GAINSCO INC, DEFA14A, 1998-06-11

GAINSCO INC
DEFA14A, 1998-06-11
FIRE, MARINE & CASUALTY INSURANCE

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GAINSCO, INC.
500 Commerce Street
Fort Worth, Texas 76102

June 11, 1998

Dear Gainsco Shareholder:

You have previously received proxy materials dated April 14, 1998
for the Annual Meeting of Shareholders of GAINSCO, INC. (the "Company")
which originally was to be held May 18, 1998 (the "Meeting").
Subsequent to the date of those proxy materials, Joseph D. Macchia
resigned as Chairman of the Board, President and Chief Executive
Officer and as a director of the Company.

Glenn W. Anderson is the new President and Chief Executive
Officer, and replaces Mr. Macchia as a management nominee for election
to the Board of Directors at the Meeting.

In addition to providing you with updated information on the
holdings of officers, directors and 5% shareholders, the enclosed
supplement to the earlier Proxy Statement provides information on the
1998 Long-Term Incentive Plan, approval of which will be requested at
the Meeting.

Enclosed is a new proxy card with a green bar. The proxy card
which accompanied the prior distribution of materials to you is not
valid. Therefore, we urge you to submit the enclosed proxy card with
the green bar since only by doing so or by voting at the Meeting in
person can your votes be recorded.

On behalf of the Board of Directors,

Joel C. Puckett
Chairman

-Page-

GAINSCO, INC.
500 Commerce Street
Fort Worth, Texas 76102

SUPPLEMENTAL NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 17, 1998

TO THE SHAREHOLDERS:

The Annual Meeting of the Shareholders of GAINSCO, INC. will be
held in the Brazos I Room at the Worthington Hotel, 200 Main Street,
Fort Worth, Texas, on July 17, 1998 at 10:00 a.m. (C.D.T.) for the
following purposes:

1. To elect a Board of Directors consisting of eight persons.

2. To approve the appointment of KPMG Peat Marwick LLP as
independent auditors for the current fiscal year.

3, To consider approval of the Company's 1998 Long-Term
Incentive Plan.

4. To transact such other business as may properly come before
the Meeting or any adjournment(s) thereof.

Only Shareholders of record as of the close of business on May
26, 1998 will be entitled to notice of or to vote at this Meeting or
any adjournment or adjournments thereof. A copy of the Annual Report
to Shareholders for the fiscal year ended December 31, 1997 has been
previously mailed or is mailed herewith to shareholders of record at
the record date.

This Supplemental Notice of Annual Meeting of Shareholders alters
the original Notice of Annual Meeting of Shareholders dated April 14,
1998 by (a) changing the time of the Meeting from 2:00 p.m. (C.D.T.)
to 10:00 a.m. (C.D.T.), (b) changing the place from the Pecos I Room
to the Brazos I Room at the Worthington Hotel, and (c) adding
approval of the Company's 1998 Long-Term Incentive Plan for
consideration. Since the distribution of the original Proxy Statement
related to the Meeting, there have been some significant developments
with respect to the Company. Please consult the attached Supplement
dated June 11, 1998 to Proxy Statement dated April 14, 1998 for a
discussion of how these developments relate to matters to be
considered at the Meeting.

WE HOPE YOU WILL BE ABLE TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE DATE AND SIGN THE ENCLOSED
NEW PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING ADDRESSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

BY ORDER OF THE BOARD OF DIRECTORS

Sam Rosen,
Secretary
Fort Worth, Texas,
Dated June 11, 1998

-Page-

GAINSCO, INC.
500 Commerce Street
Fort Worth, Texas 76102

SUPPLEMENT DATED JUNE 11, 1998
TO PROXY STATEMENT DATED APRIL 14, 1998

For The

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON JULY 17, 1998

This Supplement dated June 11, 1998 (the "Supplement") to the
Proxy Statement dated April 14, 1998 (the "April Proxy Statement") for
the Annual Meeting of Shareholders (the "Meeting") of GAINSCO, INC.
(the "Company") to be held on July 17, 1998, supplements the
information provided in the April Proxy Statement and is meant to be
read in conjunction therewith. Several material events regarding the
Company have occurred since the distribution of the April Proxy
Statement. This Supplement describes those changes and solicits, on
behalf of the Board of Directors of the Company, the proxy of
shareholders in support of the matters set forth in the April Proxy
Statement and in this Supplement.

Included with this Supplement is a proxy which supercedes the
proxy previously sent to you with the April Proxy Statement. The
proxies originally sent are not valid for use at the Meeting. The
replacement proxy has a green bar across it. In order for your votes
to be recorded, you must submit the replacement proxy or vote in
person at the Meeting.

The cost of soliciting proxies is being paid by the Company. In
addition to the mails, the Company's officers, directors and other
regular employees, without additional compensation, may solicit
proxies personally or by other appropriate means. It is also
contemplated that, for a fee of approximately $6,000 plus certain
expenses, additional solicitations will be made by personal interview,
telephone or other appropriate means under direction of Morrow & Co.,
Inc., 909 Third Avenue, New York, NY 10022-4799.

If the enclosed proxy is properly executed and returned, the
shares represented thereby will be voted in the manner specified.
Delivery of the enclosed proxy will serve to revoke any previous
proxies sent to the Company. If no specification is made in the
proxy, then the shares shall be voted in favor of the recommendations
of the Board of Directors. A proxy may be revoked by a shareholder at
any time prior to the actual exercise thereof by written notice to the
Secretary of the Company, by submission of another proxy bearing a
later date or by attending the Meeting and voting in person.

-1-
RECORD DATE AND VOTING SECURITIES

Only holders of the Company's $.10 par value common stock
("Common Stock") of record as of the close of business on May 26, 1998,
will be entitled to vote on matters presented at the Meeting. On May
26, 1998, there were outstanding 20,867,181 shares of Common Stock,
which constituted all of the outstanding voting securities of the
Company.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of May 31, 1998, the number
of shares of Common Stock beneficially owned (as defined by the
Securities and Exchange Commission) by (i) each director and director
nominee, (ii) each executive officer named in the Summary Compensation
Table and (iii) all of the executive officers of the Company as a
group. Except as otherwise indicated, each of the persons named below
has sole voting and investment power with respect to the shares of
Common Stock beneficially owned by that person.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership(13)

Number of
Name of Beneficial Owner Shares Percent
________________________ ______ _______
<S> <C> <C>
Glenn W. Anderson 579,710(1) 2.6%
Joel C. Puckett 463,221(2) 2.1%
Sam Rosen 209,572(3) *
Jack L. Johnson 193,803(4) *
Daniel J. Coots 125,662(5) *
John H. Williams 45,762(6) *
Harden H. Wiedemann 45,644(7) *
Richard M. Buxton 36,808(8) *
Richard A. Laabs 20,702(9) *
John C. Goff 16,800(10) *
Robert J. McGee, Jr. 16,800(11) *
Executive officers as a
group (10 persons) 1,280,272(12) 5.8%
_____________________________
* Less than 1%
<FN>
<F1>
Includes 579,710 shares of Common Stock that Mr. Anderson has the
right to acquire within 60 days through the exercise of options
granted pursuant to his Employment Agreement with the Company
described under "EMPLOYMENT AGREEMENT WITH GLENN W. ANDERSON."
<F2>
Includes 51,927 shares of Common Stock held by the Joel Puckett
Self-Employed Retirement Trust and 160,101 shares of Common Stock that
Mr. Puckett has the right to acquire within 60 days through the
exercise of option s granted under the 1990 and 1995 Stock Option
Plans.
-2-
<F3>
Includes 3,163 shares held by an IRA of Mr. Rosen's wife. Mr. Rosen
disclaims beneficial ownership of those shares. Also includes 35,065
shares held for the benefit of Mr. Rosen by the Shannon, Gracey,
Ratliff & Miller, L.L.P. Profit Sharing Plan, 3,163 shares of Common
Stock held by Mr. Rosen's IRA and 90,464 shares of Common Stock that
Mr. Rosen has the right to acquire within 60 days through the exercise
of options granted under the 1990 and 1995 Stock Option Plans. Mr.
Rosen is a partner in the law firm of Shannon, Gracey, Ratliff &
Miller, L.L.P. That firm, or its predecessors, has been general
counsel to the Company since 1979. The Company intends to retain that
firm as its general counsel during the current fiscal year.
<F4>
Includes 78,131 shares of Common Stock that Mr. Johnson has the right
to acquire within 60 days through the exercise of options granted
under the 1990 and 1995 Stock Option Plans.
<F5>
Includes 38,869 shares of Common Stock held by the Profit Sharing Plan
of the Company for the account of Mr. Coots as beneficiary and 78,272
shares of Common Stock that Mr. Coots has the right to acquire within
60 days through the exercise of options granted under the 1990 and
1995 Stock Option Plans.
<F6>
Includes 45,145 shares of Common Stock that Mr. Williams has the right
to acquire within 60 days through the exercise of options granted
under the 1990 and 1995 Stock Option Plans.
<F7>
Includes 30,240 shares of Common Stock that Mr. Wiedemann has the
right to acquire within 60 days through the exercise of options
granted under the 1990 and 1995 Stock Option Plans.
<F8>
Includes 21,808 shares of Common Stock that Mr. Buxton has the right
to acquire within 60 days through the exercise of options granted
under the 1995 Stock Option Plan.
<F9>
Includes 20,542 shares of Common Stock that Mr. Laabs has the right to
acquire within 60 days through the exercise of options granted under
the 1995 Stock Option Plan.
<F10>
Includes 16,800 shares of Common Stock that Mr. Goff has the right to
acquire within 60 days through the exercise of options granted under
the 1995 Stock Option Plan.
<F11>
Includes 16,800 shares of Common Stock that Mr. McGee has the right to
acquire within 60 days through the exercise of options granted under
the 1995 Stock Option Plan.
<F12>
Includes 81,743 shares of Common Stock held by the Profit Sharing Plan
of the Company for the account of executive officers and 980,507
shares of Common Stock that executive officers of the Company have the
right to acquire within 60 days through the exercise of options
granted under the 1990 and 1995 Stock Option Plans.
<F13>
Participants in the Profit Sharing Plan of the Company have no voting
power with regard to shares held for their benefit but have sole
disposition power.
</FN>
<\TABLE\>
-3-
FIVE PERCENT SHAREHOLDERS

The following table sets forth, as of May 31, 1998, information
with respect to each person known by the Company to own beneficially
more than 5% of the Common Stock of the Company:

</TABLE>
<TABLE>
<CAPTION>
Amount and Nature Percent
Name and Address of Beneficial Ownership of Class
<S> <C> <C> <C> <C>
(1) Joseph D. Macchia 2,367,444 11.4%
1409 Indian Creek
Fort Worth, TX 76109

(2) Ryback Management 1,222,200 5.9%
Corporation
7711 Carondelet Ave.
Box 16900
St. Louis, MO 63105

(3) I.G. Investment 1,363,500 6.5%
Managment Ltd.
447 Portage Ave.
One Canada Center
Winnipeg, Manitoba R3C 3B6

(4) The Millers Mutual Fire 1,559,900 7.5%
Insurance Company
300 Burnett Street
Fort Worth, TX 76102
_____________________________
<FN>
<F1>
This information was reported to the SEC and to the Company by Mr.
Macchia. It was reported that Mr. Macchia had sole voting power and
sole dispositive power of 2,367,444 shares of Common Stock. Reference
is made to the Schedule 13D, dated April 20, 1998, filed with the SEC
by Mr. Macchia for more detailed information on the matter summarized
in this footnote.
<F2>
This information was reported to the SEC and to the Company by Ryback
Management Corporation. It was reported that Lindner Growth Fund had
the sole power to vote or direct the vote of and sole power to dispose
of or direct disposition of 1,222,200 shares of Common Stock.
Reference is made to the Schedule 13G, dated January 23, 1998, filed
with the SEC by Ryback Management Corporation for more detailed
information on the matter summarized in this footnote.
<F3>
This information was provided to the SEC and obtained by the Company
from I.G. Investment Management Ltd, a Canadian based mutual fund
company. I.G. Investment Management Ltd, a subsidiary of Investors
Group, Inc., in one or more of its mutual funds and private client
managed accounts, holds 1,363,500 shares of Common Stock. It was
-4-
reported that I.G. Investment Management Ltd holds the sole power to
vote and dispose of the shares of Common Stock. Reference is made to
the Schedule 13F, dated May 6, 1998, filed with the SEC by I.G.
Investment Management Ltd for more detailed information on the matter
summarized in this footnote.
<F4>
This information was reported to the SEC and to the Company by The
Millers Mutual Fire Insurance Company. It was reported that The
Millers Mutual Fire Insurance Company has the sole power to vote or
direct the vote of and sole power to dispose of or direct disposition
of 1,559,000 shares of Common Stock. Reference is made to Schedule
13D, dated May 6, 1998, filed with the SEC by The Millers Mutual Fire
Insurance Company for more detailed information on the matter
summarized in this footnote.
</FN>
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

The bylaws of the Company provide that the Board of Directors
shall consist of nine directors until the 1998 meeting of the
shareholders at which time the number of directors shall be reduced to
eight directors. The Board of Directors has nominated the following
eight candidates for election as directors for a term ending at the
1999 Annual Meeting of the Shareholders. Each candidate other than
Glenn W. Anderson has previously been elected by the shareholders.
All of the nominees are currently serving as a director and are
currently serving on the Board committees indicated in the following
list.
<TABLE>
<CAPTION>
Name Age Position with Company
____ ___ _____________________
<S> <C> <C>
Glenn W. Anderson(1) 46 President and Chief
Executive Officer

Joel C. Puckett(1)(2) 54 Chairman of the Board

Sam Rosen 63 Secretary and Director

Harden H. Wiedemann(1)(2)(3) 44 Director

John H. Williams(1)(2)(3) 64 Director

John C. Goff(1)(2)(3) 42 Director

Robert J. McGee, Jr.(1)(2)(3) 43 Director

Daniel J. Coots 46 Senior Vice President,
Chief Financial Officer
and Director
_________________________
<FN>
<F1>
Member of the Executive Committee.
<F2>
Member of the Audit Committee.
<F3>
Member of the Compensation Committee
</FN>
</TABLE>
Joseph D. Macchia resigned as Chairman of the Board, President
and Chief Executive Officer of the Company on April 17, 1998. He also
resigned all other positions held with the Company and its subsidiaries.
The name of Mr. Macchia has been withdrawn as a nominee of the Board of
-5-
Directors for reelection to the Board at the Meeting and the name of Glenn
W. Anderson has been substituted.

Mr. Anderson, who is 46 years old and a 1974 graduate of Stanford
University, became President and Chief Executive Officer of the
Company on April 17, 1998 and has been elected to the Board to fill
the vacancy resulting from the resignation of Mr. Macchia. Mr.
Anderson most recently served as Executive Vice President of USF&G
Corporation and as President of the Commercial Insurance Group of
United States Fidelity & Guaranty Company, positions which he held
since 1996. From 1995 to 1996 he served as Executive Vice President,
Commercial Lines of that company. Mr. Anderson served from 1993 to
1995 as Senior Vice President, Commercial Lines Middle Market, for
USF&G Corporation. Mr. Anderson does not have a beneficial interest
in any shares of the Company except to the extent described elsewhere
in this Supplement. He has no family relationship with any other
director, executive officer of the Company or nominee for the Board.

Joel C. Puckett, a director of the Company since 1979, has been
elected Chairman of the Board in place of Mr. Macchia.

During 1997, the Company had an Executive Committee, an Audit
Committee, an Executive Compensation Committee and a Stock Option Plan
Committee. The function of the Executive Committee is to act in an
emergency or on routine matters when it is impractical to assemble the
entire Board for a meeting. The Executive Committee, during intervals
between meetings of the Board, has the authority to exercise all the
powers of the full Board other than matters coming specifically within
the purview of other committees of the Board and certain extraordinary
corporate matters. The Audit Committee's functions include
recommending to the Board of Directors the engagement of the Company's
independent certified public accountants, reviewing the results of
their auditing engagement, and monitoring on a periodic basis the
internal accounting controls of the Company. The Executive
Compensation Committee establishes the compensation of officers of the
Company. The Stock Option Plan Committee administers the 1990 Stock
Option Plan and the 1995 Stock Option Plan of the Company and prepares
recommendations to the Board of Directors on the adoption of stock
option plans and grants stock options.

Directors are elected annually by the shareholders of the Company
for one year and hold office until their successors are elected and
have qualified. During 1997, there were a total of four meetings of
the Board of Directors. The only incumbent director who during the
last fiscal year attended fewer than 75 percent of the aggregate of:
(1) the total number of meetings of the Board of Directors and (2) the
total number of meetings held by all committees of the Board on which
he served was Jack L. Johnson who was unable to attend two Board of
Directors meetings due to illness. During 1997, there were no
meetings of the Executive Committee, two meetings of the Audit
Committee, two meetings of the Executive Compensation Committee and no
meetings of the Stock Option Plan Committee. The Company does not
have a nominating committee.

After the close of the 1997 year, the functions of the Executive
Compensation Committee and the Stock Option Plan Committee were
combined into a single committee known as the Compensation Committee
and the membership of all committees was restructured to consist of
those directors indicated in the table above.
-6-
Each director of the Company who is not a full time employee of
the Company receives a quarterly retainer of $2,000 and a meeting fee
of $500 per meeting, plus expenses incurred in attending meetings of
the Board of Directors. Directors who are also full time employees of
the Company are not separately compensated for their service as
director.

Each current director who is not a full time employee of the
Company participated in the 1995 Stock Option Plan (the "Plan") on a
formula basis. Each such current director was awarded options to
purchase a minimum of 42,000 shares, plus 8,400 shares for each year
of service in excess of five years up to a maximum of an additional
42,000 shares of Common Stock at the closing market price ($8.3125 -
$10.625) on the date of grant. One-fifth of those options become
exercisable immediately and a like number become exercisable on each
anniversary of the grant date, if the optionee continues to be a
director on those dates. The Plan was approved by the Shareholders on
May 10, 1996.

The principal occupations of the directors and director nominees
of the Company, and time served as such, are described below:

MR. GLENN W. ANDERSON has served as a member of the Board of
Directors since April, 1998. He is the President and Chief Executive
Officer of the Company. His prior experience is described above.

MR. JACK L. JOHNSON has served as a director of the Company since
1993. Mr. Johnson served as Senior Vice President of the Company from
1984 until his retirement in January, 1998.

MR. JOEL C. PUCKETT has served as a director of the Company since
1979 and Chairman of the Board of Directors since April, 1998. Mr.
Puckett is a certified public accountant with offices located in
Minneapolis, Minnesota. Mr. Puckett has been engaged in the private
practice of accounting since 1973.

MR. SAM ROSEN has served as the Secretary and a director of the
Company since 1983. Mr. Rosen is a partner with the law firm of
Shannon, Gracey, Ratliff & Miller, L.L.P. He has been a partner in
that firm or its predecessors since 1966. Mr. Rosen is a director of
Aztec Manufacturing Co.

MR. HARDEN H. WIEDEMANN has served as a director of the Company
since 1989. Mr. Wiedemann has been Chairman and Chief Executive Officer of
Assurance Medical, Incorporated, a company providing
independent oversight of drug testing, since 1991.

MR. JOHN H. WILLIAMS has served as a director of the Company
since 1990. Mr. Williams is Senior Vice President, Investments, with Everen
Securities, Inc. and has been a principal of that firm or its
predecessors since May 1987. Prior to that time, Mr. Williams was
associated with Thomson McKinnon Securities, Inc. and its predecessors
from 1967. Mr. Williams is a director of Clear Channel
Communications, Inc.
-7-
MR. JOHN C. GOFF has served as a director of the Company since
1997. Since 1987 to April 1994, Mr. Goff served as a senior
investment advisor to and investor with Mr. Richard Rainwater. From
April 1994 through late 1996 he served as Chief Executive Officer of
Crescent Real Estate Equities, Inc. ("Crescent") and since late 1996 he
has served as Vice Chairman of the Board of Crescent, which is a real
estate investment company (CEI on the NYSE). Mr. Goff is also Vice
Chairman of the Board of Crescent Operating, Inc., an investment
company (COPI on the NASDAQ) and Chairman of the Board of Charter
Behavioral Health Systems.

MR. ROBERT J. McGEE, JR. has served as a director of the Company since
1997. Since 1992 Mr. McGee has served as Chairman and Chief Executive
Officer of KBK Capital Corporation, a 35-year old commercial finance
company. From 1989 to 1992 Mr. McGee served as Chairman of the Board
and Chief Executive Officer of Texas Commerce Bank-Tarrant County and
Vice Chairman, Texas Commerce Bank, N.A.

MR. DANIEL J. COOTS has served as a director of the Company since
1997. From 1987 to 1991 Mr. Coots served as Vice President, Treasurer
and Chief Financial Officer of the Company. Since 1991, he has served
as Senior Vice President, Treasurer and Chief Financial Officer of the
Company. Mr. Coots has been engaged in the property and casualty
insurance business since 1983.

ELECTION OF DIRECTORS
(Proposal No. 1)

The bylaws of the Company provide that the Board of Directors
shall consist of nine directors until the 1998 meeting of
shareholders, at which time the number of directors shall be reduced
to eight directors. The Board of Directors has nominated each of the
persons now serving, including Mr. Anderson in lieu of Mr. Macchia,
but excluding Mr. Jack L. Johnson who has requested that he not be
nominated, for election as director to serve for one year until the
next annual meeting of the shareholders. All of the nominees have
expressed their willingness to serve, but if because of circumstances
not contemplated, one or more of the nominees is not available for
election, the proxy holders named in the enclosed proxy form intend to
vote for such other person or persons as the Board of Directors may
nominate. No family relationship exists among the directors,
executive officers or nominees.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE ELECTION AS DIRECTORS OF THE REVISED SLATE OF EIGHT PERSONS
NOMINATED BY MANAGEMENT. THE SLATE OF MANAGEMENT NOMINEES IS: GLENN
W. ANDERSON, DANIEL J. COOTS, JOHN C. GOFF, ROBERT J. McGEE, JR., JOEL
C. PUCKETT, SAM ROSEN, HARDEN H. WIEDEMANN, AND JOHN H. WILLIAMS.
-8-

APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal No. 2)

Proposal No. 2 included in the April Proxy Statement is unaffected
by this Supplement.

EMPLOYMENT AGREEMENT WITH GLENN W. ANDERSON

By Employment Agreement effective as of April 17, 1998 (the
"Agreement"), the Company employed Glenn W. Anderson as President and
Chief Executive Officer for a four year period. That term will be
extended for additional one year periods on each anniversary of April
17, 1998, unless either party delivers written notice to the other at
least thirty (30) days prior to the applicable anniversary date. Under the
Agreement, Mr. Anderson will receive an annual base salary
of $340,000 and will be eligible to receive annual management
incentive bonuses as may be provided in management bonus plans. He
shall receive a bonus of not less than $260,000 at the end of his
first year of employment (he has no vested right to receive an
incentive bonus thereafter).

Under the Agreement, Mr. Anderson was granted non-qualified stock
options to purchase 579,710 shares of Common Stock at an exercise
price of $8.625 per share. If on any trading day within five business
days after the public announcement of the Company's results of
operations for the quarter ended June 30, 1998, the last reported
sales price for the Common Stock on the New York Stock Exchange is
below $8.625, the Agreement provides that Mr. Anderson's options will
be canceled and replaced with new options for the same number of
shares and with an exercise price equal to the lowest closing price
during that five day period. The options were fully vested and
exercisable upon grant and have a term of five years.

The Agreement provides unaccountable relocation expenses of
$50,000 and an allowance not to exceed $110,000 for relocation, home
sale, temporary housing and moving expenses actually incurred. The
Agreement additionally provides fifteen days of paid vacation
annually, a $2,000,000 term life insurance policy, the right to
participate in any Company group health and disability program, a
monthly automobile allowance of $700, a club membership in accordance
with Company policy and reimbursement of all appropriate and
reasonable expenses incurred by Mr. Anderson in the performance of his
duties. The Agreement permits termination of Mr. Anderson for cause
with payment of salary accrued to the date of termination. If Mr.
Anderson's employment is terminated without cause, he will be entitled
to an amount equal to thirty-six times 150% of his then current
monthly rate of base salary. The Company has entered into a Change in
Control Agreement with Mr. Anderson in substantially the same form
entered into with other executive officers of the Company (see Change
in Control Agreements on page 10 of the April Proxy Statement) and if
he is terminated without cause within twenty-four months of a change
in control of the Company, he shall be entitled to the greater of (i)
the amount he would be entitled to upon such termination in the
absence of a change in control or (ii) the amount called for by the
Change in Control Agreement.

Section 162(m) of the Internal Revenue Code of 1986, as amended,
imposes a $1,000,000 limit on the amount of compensation that will be
deductible by the Company with respect to each of the chief executive
officer and the four other most highly compensated executive officers.
-9-
Performance based compensation that meets certain requirements will
not be subject to the deduction limit. Because they were not approved
by the shareholders before vesting, the nonqualified stock options granted
to Mr. Anderson pursuant to the Agreement are not excluded from the
deduction from the deduction limits of Section 162(m). Therefore, if the
exercise of these options by Mr. Anderson results in income to him in
excess of $1,000,000 in any one year, that portion over $1,000,000
will not be tax deductible by the Company.

APPROVAL OF THE 1998 LONG-TERM INCENTIVE PLAN
(Proposal No. 3)

On May 1, 1998, the Board of Directors approved the Company's
1998 Long-Term Incentive Plan (the "Plan") to become effective on that
date, subject to the approval of the shareholders within twelve
months of the effective date. A copy of the Plan is attached hereto
as Exhibit "A". The summary of the Plan contained herein is not
intended to be complete and is qualified in its entirety by reference
to Exhibit "A" to this Supplement, which contains the complete text of
the Plan.

The purpose of the Plan is to promote the growth and general
prosperity of the Company by enabling the Company to grant to its
employees, directors and advisors awards of stock options, stock
appreciation rights and restricted stock. The Plan is designed (i) to
assist the Company and its subsidiaries in attracting and retaining
superior personnel for positions of substantial responsibility, and
(ii) to provide employees, directors, and advisors with an additional
incentive to contribute to the success of the Company.

AVAILABLE SHARES

The aggregate number of shares of Common Stock which may be
issued under the Plan (or with respect to which awards may be granted)
shall not exceed 1,000,000 shares. The maximum aggregate number of
shares of Common Stock with respect to which awards may be granted to
any person during the term of the Plan shall not exceed 600,000
shares. Shares issued under the Plan may be either authorized and
unissued shares of Common Stock or shares of Common Stock issued and
thereafter acquired by the Company. Any shares of Common Stock
subject to a stock option that are not issued prior to the expiration
of such awards, or any restricted stock that is forfeited, will again
be available for award under the Plan.

PERSONS ELIGIBLE TO PARTICIPATE

Any employee, director or advisor of the Company and its
subsidiaries is eligible to participate in the Plan. Subject to the
provisions of the Plan, the Compensation Committee (the "Committee")
may grant awards in accordance with such determinations as the
Committee in its sole discretion shall make. Awards of incentive
stock options, however, may be granted only to persons who are
employees.
-10-
ADMINISTRATION

The Committee, comprised of not fewer than two non-employee
directors of the Company, shall administer the Plan and have broad
powers under the Plan to, among other things, administer and interpret
the Plan, establish guidelines for the Plan's operation, select
persons to whom awards are to be made under the Plan, determine the
types and sizes of awards to be granted under the Plan, and determine
other terms and conditions of an award. In addition, except as
otherwise set forth in the Plan, the Committee also shall have the
power to waive restrictions or limitations on the exercisability of
awards and to accelerate and extend existing awards. In addition, the
Committee has the power to modify or amend the terms of existing
awards.

TYPES OF AWARDS

The Plan provides for the grant of any or all of the following
types of awards: (1) stock options, including incentive stock options
and nonqualified stock options; (2) stock appreciation rights; and (3)
restricted stock awards.

STOCK OPTIONS. Under the Plan, the Committee may grant awards in
the form of options to purchase shares of Common Stock. Options may be
in the form of incentive stock options or nonqualified stock options.
The Committee will, with regard to each stock option, determine the
number of shares subject to the option, the term of the option (which,
for both incentive and nonqualified stock options, shall not exceed
ten years), the exercise price per share of stock subject to the
option (which, for both incentive and nonqualified stock options, must
be not less than the fair market value of the shares of Common Stock
at the time of grant), the vesting schedule (if any) and the other
material terms of the option. Any option granted in the form of an
incentive stock option must satisfy the applicable requirements of
Section 422 of the Internal Revenue Code of 1986, as amended.

The option price upon exercise shall be paid by the optionee,as
the Committee may in each case determine, (i) in cash, (ii) by
certified or cashier's check, (iii) in shares of Common Stock, (iv) by
cash or certified or cashier's check for the par value of the shares
of Common Stock plus a promissory note for the balance of the purchase
price, which note shall contain such terms and provisions as the
Committee may determine, including the right to pay the note partially
or wholly with shares of Common Stock, (v) by delivery of a copy of
irrevocable instructions from the optionee to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the shares of
Common Stock purchased upon exercise of the option or to pledge them
as collateral for a loan from a third party and promptly to deliver to
the Company the amount of sale or loan proceeds necessary to pay such
purchase price, or (vi) in any other form of valid consideration
permitted by the Committee in its discretion.

STOCK APPRECIATION RIGHTS ("SARs"). The Plan authorizes the
Committee to grant SARs. An SAR under the Plan is a right to receive
a payment in cash or shares of Common Stock, as the Committee may
determine, equal in value to the excess of the fair market value of a
share of Common Stock on the date of exercise over the exercise price
of a nonqualified or incentive stock option granted under the Plan to
which the SAR relates. Any SAR granted with an incentive stock option
shall be subject to certain additional requirements specified in the Plan.
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RESTRICTED STOCK AWARDS. The Plan authorizes the Committee to
grant awards in the form of restricted shares of Common Stock. These
awards may be in such amounts and subject to such terms and conditions
as the Committee may determine, provided that the stock shall be
restricted for a period of not less than three (3) years or more than
ten (10) years. During this period, the sale, assignment, transfer,
pledge or other encumbrance of the shares of Common Stock is
restricted, and the shares are subject to forfeiture to the Company in
the event the awardee ceases to be an employee, director, or advisor
of the Company or one of its subsidiaries prior to the expiration of
the period of restriction. This forfeiture is not applicable if the
awardee's termination of employment or service is due to his death,
permanent disability or retirement, or termination without cause, or
constructive termination after a change in control (as defined in the
Plan).

TERMINATION OF AWARDS

Awards of options and SARs granted under the Plan are subject to
earlier termination upon the death, disability, or termination of
employment of the awardee. In the event an awardee's employment is
terminated for cause, the awardee's awards (other than restricted
stock that has already vested) will automatically expire on the date
of termination.

COMPLIANCE WITH SECURITIES LAWS

No awards may be granted under the Plan without compliance with
applicable securities laws and the listing of the shares of Common
Stock subject to the Plan with the New York Stock Exchange. It is
contemplated by management of the Company that upon the award of
options, SARs or restricted stock under the Plan, the shares of Common
Stock to be issued under the Plan will be registered by the Company
under the federal securities laws and listed with the New York Stock
Exchange.

TRANSFERABILITY

Awards granted under the Plan (other than restricted stock that
has fully vested) are not transferable other than by will or the laws
of descent and distribution, or with respect to nonqualified stock
options or SARs, pursuant to the terms of a qualified domestic
relations order. Incentive stock options awarded under the Plan may
be exercised during the lifetime of an optionee only by that optionee
or by his legally authorized representative. The Committee, in its
discretion, may permit nonqualified stock options or SARs to be
transferred to members of the awardee's immediate family, trusts for
the benefit of such immediate family members, and partnerships in
which such immediate family members are the only partners, provided
that there is no consideration for the transfer.

ACCELERATION OF AWARDS

The Committee may accelerate the exercisability or other vesting
of any award at any time. Awards granted under the Plan will vest in
full immediately in the event the Company experiences a "change in
control" (as defined in the Plan) or a "threatened change in control"
(as determined by the Committee in its sole discretion).
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TERM

The Plan shall terminate on April 30, 2008. No award will be
granted under the Plan after that date of termination.

SUMMARY OF CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF AWARDS

The following is a limited discussion of certain of the material
federal income tax consequences of awards under the Plan. No attempt
has been made to comment on all relevant tax matters related to the
Plan nor those dependent upon the particular circumstances of a
recipient of an award. The summary is based on current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), regulations
thereunder, administrative rulings and court decisions, all of which
are subject to change (possibly retroactively). The summary does not
address state, local, or foreign income tax considerations, nor
federal income tax considerations of non-U.S. persons.

INCENTIVE STOCK OPTIONS. The Company generally will not be
entitled to a compensation deduction for federal income tax purposes
with respect to the grant or exercise of an incentive stock option or
upon the disposition of Common Stock received upon exercise of an
incentive stock option. No taxable income will generally be realized
by an optionee upon the grant or exercise of an incentive stock
option, and an optionee will generally recognize long-term or short-term
capital gain upon disposition of Common Stock received upon
exercise of an incentive stock option, depending upon the length of
time the optionee has held the Common Stock before disposition. If,
however, an optionee disposes of Common Stock acquired upon exercise
of an incentive stock option when the shares have not been held by the
optionee for more than one year after their issuance and two years
after the date of grant of the incentive stock option pursuant to
which the shares were issued, the optionee will realize ordinary
income and the Company will be entitled to a compensation deduction
with respect to the lesser of (i) the excess of the fair market value
of the shares on the date of exercise over the option exercise price
and (ii) the excess of the amount realized on the disposition of the
shares and the optionee's adjusted basis in the shares. The difference
between the fair market value at the time of exercise of the Common
Stock received upon exercise of an incentive stock option and the
option exercise price may give rise to alternative minimum taxable income
subject to the alternative minimum tax. Certain special rules apply
if an incentive stock option is exercised by tendering Company stock.

NONQUALIFIED STOCK OPTIONS. The Company will generally be
entitled to a compensation deduction with respect to nonqualified
stock options granted under the Plan only upon their exercise and in
an amount equal to any excess of the fair market value of the Common
Stock issued upon exercise over the exercise price. Such excess will
generally constitute ordinary compensation income to the optionee for
the year of exercise.

STOCK APPRECIATION RIGHTS. The Company will generally be
entitled to a compensation deduction with respect to stock
appreciation rights granted under the Plan only upon their exercise
and in an amount equal to the amount of cash or the fair market value
(on the date of exercise) of any Common Stock issued upon such
exercise. Such amount will generally constitute ordinary compensation
income to the holder for the year of exercise.
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RESTRICTED STOCK GRANTS. The Company will generally be entitled
to a compensation deduction with respect to restricted stock grants
under the Plan only when the shares are "substantially vested" and in
an amount equal to any excess of the fair market value of the shares
at the time of exercise over any amounts paid for the shares. Such
excess will generally constitute ordinary compensation income to the
holder for the year in which the shares become "substantially vested."
The shares will become "substantially vested" as of the first date (the
"vesting date") the holder's interest in the shares is no longer
subject to a substantial risk of forfeiture or such shares are
transferable free of any substantial risk of forfeiture. A holder
may, however, elect, pursuant to Section 83(b) of the Code, to report
any excess of the fair market value of the shares on the date of grant
over the amount paid, if any, for the shares as ordinary income for
the taxable year of the grant. In such case, the Company's
corresponding deduction is limited to such amount and required to be
taken only in the taxable year of the grant. To be effective, the
Section 83(b) election must be filed with the Internal Revenue Service
within 30 days after the date the shares are transferred to the
holder.

CODE SECTION 162(m). Notwithstanding the foregoing, Section
162(m) of the Code denies the Company a deduction with respect to the
aggregate compensation of certain covered employees to the extent a
covered employee's aggregate compensation for any taxable year exceeds
$1,000,000. Covered employees include the Company's chief executive
officer and its four other highest compensated officers for the
applicable taxable year. Compensation resulting from the grant,
exercise or disposition of awards is potentially subject to the Code Section
162(m) limitation. Certain "qualified performance based
compensation" ("QPBC") is excepted from the Section 162(m) limitation,
however. Incentive stock options granted under the Plan should
qualify for the QPBC exception. Additionally, nonqualified stock
options and stock appreciation rights granted under the Plan should so
qualify, provided that their exercise prices are at least equal to the
fair market value of the underlying Common Stock on the date of grant.
Restricted stock grants under the Plan will not qualify for the QPBC
exception because, among other matters, they are expected to be issued
only on the condition that the grantee continue in the employment of
the Company for a period of time and, thus, their retention will not
be conditioned solely on post-grant appreciation in the value of the
Common Stock. When applicable, the Company presently intends to use
its best efforts to limit awards to those qualifying for the QPBC
exception. Nevertheless, the Company may issue awards that do not so
qualify. In such case, all or part of the compensation deduction
otherwise available to the Company will be denied and the Company's
after-tax cost of the Award will increase.

SHAREHOLDER APPROVAL

The Plan is subject to shareholder approval at the 1998 Annual
Meeting of Shareholders. Without this shareholder approval, the Plan
and any awards made under the Plan will be void and of no force or
effect. The affirmative vote of the holders of a majority of the
total number of shares voting "FOR" or "AGAINST" the Plan at the
Shareholders' Meeting, assuming a quorum is present, is required for
approval of the Plan.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE COMPANY'S 1998 LONG-TERM INCENTIVE PLAN.
-14-

ACTION TO BE TAKEN UNDER THE PROXY

The accompanying proxy will be voted "FOR" the election of the
revised slate of eight (8) persons recommended by the Board of
Directors as described above, "FOR" approval of the appointment of KPMG
Peat Marwick LLP as the Company's independent auditors and "FOR"
approval of the Company's 1998 Long-Term Incentive Plan unless the
proxy is marked in such a manner as to withhold authority to so vote.
The accompanying proxy will also be voted in connection with the
transaction of such other business as may properly come before the
Meeting or any adjournment or adjournments thereof. The Board of
Directors knows of no matters, other than as set forth above, to be
considered at the Meeting. If, however, any other matters properly
come before the Meeting or any adjournment or adjournments thereof,
the persons named in the accompanying proxy, or any of them, will vote
such proxy in accordance with their best judgement on any such matter.
The persons named in the accompanying proxy, or any of them, will
also, if in their judgment it is deemed to be advisable, vote to
adjourn the Meeting from time to time.

Shareholders are referred to the April Proxy Statement for a
description of other matters regarding the Meeting.

-15-

EXHIBIT A

GAINSCO, INC.
1998 LONG-TERM INCENTIVE PLAN

ARTICLE I
THE PLAN

1.1 NAME. This Plan shall be known as the "Gainsco, Inc. 1998
Long-Term Incentive Plan." Capitalized terms used herein are defined in
Article IX hereof.

1.2 PURPOSE. The purpose of the Plan is to promote the growth and
general prosperity of the Company by permitting the Company to grant to its
employees, directors, and Advisors Restricted Stock, Stock Appreciation
Rights, and Options to purchase Common Stock of the Company. The Plan is
designed to help the Company and its Subsidiaries attract and retain superior
personnel for positions of substantial responsibility and to provide
employees, directors, and Advisors with an additional incentive to contribute
to the success of the Company. The Company intends that Incentive Stock
Options granted pursuant to Article III shall qualify as "incentive stock
options" within the meaning of Section 422 of the Code.

1.3 EFFECTIVE DATE. The Plan shall become effective upon the
Effective Date; provided, however, that if the shareholders of the Company
have not approved the Plan by the date that is twelve months after the
Effective Date, the Plan and all grants made under the Plan shall be void and
of no force or effect.

1.4 ELIGIBILITY TO PARTICIPATE. Any Employee, Director, or Advisor
shall be eligible to participate in the Plan. Subject to the following
provisions, the Committee may make Awards in accordance with such
determinations as the Committee from time to time in its sole discretion shall
make; provided, however, that Incentive Stock Options may be granted only to
persons who are Employees.

1.5 SHARES SUBJECT TO THE PLAN. The shares of Common Stock to be
issued pursuant to the Plan shall be either authorized and unissued shares of
Common Stock or shares of Common Stock issued and thereafter acquired by the
Company.

1.6 MAXIMUM NUMBER OF PLAN SHARES. Subject to adjustment pursuant to
the provisions of Section 7.2, and subject to any additional restrictions
elsewhere in the Plan, the maximum aggregate number of shares of Common Stock
that may be issued and sold hereunder shall not exceed 1,000,000 shares. The
maximum aggregate number of shares of Common Stock with respect to which
Awards may be granted to any person during the term of the Plan shall not
exceed 600,000 shares.

1.7 OPTIONS AND STOCK GRANTED UNDER PLAN. Plan Shares with respect
to which an Option has been exercised or Restricted Stock has vested shall not
A-1
again be available for grant hereunder. If Options terminate for any reason
without being wholly exercised or if Restricted Stock is forfeited prior to
vesting, new Awards may be granted hereunder covering the number of Plan
Shares to which such termination or forfeiture relates.

1.8 CONDITIONS PRECEDENT. The Company shall not issue any
certificate for Plan Shares pursuant to the Plan prior to fulfillment of all
of the following conditions:

(a) The admission of the Plan Shares to listing on all stock
exchanges on which the Common Stock is then listed, unless the Committee
determines in its sole discretion that such listing is neither necessary nor
advisable;

(b) The completion of any registration or other qualification of
the offer or sale of the Plan Shares under any federal or state law or under
the rulings or regulations of the Securities and Exchange Commission or any
other governmental regulatory body that the Committee shall in its sole
discretion deem necessary or advisable; and

(c) The obtaining of any approval or other clearance from any
federal or state governmental agency that the Committee shall in its sole
discretion determine to be necessary or advisable.

1.9 RESERVATION OF SHARES OF COMMON STOCK. During the term of the
Plan, the Company shall at all times reserve and keep available such number of
shares of Common Stock as shall be necessary to satisfy the requirements of
the Plan as to the number of Plan Shares. In addition, the Company shall from
time to time, as is necessary to accomplish the purposes of the Plan, seek or
obtain from any regulatory agency having jurisdiction any requisite authority
that is necessary to issue Plan Shares hereunder. The inability of the
Company to obtain from any regulatory agency having jurisdiction the authority
deemed by the Company's counsel to be necessary to the lawful issuance of any
Plan Shares shall relieve the Company of any liability in respect of the
nonissuance of Plan Shares as to which the requisite authority shall not have
been obtained.

1.10 TAX WITHHOLDING AND REPORTING.

(a) CONDITION PRECEDENT. The issuance of Plan Shares pursuant
to the exercise of any Option, the vesting of any Restricted Stock, or the
payment of any SAR, is subject to the condition that if at any time the
Committee shall determine, in its discretion, that the satisfaction of
withholding tax or other withholding liabilities under any federal, state, or
local law is necessary or desirable as a condition of, or in connection with
such issuance, vesting or payment, then the issuance, vesting or payment
shall not be effected unless the withholding shall have been effected or
obtained in a manner acceptable to the Committee.

(b) MANNER OF SATISFYING WITHHOLDING OBLIGATION. When the
Committee requires an Awardee to pay to the Company an amount required to be
withheld under applicable income tax laws in connection with paragraph (a)
above, such payment shall be made, as the Committee may in each case in its
discretion determine, (i) in cash, (ii) by check, (iii) by delivery to the
Company of shares of Common Stock already owned by the Awardee having a Fair
Market Value on the Tax Date equal to the amount required to be withheld, (iv)
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through the withholding by the Company ("Company Withholding") of a portion of
the Plan Shares acquired upon the exercise of an Option having a Fair Market
Value on the Tax Date equal to the amount required to be withheld, or (v) in
any other form of valid consideration.

(c) NOTICE OF DISPOSITION OF STOCK ACQUIRED PURSUANT TO
INCENTIVE STOCK OPTIONS. The Company may require as a condition to the
issuance of Plan Shares covered by any Incentive Stock Option that the party
exercising the Option give a written representation to the Company,
satisfactory in form and substance to its counsel and upon which the Company
may reasonably rely, that he shall report to the Company any disposition of
such shares prior to the expiration of the holding periods specified by
Section 422(a)(1) of the Code. If and to the extent the realization of income
in such a disposition imposes upon the Company federal, state, or local
withholding tax requirements or any such withholding is required to secure for
the Company an otherwise available tax deduction, the Company shall have the
right to require that the recipient remit to the Company an amount sufficient
to satisfy those requirements; and the Company may require as a condition to
the issuance of Plan Shares covered by an Incentive Stock Option that the
party exercising such Option give a satisfactory written representation
promising to make such a remittance.

(d) TAX REPORTING. The Company shall file, and shall furnish
the Awardee a copy of, all federal, state, and local tax information returns
that it deems to be required in connection with the grant, exercise, or
vesting of any Award.

1.11 EXERCISE OF OPTIONS AND SARS.

(a) METHOD OF EXERCISE. Each Option or SAR shall be exercisable
in accordance with the terms of the Option or SAR Agreement pursuant to which
the Option or SAR was granted. No Option may be exercised for a fraction of a
Plan Share.

(b) PAYMENT OF PURCHASE PRICE. The purchase price of any Plan
Shares purchased pursuant to an Option shall be paid at the time of exercise
of the Option, as the Committee may in each case in its discretion determine,
(i) in cash, (ii) by certified or cashier's check, (iii) in shares of Common
Stock, (iv) by cash or certified or cashier's check for the par value of the
Plan Shares plus a promissory note for the balance of the purchase price,
which note shall provide for full personal liability of the maker and shall
contain such terms and provisions as the Committee may determine, including
without limitation the right to pay the note partially or wholly with Common
Stock, (v) by delivery of a copy of irrevocable instructions from the Optionee
to a broker or dealer, reasonably acceptable to the Company, to sell certain
of the Plan Shares purchased upon exercise of the Option or to pledge them as
collateral for a loan and promptly to deliver to the Company the amount of
sale or loan proceeds necessary to pay such purchase price or (vi) in any
other form of valid consideration permitted by the Committee in its
discretion. If any portion of the purchase price or a note given at the time
of exercise is paid in shares of Common Stock, those shares shall be valued at
their then Fair Market Value.

1.12 ACCELERATION IN CERTAIN EVENTS. The Committee may accelerate
the exercisability or other vesting of any Award in whole or in part at any
A-3
time. Notwithstanding the provisions of any Award Agreement, the following
provisions shall apply:

(a) MERGERS, CONSOLIDATION, ETC. In the event that the Company,
pursuant to action by the Board, at any time enters an agreement whereby the
Company will merge into, consolidate with, or sell or otherwise transfer all
or substantially all of its assets to another corporation and provision is not
made pursuant to the terms of such transaction for the assumption by the
surviving, resulting, or acquiring corporation of outstanding Awards, or for
the substitution of new Awards with substantially equivalent benefit therefor,
each outstanding Award shall become fully (100 percent) vested. The Committee
shall advise each Awardee in writing of the manner and terms under which such
fully vested Awards shall be exercised, if applicable.

(b) CHANGE IN CONTROL. Anything contained herein to the
contrary notwithstanding, (1) an Awardee shall become fully (100 percent)
vested in each of his or her Awards upon the occurrence of a Change in Control
(as defined below) or a threatened Change in Control (as determined by the
Committee in its sole discretion); and (2) no Award held by an Awardee at the
time a Change in Control or threatened Change in Control occurs or at any time
thereafter shall terminate for any reason before the end of the Award's
express term (if applicable). For purposes of this section, "Change in
Control" means one or more of the following events:

(i) Any person within the meaning of Section 13(d) and 14(d) of
the Exchange Act, other than the Company (including its Subsidiaries,
directors or executive officers) has become the beneficial owner, within the
meaning of Rule 13d-3 under the Exchange Act, of 50 percent or more of the
combined voting power of the Company's then outstanding Common Stock and any
other class or classes of the Company's outstanding securities ordinarily
entitled to vote in elections of directors (collectively, "Voting Securities")
(other than through the purchase of Voting Securities from the Company); or

(ii) Shares representing 50 percent or more of the combined
voting power of the Company's Voting Securities are purchased pursuant to a
tender offer or exchange offer (other than an offer by the Company or its
subsidiaries or affiliates); or

(iii) As a result of, or in connection with, any tender offer
or exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were Directors of the Company before the
Transaction shall cease to constitute a majority of the Board of the Company
or of any successor to the Company; or

(iv) Following the effective date of the Plan, the Company is
merged or consolidated with another corporation and as a result of such merger
or consolidation less than 50 percent of the outstanding Voting Securities of
the surviving or resulting corporation shall then be owned in the aggregate by
the former shareholders of the Company, other than (A) any party to such
merger or consolidation or (B) any affiliates of any such party; or

(v) The Company transfers more than 50 percent of its assets,
A-4
or the last of a series of transfers results in the transfer of more than 50
percent of the assets of the Company, to another entity that is not
wholly-owned by the Company. For purposes of this subsection (v), the
determination of what constitutes a transfer and what constitutes over 50
percent of the assets of the Company shall be made by the Committee, as
constituted immediately prior to the events that would constitute a Change in
Control if 50 percent of the Company's assets were transferred in connection
with such events, in its sole discretion.

1.13 WRITTEN NOTICE REQUIRED. Any Option or SAR shall be deemed to
be exercised for purposes of the Plan when written notice of exercise has been
received by the Company at its principal office from the person entitled to
exercise the Option or SAR and payment for the Plan Shares with respect to
which the Option is exercised (if applicable) has been received by the Company
in accordance with Section 1.11.

1.14 COMPLIANCE WITH SECURITIES LAWS. Plan Shares shall not be
issued with respect to any Award unless the issuance and delivery of the Plan
Shares (and the exercise of an Option, if applicable) shall comply with all
relevant provisions of state and federal law (including without limitation (i)
the Securities Act and the rules and regulations promulgated thereunder and
(ii) the requirements of any stock exchange upon which the Plan Shares may
then be listed) and shall be further subject to the approval of counsel for
the Company with respect to such compliance. The Committee may also require
an Awardee to furnish evidence satisfactory to the Company, including without
limitation a written and signed representation letter and consent to be bound
by any transfer restrictions imposed by law, legend, condition, or otherwise,
that the Plan Shares are being acquired only for investment and without any
present intention to sell or distribute the shares in violation of any state
or federal law, rule, or regulation. Further, each Awardee shall consent to
the imposition of a legend on the certificate representing the Plan Shares
issued pursuant to an Award, restricting their transfer as required by law or
this section.

1.15 EMPLOYMENT OR SERVICE OF AWARDEE. Nothing in the Plan or in any
Award shall confer upon any Employee any right to continued employment by the
Company or any of its Subsidiaries or limit in any way the right of the
Company or any Subsidiary at any time to terminate or alter the terms of that
employment. Nothing in the Plan or in any Award shall confer upon any
Director or Advisor any right to continued service as a Director or Advisor of
the Company or any of its Subsidiaries or limit in any way the right of the
Company or any Subsidiary at any time to terminate or alter the terms of that
service.

1.16 RIGHTS OF AWARDEES UPON TERMINATION OF EMPLOYMENT OR SERVICE.
The provisions in this Section 1.16 shall be subject to the provisions of
Section 5.1 and the provisions of any Restricted Stock Agreement. In the
event an Awardee ceases to be an Employee, Director, or Advisor for any reason
other than death, Retirement, Permanent Disability, or Cause or pursuant to a
right of termination under an Employee's employment agreement with the
Company, (i) the Committee shall have the ability to accelerate the vesting of
the Awardee's Awards, in its sole discretion, and (ii) any Option or SAR held
by such Awardee shall be exercisable (to the extent exercisable on the date of
termination of employment or rendition of services, or, if the vesting of such
Option or SAR has been accelerated, to the extent exercisable following such
A-5
acceleration) at any time within three months after the date of termination of
employment or rendition of services, unless by its terms the Option or SAR
expires earlier or unless, with respect to a Nonqualified Stock Option or an
SAR, the Committee agrees, in its sole discretion, to extend its term further;
provided that the term of any such Option or SAR shall not be extended beyond
its initial term. In the event an Awardee ceases to serve as an Employee,
Director, or Advisor due to death, Permanent Disability, Retirement, or Cause
or pursuant to a right of termination under an Employee's employment agreement
with the Company, (i) the Committee shall have the ability to accelerate the
vesting of the Awardee's Awards, in its sole discretion, and (ii) the
Awardee's Options and SARs may be exercised as follows:

(a) DEATH. Except as otherwise limited by the Committee at the
time of the grant of an Option or SAR, if an Awardee dies while serving as an
Employee, Director, or Advisor or within three months after ceasing to be an
Employee, Director, or Advisor, his Options and SARs shall become fully (100
percent) vested on the date of his death and shall expire twelve months
thereafter, unless by their terms they expire sooner or unless, with respect
to a Nonqualified Stock Option or SAR, the Committee agrees, in its sole
discretion, to extend its term further; provided that the term of any such
Nonqualified Stock Option or SAR shall not be extended beyond its initial
term. During such period, the Option or SAR may be fully exercised, to the
extent that it remains unexercised on the date of death, by the Awardee's
personal representative or by the distributees to whom the Awardee's rights
under the Option or SAR pass by will or by the laws of descent and
distribution.

(b) RETIREMENT. If an Awardee ceases to serve as an Employee,
Director, or Advisor as a result of Retirement, (i) the Committee shall have
the ability to accelerate the vesting of the Awardee's Awards, in its sole
discretion, and (ii) the Awardee's Options and SARs shall be exercisable (to
the extent exercisable on the effective date of such Retirement or, if the
vesting of such Options or SARs has been accelerated, to the extent
exercisable following such acceleration) only at any time within three months
after the effective date of such Retirement, unless by their terms the Options
or SARs expire earlier or unless, with respect to a Nonqualified Stock Option
or SAR, the Committee agrees, in its sole discretion, to extend its term
further; provided that the term of any such Option or SAR shall not be
extended beyond its initial term.

(c) DISABILITY. If an Optionee ceases to serve as an Employee,
Director, or Advisor as a result of Permanent Disability, the Awardee's Awards
shall become fully (100 percent) vested and shall expire twelve months
thereafter, unless by their terms they expire sooner or, unless, with respect
to a Nonqualified Stock Option or SAR, the Committee agrees, in its sole
discretion, to extend its term; provided that the term of any such Option or
SAR shall not be extended beyond its initial term.

(d) CAUSE. If an Awardee ceases to be employed by the Company
or a Subsidiary or ceases to serve as a Director or Advisor because the
Awardee's employment or service relationship with the Company or a Subsidiary
is terminated for Cause, the Awardee's Awards (other than Restricted Stock
that has already vested) shall automatically expire on the date of such
termination. If any facts that would constitute Cause for termination or
removal of an Awardee are discovered after the Awardee's employment or service
relationship with the Company has ended, any Awards then held by the Awardee
(other than Restricted Stock that has already vested) may be immediately
A-6
terminated by the Committee. Notwithstanding the foregoing, if an Awardee is
an Employee employed pursuant to a written employment agreement with the
Company or a Subsidiary, the Awardee's relationship with the Company or a
Subsidiary shall be deemed terminated for Cause for purposes of the Plan only
if the Awardee is considered under the circumstances to have been terminated
"for cause" for purposes of such written agreement or the Awardee voluntarily
ceases to be an Employee in breach of his employment agreement with the
Company or a Subsidiary.

(e) NOTICE. If an Awardee's employment agreement with the
Company or a Subsidiary is terminated by either the Company, a Subsidiary, or
the Awardee by providing a required or permitted notice of termination
thereunder, the Awards that are exercisable as of the date of termination
shall remain exercisable for a period of twelve months (three months if
Incentive Stock Options) after the date of termination and shall expire at the
end of such twelve-month period (three-month period if Incentive Stock
Options).

1.17 TRANSFERABILITY OF AWARDS. Except as may be agreed upon by the
Committee in accordance with this section, Awards (other than Restricted Stock
that has fully vested) shall not be transferable other than by will or the
laws of descent and distribution or, with respect to Nonqualified Stock
Options or SARs, pursuant to the terms of a qualified domestic relations order
as defined by the Code or Title I of ERISA, or the rules thereunder, and, with
respect to Incentive Stock Options, may be exercised during the lifetime of an
Optionee only by that Optionee or by his legally authorized representative.
The designation by an Awardee of a beneficiary shall not constitute a transfer
of the Award. The Committee may, in its discretion, provide in an Award
Agreement that Nonqualified Stock Options or SARs may be transferred to
members of the Awardee's immediate family, trusts for the benefit of such
immediate family members, and partnerships in which such immediate family
members are the only partners, provided that there is no consideration for the
transfer.

1.18 INFORMATION TO AWARDEES. The Company shall furnish to each
Awardee a copy of the annual report, proxy statements and all other reports
sent to the Company's shareholders, unless the Awardee otherwise receives same
as a shareholder of the Company. Upon written request, the Company shall
furnish to each Awardee a copy of its most recent Annual Report or Form 10-K
and each quarterly report to shareholders issued since the end of the
Company's most recent fiscal year.

ARTICLE II
ADMINISTRATION

2.1 COMMITTEE. The Plan shall be administered by a Committee of not
fewer than two members of the Board. The Committee shall be appointed by the
Board. Each member of the Committee shall be both a "Non-Employee Director"
within the meaning of Rule 16b-3 under the Exchange Act and an "outside
director" within the meaning of Section 162(m) of the Code and the regulations
issued pursuant thereto. Subject to the provisions of the Plan, the Committee
shall have the sole discretion and authority to determine from time to time
the persons to whom Awards shall be granted and the number of Plan Shares
subject to each Award, to interpret the Plan, to prescribe, amend, and rescind
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any rules and regulations necessary or appropriate for the administration of
the Plan, to determine and interpret the details and provisions of each Award
Agreement, to modify or amend any Award Agreement or waive any conditions or
restrictions applicable to any Award (or the exercise thereof), and to make
all other determinations necessary or advisable for the administration of the
Plan.

2.2 MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. A majority of the
members of the Committee shall constitute a quorum, and any action taken by a
majority present at a meeting at which a quorum is present or any action taken
without a meeting evidenced by a writing executed by all members of the
Committee shall constitute the action of the Committee. Meetings of the
Committee may take place by telephone conference call.

2.3 COMPANY ASSISTANCE. The Company shall supply full and timely
information to the Committee on all matters relating to Employees, Directors,
and Advisors, their employment, death, Retirement, Permanent Disability, or
other termination of employment or service, and such other pertinent facts as
the Committee may require. The Company shall furnish the Committee with such
clerical and other assistance as is necessary in the performance of its
duties.

2.4 EXCULPATION OF COMMITTEE. No member of the Committee shall be
personally liable for, and the Company shall indemnify all members of the
Committee and hold them harmless against, any claims resulting directly or
indirectly from any action or inaction by the Committee pursuant to the Plan,
including without limitation any determination by the Committee regarding
whether a Change in Control (within the meaning of Section 1.12) is threatened
and any failure by the Committee to consider such a determination.

ARTICLE III
INCENTIVE STOCK OPTIONS

3.1 TERMS AND CONDITIONS. The terms and conditions of Options
granted under this Article may differ from one another as the Committee shall,
in its discretion, determine, as long as all Options granted under this
Article satisfy the requirements of this Article.

3.2 DURATION OF OPTIONS. Each Option granted pursuant to this
Article and all rights thereunder shall expire on the date determined by the
Committee, but in no event shall any Option granted under this Article expire
earlier than one year or later than ten years after the date on which the
Option is granted; and in no event shall any Option granted under this Article
to an individual who, at the time the Option is granted, owns shares of stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or any Subsidiary or affiliate thereof within
the meaning of Section 422 of the Code expire later than five years after the
date on which the Option is granted. In addition, each Option shall be
subject to early termination as provided elsewhere in the Plan.

3.3 PURCHASE PRICE. The purchase price for Plan Shares acquired
pursuant to the exercise, in whole or in part, of any Option granted under
this Article shall not be less than the Fair Market Value of the Plan Shares
at the time of the grant of the Option; provided, however, in the event of the
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grant of any Option to an individual who, at the time the Option is granted,
owns shares of stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or any Subsidiary or
affiliate thereof within the meaning of Section 422 of the Code, the purchase
price for the Plan Shares subject to that Option must be at least 110 percent
of the Fair Market Value of those Plan Shares at the time the Option is
granted.

3.4 MAXIMUM AMOUNT OF OPTIONS FIRST EXERCISABLE IN ANY CALENDAR
YEAR. The aggregate Fair Market Value of Plan Shares (determined at the time
the Option is granted) with respect to which Options issued under this Article
are exercisable for the first time by any Employee during any calendar year
under all incentive stock option plans of the Company and its Subsidiaries and
affiliates shall not exceed $100,000. Any portion of an Option granted under
the Plan in excess of the foregoing limit shall be considered granted pursuant
to Article IV.

3.5 INDIVIDUAL OPTION AGREEMENTS. Each Employee receiving Options
pursuant to this Article shall be required to enter a written Option Agreement
with the Company. In such Option Agreement, the Employee shall agree to be
bound by the terms and conditions of the Plan, the Options granted pursuant
hereto, and such other matters as the Committee deems appropriate.

ARTICLE IV
NONQUALIFIED STOCK OPTIONS

4.1 OPTION TERMS AND CONDITIONS. The terms and conditions of Options
granted under this Article may differ from one another as the Committee shall,
in its discretion, determine as long as all Options granted under this Article
satisfy the requirements of this Article.

4.2 DURATION OF OPTIONS. Each Option granted pursuant to this
Article and all rights thereunder shall expire on the date determined by the
Committee, but in no event shall any Option granted under this Article expire
later than ten years after the date on which the Option is granted. In
addition, each Option shall be subject to early termination as provided
elsewhere in the Plan.

4.3 PURCHASE PRICE. The purchase price for the Plan Shares acquired
pursuant to the exercise, in whole or in part, of any Option granted under
this Article shall not be less than the Fair Market Value of the Plan Shares
at the time of the grant of the Option.

4.4 INDIVIDUAL OPTION AGREEMENTS. Each Optionee receiving Options
pursuant to this Article shall be required to enter a written Option Agreement
with the Company. In such Option Agreement, the Optionee shall agree to be
bound by the terms and conditions of the Plan, the Options granted pursuant
hereto, and such other matters as the Committee deems appropriate.

ARTICLE V
RESTRICTED STOCK

5.1 TERMS AND CONDITIONS. Each grant of Restricted Stock shall
confer upon the Awardee thereof the right to receive a specified number of
Plan Shares in accordance with the terms and conditions of a Restricted Stock
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Agreement as set forth in Section 5.2. The general terms and conditions of
the Restricted Stock grants shall be as follows:

(a) RESTRICTIONS. Any Plan Shares awarded under this Article
shall be restricted for a period of time to be determined by the Committee at
the time of the award, which period shall be not less than 3 years or more
than 10 years. The restrictions shall prohibit the sale, assignment,
transfer, pledge, or other encumbrance of the Plan Shares and will provide for
possible reversion thereof to the Company in accordance with paragraph (b)
during the period of restriction.

(b) FORFEITURE UPON TERMINATION OF EMPLOYMENT. All Restricted
Stock awarded under this Article shall be forfeited and returned to the
Company in the event the Awardee ceases to be an Employee, Director, or
Advisor of the Company or one of its subsidiaries or affiliates prior to the
expiration of the period of restriction, unless the Awardee's termination of
employment or service is due to his death, Permanent Disability, or
Retirement, or termination without Cause, or constructive termination after a
Change in Control. Whether or not an Awardee's Retirement or Permanent
Disability has occurred will be determined by the Committee in its sole
discretion.

(c) LAPSE OF RESTRICTIONS UPON DEATH OR DISABILITY. In the
event of an Awardee's death or Permanent Disability, or termination without
cause, or constructive termination after a Change in Control, the restrictions
under paragraph (a) will lapse with respect to all Restricted Stock awarded to
the Awardee under this Article prior to any such event, and the Plan Shares
involved shall cease to be Restricted Stock within the meaning of this Article
and shall no longer be subject to forfeiture to the Company pursuant to
paragraph (b).

(d) EFFECT OF RETIREMENT. In the event of an Awardee's
Retirement, the restrictions under paragraph (a) shall continue to apply as
though the Awardee were still an Employee, Director, or Advisor, unless the
Committee shortens the restriction period.

(e) CERTIFICATES. Plan Share certificates issued with respect
to awards of Restricted Stock shall be registered in the name of the Awardee
but shall be delivered by him to the Company together with a stock power
endorsed in blank. Each such certificate shall bear the following legend:

"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE,
RESTRICTIONS ON TRANSFER, AND CERTAIN OTHER TERMS AND CONDITIONS SET FORTH IN
THE GAINSCO, INC. 1998 LONG-TERM INCENTIVE PLAN AND THE RESTRICTED STOCK
AGREEMENT BETWEEN THE REGISTERED OWNER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE AND GAINSCO, INC., ENTERED PURSUANT TO SUCH PLAN."

(f) LAPSE OF RESTRICTION PERIOD. Upon the lapse of a
restriction period as determined pursuant to paragraph (a), the Company will
return the stock certificates representing the Plan Shares with respect to
which the restriction has lapsed to the Awardee or his legal representative
and pursuant to the instruction of the Awardee or his legally authorized
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representative will issue a certificate for such Plan Shares which does not
bear the legend set forth in paragraph (e).

(g) RESTRICTIONS ON CORRESPONDING SECURITIES AND ASSETS. Any
other securities or assets (other than ordinary cash dividends) that are
received by an Awardee with respect to Restricted Stock awarded to him, which
is still subject to restrictions provided for in paragraph (a), will be
subject to the same restrictions and shall be delivered by the Awardee to the
Company as provided in paragraph (e).

(h) RIGHTS IN RESTRICTED STOCK. From the time of grant of the
Restricted Stock, the Awardee shall be entitled to exercise all voting rights
attributable to the Restricted Stock, subject to forfeiture of such voting
rights and the Restricted Stock as provided in paragraph (b).

5.2 INDIVIDUAL RESTRICTED STOCK AGREEMENTS. Each Awardee of
Restricted Stock shall be required to enter a written Restricted Stock
Agreement with the Company as a precondition to receiving the award. In such
Restricted Stock Agreement, the Awardee shall agree to be bound by the terms
and conditions of the Plan, the awards made pursuant hereto, and such other
matters as the Committee deems appropriate.

ARTICLE VI
STOCK APPRECIATION RIGHTS

6.1 TERMS AND CONDITIONS. The Committee may, but shall not be
obligated to, authorize the Company, on such terms and conditions as the
Committee deems appropriate in each case, to accept the surrender by an
Optionee of the right to exercise his Option, or a portion thereof, in
consideration for the payment by the Company of an amount equal to the excess
of the Fair Market Value of the Plan Shares subject to such Option, or portion
thereof, surrendered over the purchase price of such Plan Shares under the
Option (a "Stock Appreciation Right"). Such payment, at the discretion of the
Committee, may be made in Plan Shares valued at the then Fair Market Value
thereof or in cash or partly in cash and partly in Plan Shares.

6.2 EFFECT OF EXERCISE OF STOCK APPRECIATION RIGHTS ON RELATED
OPTIONS. Upon the exercise of a Stock Appreciation Right, the number of Plan
Shares available under the Option to which it relates shall decrease by a
number equal to the number of Plan Shares for which the Stock Appreciation
Right was exercised. Upon the exercise of an Option, any related Stock
Appreciation Right shall terminate as to any number of Plan Shares subject to
the Stock Appreciation Right that exceeds the total number of Plan Shares for
which the Option remains unexercised.

6.3 TIME OF GRANT. Stock Appreciation Rights may be granted
concurrently with the Options to which they relate or at any time thereafter
prior to the exercise or expiration of the Options.

6.4 Tandem Incentive Stock Option. Whenever an Incentive Stock
Option and a Stock Appreciation Right are granted together and the exercise of
one affects the right to exercise the other, the following requirements shall
apply:
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(a) The Stock Appreciation Right will expire no later than the
expiration of the underlying Incentive Stock Option;

(b) The Stock Appreciation Right may be for no more than the
difference between the purchase price under the underlying Incentive Stock
Option and the market price of the Plan Shares subject to the underlying
Incentive Stock Option at the time the Stock Appreciation Right is exercised;

(c) The Stock Appreciation Right shall be transferable only when
the underlying Incentive Stock Option is transferable, and under the same
conditions;

(d) The Stock Appreciation Right may be exercised only when the
underlying Incentive Stock Option is eligible to be exercised; and

(e) The Stock Appreciation Right may be exercised only when the
market price of the Plan Shares subject to the underlying Incentive Stock
Option exceeds the purchase price of the Plan Shares subject to the underlying
Incentive Stock Option.

6.5 INDIVIDUAL SAR AGREEMENT. Each Awardee receiving SARs pursuant
to this Article shall be required to enter a written SAR Agreement with the
Company as a precondition to receiving the SARs. In such SAR Agreement, the
Awardee shall agree to be bound by the terms and conditions of the Plan, the
awards made pursuant hereto, and such other matters as the Committee deems
appropriate.

ARTICLE VII
TERMINATION, AMENDMENT, AND ADJUSTMENT

7.1 TERMINATION AND AMENDMENT. The Plan shall terminate on the date
that is one day prior to the tenth anniversary of the Effective Date. No
Award shall be granted under the Plan after that date of termination. Subject
to the limitations contained in this section, the Committee may at any time
amend or revise the terms of the Plan, including the form and substance of the
Award Agreements to be used in connection herewith; provided that no amendment
or revision may be made without the approval of the shareholders of the
Company if such approval is required under the Code, Rule 16b-3, or any other
applicable law or rule. No amendment, suspension, or termination of the Plan
shall, without the consent of the individual who has received an Award
hereunder, alter or impair any of that individual's rights or obligations
under any Award granted prior to that amendment, suspension, or termination.

7.2 ADJUSTMENTS. If the outstanding Common Stock is increased,
decreased, changed into, or exchanged for a different number or kind of shares
or securities through merger, consolidation, combination, exchange of shares,
other reorganization, recapitalization, reclassification, stock dividend,
stock split, or reverse stock split, an appropriate and proportionate
adjustment shall be made in the maximum number and kind of Plan Shares as to
which Awards may be granted under the Plan. A corresponding adjustment
changing the number or kind of shares allocated to unexercised Options or
A-12
SARs, outstanding Restricted Stock, or portions thereof granted prior to any
such change also shall be made. Any such adjustment in outstanding Options
shall be made without change in the aggregate purchase price applicable to the
unexercised portion of the Options but with a corresponding adjustment in the
price for each share covered by the Options. The foregoing adjustments and
the manner of application of the foregoing provisions shall be determined
solely by the Committee, and any such adjustment may provide for the
elimination of fractional share interests.

ARTICLE VIII
MISCELLANEOUS

8.1 OTHER COMPENSATION PLANS. The adoption of the Plan shall not
affect any other stock option or incentive or other compensation plans in
effect for the Company or any Subsidiary or affiliate of the Company, nor
shall the Plan preclude the Company or any Subsidiary or affiliate thereof
from establishing any other forms of incentive or other compensation plans.

8.2 PLAN BINDING ON SUCCESSORS. The Plan shall be binding upon the
successors and assigns of the Company and any Subsidiary or affiliate of the
Company that adopts the Plan.

8.3 NUMBER AND GENDER. Whenever used herein, nouns in the singular
shall include the plural where appropriate, and the masculine pronoun shall
include the feminine gender.

8.4 HEADINGS. Headings of articles and sections hereof are inserted
for convenience of reference and constitute no part of the Plan.

ARTICLE IX
DEFINITIONS

As used herein, the following terms have the meanings hereinafter set
forth unless the context clearly indicates to the contrary:

9.1 "Advisor" means any person not employed by the Company and not a
Director, rendering consulting or advisory services to the Company, who is
expected or determined by the Committee to contribute significantly to the
management, growth, or direction of some part or all of the business of the
Company. The power to determine who is and who is not an Advisor for purposes
of the Plan is reserved solely to the Committee.

9.2 The term "affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with such Person.

9.3 "Award" means the grant of an Option, Restricted Stock, or Stock
Appreciation Rights pursuant to the Plan.

9.4 "Award Agreement" means an Option Agreement, SAR Agreement, or
Restricted Stock Agreement.
A-13
9.5 "Awardee" means the recipient of an Award.

9.6 "Board" means the Board of Directors of the Company.

9.7 "Cause" means conviction of a crime involving moral turpitude or
a crime providing for a term of imprisonment in a federal or state
penitentiary; failure or refusal to follow reasonable instructions of the
Board; failure or refusal to comply with the reasonable policies, standards
and regulations of the Company, which from time to time may be established;
failure or refusal to faithfully and diligently perform the usual customary
duties of his employment or service; acting in an unprofessional, unethical,
immoral or fraudulent manner; acting in a manner which discredits or is
detrimental to the reputation, character and standing of Company or a
Subsidiary; or the commission of any other act that causes or reasonably may
be expected to cause substantial injury to the Company.

9.8The term "Change in Control" has the meaning set forth in Section
1.12(b).

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

9.10 "Committee" means the Committee appointed in accordance with
Section 2.1.

9.11 "Common Stock" means the Common Stock, par value $0.10 per
share, of the Company or, in the event that the outstanding shares of such
Common Stock are hereafter changed into or exchanged for shares of a different
stock or security of the Company or some other corporation, such other stock
or security.

9.12 "Company" means GAINSCO, INC., a Texas corporation, or one or
more of its Subsidiaries.

9.13 "Director" means a member of the Board.

9.14"Effective Date" means the date on which the Board approves the Plan.

9.15 "Employee" means an employee (within the meaning of Section
3401(c) of the Code and the regulations thereunder) of the Company or of any
Subsidiary of the Company that adopts the Plan, including Officers.

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

9.17 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

9.18 "Fair Market Value" means such value as determined by the
Committee on the basis of such factors as it deems appropriate; provided that
if the Common Stock is traded on a national securities exchange or
transactions in the Common Stock are quoted on the Nasdaq National Market
System, such value as shall be determined by the Committee on the basis of the
reported sales prices for the Common Stock on the date for which such
determination is relevant, as reported on the national securities exchange or
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the Nasdaq National Market System, as the case may be. If the Common Stock is
not listed and traded upon a recognized securities exchange or on the Nasdaq
National Market System, the Committee shall make a determination of Fair
Market Value on a reasonable basis which may include the mean between the
closing bid and asked quotations for such stock on the date for which such
determination is relevant (as reported by a recognized stock quotation
service) or, in the event that there shall be no bid or asked quotations on
the date for which such determination is relevant, then on the basis of the
mean between the closing bid and asked quotations on the date nearest
preceding the date for which such determination is relevant for which such bid
and asked quotations were available.

9.19 "Incentive Stock Option" means an Option granted pursuant to
Article III.

9.20 "Nonqualified Stock Option" means an Option granted pursuant to
Article IV.

9.21 "Officer" means an officer of the Company or any Subsidiary.

9.22 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.

9.23 "Optionee" means an Awardee to whom an Option has been granted
hereunder.

9.24 "Option Agreement" means an agreement between the Company and an
Optionee with respect to one or more Options.

9.25 "Permanent Disability" has the meaning provided for that term in
Section 22(e)(3) of the Code.

9.26 "Person" means any individual, corporation, partnership, joint
venture, trust, or unincorporated organization.

9.27 "Plan" means the GAINSCO, INC. Long-Term Incentive Plan, as set
forth herein and as amended from time to time.

9.28"Plan Shares" means shares of Common Stock issuable pursuant to the
Plan.

9.29 "Restricted Stock" means stock issued pursuant to Article V.

9.30 "Restricted Stock Agreement" means an agreement between the
Company and an Awardee with respect to Restricted Stock.

9.31 "Retirement" occurs when an Awardee terminates his employment or
service relationship with the Company or a Subsidiary on or after the date he
(a) turns 65 years old or (b) turns 55 years old and has completed ten years
of service with the Company or a Subsidiary as otherwise determined by the
Board.
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9.32 "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor rule.

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

9.34 "Stock Appreciation Right" or "SAR" means a right issued
pursuant to Article VI.

9.35 "SAR Agreement" means an agreement between the Company and an
Awardee with respect to Stock Appreciation Rights.

9.36 "Subsidiary" means a subsidiary corporation of the Company, as
defined in Section 424(f) of the Code.

9.37 "Tax Date" means the date on which the amount of tax to be
withheld is determined.

9.38 "Transaction" has the meaning set forth in Section
1.12(b)(iii).

9.39 The term "Voting Securities" has the meaning set forth in
Section 1.12(b)(i).
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P R O X Y

GAINSCO, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Joel C. Puckett, Daniel J. Coots and Sam
Rosen, and each of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as
designated below, all the shares of common stock of GAINSCO, INC. held of
record by the undersigned on May 26, 1998, at the Annaul Meeting of
Shareholders to be held on July 17, 1998, or any adjournment thereof.
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS [ ] FOR all nominees listed below (except as [ ] WITHOLD AUTHORITY to vote
marked to the contrary below, see instructions) for all nominees listed below

Glenn W. Anderson, Daniel J. Coots, John C. Goff, Robert J. McGee, Jr., Joel C. Puckett, Sam Rosen,
Harden H. Wiedemann, John H. Williams

_______________________________________________________________________________________________________

2. [ ] FOR [ ] AGAINST [ ] ABSTAIN on approval of appointment of KPMG Peat Marwick LLP as the
Company's independent auditors.
3. [ ] FOR [ ] AGAINST [ ] ABSTAIN on approval of the 1998 Long-Term Incentive Plan.
The Proxies are authorized to vote in their discretion upon such other business as may properly come
before the meeting.
</TABLE>
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
- -------------------------------------------------------------------------------
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THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR PROPOSALS 1, 2, AND 3. THIS
___
PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN.
IN THE ABSENCE OF INSTRUCTIONS, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, AND 3. ___

Dated: ________________, 1998

_________________________________
(Signature of shareholder)

_________________________________
(Signature if held jointly)

Receipt of Notice of the Annual Meeing of
Shareholders, the Proxy Statement dated April
14, 1998, and the Supplement dated June 11,
1998, to the Proxy Statement is hereby
acknowledged. Please sign exactly as name
appears on this card. When shares are held
by joint tenants, both should sign. When
signing as attorney, as executor,
administrator, trustee, or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name.
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