liquidation Difference") between what the holder
               of such Series A Preferred would have received upon redemption at
               the original Redemption Price (i.e., $10 per share) and the
               amount the holder of such Series A Preferred actually receives
               upon such liquidation, dissolution or winding up at the reduced
               Redemption Price (i.e., $0.01 per share) is equal to the amount
               of such Indemnification Claim, or (d) cash payments as
               contemplated under clause (a) above, Redemption Differences as
               contemplated under clause (b) above and/or Liquidation
               Differences as contemplated under clause (c) above equal the
               amount of such Indemnification Claim.

               "Unredeemed Shares" shall mean the shares of Series A Preferred
               issued and outstanding that have not otherwise been previously
               redeemed or converted into shares of Common Stock.

D.   SERIES B JUNIOR PARTICIPATING PREFERRED STOCK

               Section 1. Designation and Amount. The shares of this series
     shall be designated as "Series B Junior Participating Preferred Stock" (the
     "Series B Preferred Stock") and the number of shares constituting the
     Series B Preferred Stock shall be two hundred fifty thousand (250,000).
     Such number of shares may be increased or decreased by resolution of the
     Board of Directors; provided, that no decrease shall reduce the number of
     shares of Series B Preferred Stock to a number less than the number of
     shares then outstanding plus the number of shares reserved for issuance
     upon the exercise of outstanding options, rights or warrants or upon the
     conversion of any outstanding securities issued by the Corporation
     convertible into Series B Preferred Stock.


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         Section 2. Dividends and Distributions.

                  (A) Subject to the rights of the holders of any shares of any
         series of Preferred Stock (or any other stock) ranking prior and
         superior to the Series B Preferred Stock with respect to dividends, the
         holders of shares of Series B Preferred Stock, in preference to the
         holders of Common Stock, par value $.10 per share (the "Common Stock"),
         of the Corporation, and of any other junior stock, shall be entitled to
         receive, when, as and if declared by the Board of Directors out of
         funds legally available for the purpose, quarterly dividends payable in
         cash on the last day of March, June, September and December in each
         year (each such date being referred to herein as a "Quarterly Dividend
         Payment Date"), commencing on the first Quarterly Dividend Payment Date
         after the first issuance of a share or fraction of a share of Series B
         Preferred Stock, in an amount per share (rounded to the nearest cent)
         equal to the greater of (a) $1 or (b) subject to the provision for
         adjustment hereinafter set forth, 1,000 times the aggregate per share
         amount of all cash dividends, and 1,000 times the aggregate per share
         amount (payable in kind) of all non-cash dividends or other
         distributions, other than a dividend payable in shares of Common Stock
         or a subdivision of the outstanding shares of Common Stock (by
         reclassification or otherwise), declared on the Common Stock since the
         immediately preceding Quarterly Dividend Payment Date or, with respect
         to the first Quarterly Dividend Payment Date, since the first issuance
         of any share or fraction of a share of Series B Preferred Stock. In the
         event the Corporation shall at any time declare or pay any dividend on
         the Common Stock payable in shares of Common Stock, or effect a
         subdivision or combination or consolidation of the outstanding shares
         of Common Stock (by reclassification or otherwise than by payment of a
         dividend in shares of Common Stock) into a greater or lesser number of
         shares of Common Stock, then in each such case the amount to which
         holders of shares of Series B Preferred Stock were entitled immediately
         prior to such event under clause (b) of the preceding sentence shall be
         adjusted by multiplying such amount by a fraction, the numerator of
         which is the number of shares of Common Stock outstanding immediately
         after such event and the denominator of which is the number of shares
         of Common Stock that were outstanding immediately prior to such event.

                  (B) The Corporation shall declare a dividend or distribution
         on the Series B Preferred Stock as provided in paragraph (A) of this
         Section immediately after it declares a dividend or distribution on the
         Common Stock (other than a dividend payable in shares of Common Stock);
         provided that, in the event no dividend or distribution shall have been
         declared on the Common Stock during the period between any Quarterly
         Dividend Payment Date and the next subsequent Quarterly Dividend
         Payment Date, a dividend of $1 per share on the Series B Preferred
         Stock shall nevertheless be payable on such subsequent Quarterly
         Dividend Payment Date.

                  (C) Dividends shall begin to accrue and be cumulative on
         outstanding shares of Series B Preferred Stock from the Quarterly
         Dividend Payment Date next

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         preceding the date of issue of such shares, unless the date of issue of
         such shares is prior to the record date for the first Quarterly
         Dividend Payment Date, in which case dividends on such shares shall
         begin to accrue from the date of issue of such shares, or unless the
         date of issue is a Quarterly Dividend Payment Date or is a date after
         the record date for the determination of holders of shares of Series B
         Preferred Stock entitled to receive a quarterly dividend and before
         such Quarterly Dividend Payment Date, in either of which events such
         dividends shall begin to accrue and be cumulative from such Quarterly
         Dividend Payment Date. Accrued but unpaid dividends shall not bear
         interest. Dividends paid on the shares of Series B Preferred Stock in
         an amount less than the total amount of such dividends at the time
         accrued and payable on such shares shall be allocated pro rata on a
         share-by-share basis among all such shares at the time outstanding. The
         Board of Directors may fix a record date for the determination of
         holders of shares of Series B Preferred Stock entitled to receive
         payment of a dividend or distribution declared thereon, which record
         date shall be not more than 60 days prior to the date fixed for the
         payment thereof.

         Section 3.   Voting Rights.  The holders of shares of Series B 
Preferred Stock shall have the following voting rights:

                  (A) Each share of Series B Preferred Stock shall entitle the
         holder thereof to one thousand votes on all matters submitted to a vote
         of the shareholders of the Corporation.

                  (B) Except as otherwise provided herein, in any other
         Certificate of Designations creating a series of Preferred Stock or any
         similar stock, in the Certificate of Incorporation of the Corporation
         or by law, the holders of shares of Series B Preferred Stock and the
         holders of shares of Common Stock and any other capital stock of the
         Corporation having general voting rights shall vote together as one
         class on all matters submitted to a vote of shareholders of the
         Corporation.

                  (C) Except as set forth herein, or as otherwise provided by
         law, holders of Series B Preferred Stock shall have no special voting
         rights and their consent shall not be required (except to the extent
         they are entitled to vote with holders of Common Stock as set forth
         herein) for taking any corporate action.

         Section 4.   Certain Restrictions.

                  (A) Whenever quarterly dividends or other dividends or
         distributions payable on the Series B Preferred Stock as provided in
         Section 2 are in arrears, thereafter and until all accrued and unpaid
         dividends and distributions, whether or not declared, on shares of
         Series B Preferred Stock outstanding shall have been paid in full, the
         Corporation shall not:


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                           (i) declare or pay dividends, or make any other
                  distributions, on any shares of stock ranking junior (either
                  as to dividends or upon liquidation, dissolution or winding
                  up) to the Series B Preferred Stock;

                           (ii) declare or pay dividends, or make any other
                  distributions, on any shares of stock ranking on a parity
                  (either as to dividends or upon liquidation, dissolution or
                  winding up) with the Series B Preferred Stock, except
                  dividends paid ratably on the Series B Preferred Stock and all
                  such parity stock on which dividends are payable or in arrears
                  in proportion to the total amounts to which the holders of all
                  such shares are then entitled;

                           (iii) redeem or purchase or otherwise acquire for
                  consideration shares of any stock ranking junior (either as to
                  dividends or upon liquidation, dissolution or winding up) to
                  the Series B Preferred Stock, provided that the Corporation
                  may at any time redeem, purchase or otherwise acquire shares
                  of any such junior stock in exchange for shares of any stock
                  of the Corporation ranking junior (as to dividends and upon
                  dissolution, liquidation or winding up) to the Series B
                  Preferred Stock; or

                           (iv) redeem or purchase or otherwise acquire for
                  consideration any shares of Series B Preferred Stock, or any
                  shares of stock ranking on a parity with the Series B
                  Preferred Stock, except in accordance with a purchase offer
                  made in writing or by publication (as determined by the Board
                  of Directors) to all holders of such shares upon such terms as
                  the Board of Directors, after consideration of the respective
                  annual dividend rates and other relative rights and
                  preferences of the respective series and classes, shall
                  determine in good faith will result in fair and equitable
                  treatment among the respective series or classes.

                  (B) The Corporation shall not permit any subsidiary of the
         Corporation to purchase or otherwise acquire for consideration any
         shares of stock of the Corporation unless the Corporation could, under
         paragraph (A) of this Section 4, purchase or otherwise acquire such
         shares at such time and in such manner.

         Section 5. Reacquired Shares. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.

         Section 6. Liquidation Dissolution or Winding Up.  Upon any 
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders

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of shares of stock ranking junior (upon liquidation, dissolution or winding up)
to the Series B Preferred Stock unless, prior thereto, the holders of shares of
Series B Preferred Stock shall have received $100 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series B Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (upon liquidation, dissolution or winding up) with the Series B Preferred
Stock, except distributions made ratably on the Series B Preferred Stock and all
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up. In
the event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series B Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

         Section 7. Consolidation, Merger, Etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series B Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

         Section 8. No Redemption.  The shares of Series B Preferred Stock 
shall not be redeemable.


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<PAGE>   14



         Section 9.  Rank.  The Series B Preferred Stock shall rank, with 
respect to the payment of dividends and the distribution of assets, junior to
all other series of Preferred Stock.

         Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series B Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series B Preferred Stock, voting
together as a single class.

                                   ARTICLE 5
                  INITIAL CONSIDERATION FOR ISSUANCE OF SHARES

         The Corporation will not commence business until it has received for
the issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00), consisting of money, labor done or property actually received.

                                    ARTICLE 6
                              NO PREEMPTIVE RIGHTS

         No shareholder shall be entitled as a matter of right to subscribe for,
purchase or receive additional unissued or treasury shares of any class of the
Corporation, whether now or later authorized, or any bonds, debentures,
warrants, options or other securities convertible into or entitling the holder
to purchase shares. Such additional shares, bonds, debentures, warrants, options
or other securities convertible into or entitling the holder to purchase shares
may be issued or disposed of as the Board of Directors in its absolute
discretion deems advisable.

                                    ARTICLE 7
                              NO CUMULATIVE VOTING

         At each election for directors of the Corporation, every shareholder
entitled to vote at such election shall have the right to vote, in person or by
proxy, only the number of shares owned by him for as many persons as there are
directors to be elected, and no shareholder shall have the right or be permitted
to cumulate his votes on any basis, any and all rights of cumulative voting
being hereby expressly denied.

                                    ARTICLE 8
                           REGISTERED OFFICE AND AGENT

         The address of the registered office of the Corporation is 10370
Richmond Avenue, Suite 600, Houston, Texas 77042-4136 and the name of its
registered agent at such office is David W. Wehlmann.


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<PAGE>   15



                                    ARTICLE 9
                           INITIAL BOARD OF DIRECTORS

         The number of directors constituting the initial Board of Directors is
one (1), and the name and address of the person who is to serve as director
until the first annual meeting of shareholders or until his successor is elected
and qualified is:

                  NAME                      ADDRESS
                  ----                      -------
                  Max Dillard               5629 FM 1960 W.
                                            Suite 202
                                            Houston, Texas 77069

         The Bylaws of the Corporation shall provide for the number,
classification and election of directors and other matters pertaining to the
Board of Directors.

                                   ARTICLE 10
                             LIMITATION OF LIABILITY

         No director of the Corporation shall be liable to the Corporation or to
its shareholders for monetary damages for an act or omission in the director's
capacity as a director, provided, however, that this Article shall not eliminate
or limit the liability of a director to the extent the director is found liable
for:

         (i)   a breach of the director's duty of loyalty to the Corporation or
               its shareholders;

         (ii)  an act or omission not in good faith that constitutes a breach of
               duty of the director to the Corporation or an act or omission
               that involves intentional misconduct or a knowing violation of
               the law;

         (iii) a transaction from which the director received an improper
               benefit, whether or not the benefit resulted from an action taken
               within the scope of the director's office; or

         (iv)  an act or omission for which the liability of a director is
               expressly provided by an applicable statute.

         If 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 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 11
                                SPECIAL MEETINGS

         Special meetings of the shareholders may be called only by the Chairman
of the Board, the Vice Chairman of the Board, the Chief Executive Officer, the
President, the Board of Directors by

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<PAGE>   16


the written order of a majority of the entire Board of Directors or by the
holders of at least fifty percent of all the shares entitled to vote at the
proposed special meeting.

                                   ARTICLE 12
                                     BYLAWS

         The Board of Directors is expressly and exclusively authorized to
adopt, amend or repeal the Bylaws, or adopt new bylaws, without any action on
the part of the shareholders, and the shareholders of the Corporation may not
adopt, amend or repeal the Bylaws, or adopt new bylaws. Notwithstanding any
other provision of these Articles, no amendment to these Articles shall amend,
alter, change or repeal any of the provisions of this Article, unless such
amendment, alteration, change or repeal shall receive the affirmative vote of
the holders of not less than seventy-five percent of all shares of stock of the
Corporation entitled to vote at a meeting of shareholders, voting together as a
single class.

                                   ARTICLE 13
                                  VOTE REQUIRED

         If, with respect to any action to be taken by the shareholders of the
Corporation, any provisions of the Texas Business Corporation Act would, but for
this Article 13, require the vote or concurrence of the holders of shares having
more than a majority of the votes entitled to be voted thereon, or of any class
or series thereof, the vote or concurrence of the holders of shares having only
a majority of the votes entitled to be cast thereon, or of any class or series
thereof, shall be required with respect to any such action.




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