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                                                                   EXHIBIT 10.22



                              CONVERTIBLE UNSECURED
                                 PROMISSORY NOTE

$1,500,000.00                                                     March 30, 2001

         FOR VALUE RECEIVED, the undersigned, HALLWOOD INVESTMENT COMPANY, a
Cayman Islands corporation ("Maker"), promises to pay to the order of HALLWOOD
INVESTMENTS LIMITED ("Payee"), a British Virgin Islands company, at HSBC
Republic Bank, for further credit to Monaco Branch, Account Number 50802, in
immediately available funds and in lawful money of the United States of America,
the principal amount of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($1,500,000.00) ("Total Principal Amount"), together with interest on such Total
Principal Amount from the date of receipt by Maker of the Total Principal Amount
at a rate per annum of Ten Percent (10.00%), simple interest. The Payee and any
person or entity to whom this Note has properly been assigned, transferred or
negotiated are sometimes referred to herein as the "holder."

         1. Maturity Date. The entire unpaid principal balance of this Note, and
all accrued and unpaid interest on the unpaid principal balance of this Note,
shall be due and payable in full in a single payment on March 30, 2006. Subject
to Section 10 below, this Note may be prepaid in whole or in part without the
consent of the Payee (a) at any time prior to the first anniversary date with no
notice, and (b) at any time after the first anniversary date hereof on thirty
(30) days' notice. However, the outstanding principal and accrued interest of
this Note may be converted at any time prior to the end of the "Conversion
Period" (as hereinafter defined).

         2. Payments and Application of Payments. All payments of the
indebtedness evidenced by this Note shall be applied to such indebtedness in
such order and manner as the holder of this Note may from time to time determine
in its sole discretion. All payments and prepayments of principal of or interest
on this Note shall be made in lawful money of the United States of America in
immediately available funds, at the address of Payee indicated above, or such
other place as the holder of this Note shall designate in writing to Maker. Any
portion of the principal of this Note that is repaid or prepaid may not be
reborrowed. If any payment of principal of or interest on this Note shall become
due on a day which is not a Business Day (as hereinafter defined) such payment
shall be made on the next succeeding Business Day and any such extension of time
shall be included in computing interest in connection with such payment. As used
herein, the term "Business Day" shall mean any day except a Saturday, Sunday or
other date on which national banks in Dallas, Texas are authorized by law to
close. The books and records of the holder shall be prima facia evidence of all
outstanding principal of and accrued and unpaid interest on this Note.

         3. Commercial Loan. Maker agrees that no proceeds of this Note shall be
used for personal, family or household purposes, and that all proceeds hereunder
shall be used solely for general corporate purposes.



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         4. Representations by Maker. In connection with this Note, Maker hereby
represents and warrants to Payee as follows:

         (a) The execution, delivery, and performance of this Note by Maker have
been duly authorized by all necessary corporate action by Maker;

         b. This Note constitutes the legal, valid and binding obligation of
Maker, enforceable against Maker in accordance with its terms, except as limited
by bankruptcy, insolvency or similar laws of general application relating to the
enforcement of creditors' rights and except to the extent specific remedies may
generally be limited by equitable principles;

         c. The execution, delivery and performance of this Note by Maker, and
the consummation of the transactions contemplated hereby, do not (i) conflict
with, result in a violation of, or constitute a default under (A) any provision
of Maker's organizational documents, or any agreement or other instrument
binding upon Maker, or (B) any law, governmental regulation, court decree or
order applicable to Maker, or (ii) require the consent, approval or
authorization of any third party;

         d. Maker has entered into that certain Capital Contribution Agreement
("Contribution Agreement") of even date herewith between Maker and The Hallwood
Group Incorporated ("Hallwood Group"), a Delaware corporation and corporate
parent of Maker, a copy of which has been presented to Payee, providing for
Maker's right to acquire sufficient shares of the $.10 par value common stock
(the "Hallwood Stock") of Hallwood Group to enable Maker to satisfy its
obligations under Section 6 hereof; and

         e. The Contribution Agreement has been duly authorized, executed and
delivered by all parties thereto and constitutes the legal, valid and binding
obligation of Maker and Hallwood Group, enforceable against such parties in
accordance with its terms, except as limited by bankruptcy, insolvency or
similar laws of general application relating to the enforcement of creditors'
rights and except to the extent specific remedies may generally be limited by
equitable principles.

         5. Covenants by Maker. Until this Note is fully paid and satisfied,
Maker will furnish to the holder such information respecting the business,
properties, condition or operations, financial or otherwise, of Maker as Payee
may from time to time reasonably request.

         6. Convertibility. The amounts of principal and interest due under this
Note shall be convertible into shares of Hallwood Stock as provided herein.


         (a) At any time after the date that is one (1) year from date hereof
and prior to the payment of all amounts of principal and interest due under this
Note (the "Conversion Period"), the holder may elect to convert all or a portion
of the outstanding principal and accrued interest hereunder into the number of
fully paid and nonassessable shares of Hallwood Stock which results from
dividing the "Conversion Amount" by the "Conversion Price." As used herein, (i)
"Conversion



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Amount" means the aggregate amount of outstanding principal and accrued interest
hereunder which is designated by Payee for conversion; and (ii) "Conversion
Price" means $6.12; provided, however, if after the date hereof, the outstanding
shares of Hallwood Stock should be subdivided, combined or consolidated, by
stock split, stock dividend, combination or like event, into a greater or lesser
number of shares, the Conversion Price in effect immediately prior to such event
shall, concurrently with the effectiveness thereof, be proportionately adjusted.

         (b) In order to exercise the conversion right granted herein, the
holder must notify Maker in writing of its election to convert the Conversion
Amount prior to the expiration of the Conversion Period. Such notice (a
"Conversion Notice") shall be in the form of ANNEX A attached hereto and
delivered in accordance with the terms of Section 15 below. If the holder has
properly exercised its conversion right, then the conversion shall be deemed to
be effective immediately upon delivery of the Conversion Notice, and,
thereafter, the holder shall have the right only to receive certificates
evidencing the number of shares of Hallwood Stock to which the holder is
entitled and the cash payment for any fractional shares. Maker shall deliver to
the holder at a closing (a "Closing") to be held in the offices or Maker (or
such other place as Maker and the holder agree) one or more stock certificates
evidencing the number of fully paid and nonassessable shares of Hallwood Stock
to which the holder is entitled as determined in accordance with this Note. The
date of the Closing shall be twenty (20) days after the delivery of the
Conversion Notice to Maker, or if the twentieth (20th) day is not a Business
Day, on the next Business Day. Such stock certificates shall be duly endorsed in
favor of the holder or accompanied by duly executed and valid stock powers
enabling the holder to have such shares registered in the holder's name in the
stock transfer records of Hallwood Group.

         (c) Against receipt of such share certificates, the holder shall
deliver this Note to Maker for cancellation or reissuance in a reduced principal
amount, as appropriate. If the Note has matured, whether by acceleration or
otherwise, and the Conversion Amount represents less than all of the outstanding
principal and accrued interest with respect to this Note, Maker shall also pay
any amounts thereof remaining to the holder in cash or other current funds
acceptable to the holder. If the Note has not matured and the Conversion Amount
represents less than all of the outstanding principal and accrued interest with
respect to this Note, Maker shall also issue to the holder a new promissory note
in the same form and tenor as this Note in a principal amount equal to the
amount of outstanding principal not being converted into shares of Hallwood
Stock. Any accrued interest not then being converted shall remain outstanding
and no interest shall accrue thereon. Maker shall not be obligated to issue any
fractional shares of Hallwood Stock to the holder under this Note. Any such
Conversion Amount which would otherwise represent a fractional share of Hallwood
Stock shall be paid to the holder in cash or other current funds acceptable to
the holder.

         (d) Each certificate evidencing shares of Hallwood Stock issued
pursuant to this Note shall bear customary securities legends in a form approved
by counsel to Hallwood Group.



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         7. Events of Default. Each of the following shall constitute an "Event
of Default" under this Note:

         (a) The failure, refusal or neglect of Maker to pay when due any part
of the principal of, or interest on, this Note after such payment has become due
and payable; or

         (b) Any representation contained herein made by Maker is false or
misleading in any material respect; or

         (c) Maker fails to perform any covenant or agreement contained herein
within fifteen (15) after having received written notice of such failure from
Payee; or

         (d) If either of Maker or "Guarantor" (as hereinafter defined) (i)
becomes insolvent, or makes a transfer in fraud of creditors, or makes an
assignment for the benefit of creditors, or admits in writing its inability to
pay its debts as they become due; (ii) generally is not paying its debts as such
debts become due; (iii) has a receiver or custodian appointed for, or a receiver
or custodian takes possession of, all or substantially all of its assets, either
in a proceeding brought by it or in a proceeding brought against it, and such
appointment is not discharged or such possession is not terminated within thirty
(30) days after the effective date thereof, or if it consents or acquiesces in
such appointment or possession; (iv) files a petition for relief under the
United States Bankruptcy Code or any other present or future federal or state
insolvency, bankruptcy or similar laws (all of the foregoing hereinafter
collectively called "Applicable Bankruptcy Law") or an involuntary petition for
relief is filed against it under any Applicable Bankruptcy Law and such
involuntary petition is not dismissed within thirty (30) days after the filing
thereof, or an order for relief naming it is entered under any Applicable
Bankruptcy Law, or any composition, rearrangement, extension, reorganization or
other relief of debtors now or hereafter existing is requested or consented to
by it; (v) fails to have discharged within a period of thirty (30) days any
attachment, sequestration or similar writ levied upon any of its property; or
(vi) fails to pay within thirty (30) days any final money judgment against it.

         Nothing contained in this Note shall be construed to limit the Events
of Default enumerated hereinabove and all such Events of Default shall be
cumulative.

         8. Remedies. Maker agrees that upon the occurrence of any Event of
Default, the holder of this Note may, at its option, without further notice or
demand, (a) declare the outstanding principal balance of and accrued but unpaid
interest on this Note at once due and payable, (b) pursue any and all other
rights, remedies and recourses available to the holder hereof, including, but
not limited to, any such rights, remedies or recourses, at law or in equity, or
(c) pursue any combination of the foregoing.

         9. Guaranty. The obligations of Maker under this Note are guaranteed by
Hallwood Group pursuant to that certain Guaranty Agreement of even date
herewith. Hallwood Group is sometimes referred to herein as the "Guarantor" in
its capacity as such.



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         10. Compliance with Credit Agreement. Maker and Payee acknowledge that
Hallwood Group is a party to that certain Credit Agreement (the "Credit
Agreement"), dated December 21, 1999, by and among HWG LLP, Hallwood Group,
First Bank Texas, N.A. and certain other lenders. Maker and Payee intend that
each such party comply with all covenants and undertakings contained in the
Credit Agreement which may be applicable to them and specifically agree that no
holder of this Note shall be paid any cash payment by Maker or Guarantor in
violation of the terms of the Credit Agreement. This Section 10 shall not
prohibit any holder from receiving Hallwood Stock upon any conversion of
outstanding principal and accrued interest as contemplated by Section 6 of this
Note.

         11. No Waiver. The failure to exercise the option to accelerate the
maturity of this Note or any other right, remedy or recourse available to the
holder hereof upon the occurrence of an Event of Default hereunder shall not
constitute a waiver of the right of the holder of this Note to exercise the same
at that time or at any subsequent time with respect to such uncured Event of
Default or any other Event of Default. The rights, remedies and recourses of the
holder hereof, as provided in this Note, shall be cumulative and concurrent and
may be pursued separately, successively or together as often as occasion
therefor shall arise, at the sole discretion of the holder hereof. The
acceptance by the holder hereof of any payment under this Note which is less
than the payment in full of all amounts due and payable at the time of such
payment shall not (a) constitute a waiver of or impair, reduce, release or
extinguish any right, remedy or recourse of the holder hereof, or nullify any
prior exercise of any such right, remedy or recourse, or (b) impair, reduce,
release or extinguish the obligations of any party liable under this Note as
originally provided herein.


         12. Compliance with Applicable Usury Laws. This Note is intended to be
performed in accordance with, and only to the extent permitted by, all
applicable usury laws. If any provision hereof or the application thereof to any
person or circumstance shall, for any reason and to any extent, be invalid or
unenforceable, neither the application of such provision to any other person or
circumstance nor the remainder of the instrument in which such provision is
contained shall be affected thereby and shall be enforced to the greatest extent
permitted by law. It is expressly stipulated and agreed to be the intent of the
holder hereof to at all times comply with the usury and other applicable laws
now or hereafter governing the interest payable on the indebtedness evidenced by
this Note. If the applicable law is ever revised, repealed or judicially
interpreted so as to render usurious any amount called for under this Note, or
contracted for, charged, taken, reserved or received with respect to the
indebtedness evidenced by this Note, or if the holder's exercise of the option
to accelerate the maturity of this Note, or if any prepayment by Maker results
in Maker having paid any interest in excess of that permitted by law, then it is
the express intent of Maker and Payee that all excess amounts theretofore
collected by the holder be credited on the principal balance of this Note (or,
if this Note has been paid in full, refunded to Maker), and the provisions of
this Note immediately be deemed reformed and the amounts thereafter collectable
hereunder reduced, without the necessity of the execution of any new document,
so as to comply with the then applicable law, but so as to permit the recovery
of the fullest amount otherwise called for hereunder or thereunder. All sums
paid, or agreed to be paid, by Maker for the use, forbearance, detention,
taking, charging, receiving or reserving of the indebtedness of Maker to the
holder under this Note shall, to the



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maximum extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment in full
so that the rate or amount of interest on account of such indebtedness does not
exceed the usury ceiling from time to time in effect and applicable to such
indebtedness for so long as such indebtedness is outstanding. It is not the
intention of Payee to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration.

         13. Attorney's Fees. If this Note is placed in the hands of an attorney
for collection, or is collected in whole or in part by suit or through probate,
bankruptcy or other legal proceedings of any kind, Maker agrees to pay, in
addition to all other sums payable hereunder, all costs and expenses of
collection, including but not limited to reasonable attorneys' fees. Maker
hereby agrees to pay on demand all reasonable fees and expenses of counsel to
the holder incurred by the holder in connection with the preparation,
negotiation and execution of this Note and all related documents.

         14. Waiver of Notice, Etc. Maker and any and all endorsers and
guarantors of this Note severally waive presentment for payment, notice of
nonpayment, protest, demand, notice of protest and dishonor, diligence in
enforcement and indulgences of every kind and without further notice hereby
agree to renewals, extensions, exchanges or releases of collateral, taking of
additional collateral, indulgences or partial payments, either before or after
maturity.

         15. Notices. All notices given hereunder shall be in writing and shall
be deemed delivered upon (a) actual receipt if personally delivered or sent by
courier service or (b) confirmed receipt of a telecopy to the address or
telecopy number, respectively, of the Maker or Payee as follows:

                                    Maker:

                                    Hallwood Investment Company
                                    c/o Cater Allen Trust Company
                                    Cater Allen House
                                    Commercial Street
                                    St. Helier, Jersey JE 4 5XZ
                                    Channel Islands

                                    Payee:

                                    Hallwood Investments Limited
                                    Le Roccabella
                                    24 Princesse Grace Avenue
                                    Monte Carlo, 98000 Monaco

If either Maker or Payee should change its or his address or if this Note should
be transferred or assigned by Payee to another holder, the Maker, Payee or such
holder, as appropriate, shall notify



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the other party to this Note of such party's new address in accordance with the
requirements of this Section 15.

         16. Applicable Law. THIS NOTE HAS BEEN EXECUTED IN CONNECTION WITH THE
CONTRIBUTION AGREEMENT AND RELATED GUARANTY AGREEMENT OF HALLWOOD GROUP, A
CORPORATION WITH ITS PRINCIPAL PLACE OF BUSINESS IN DALLAS, TEXAS, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS,
EXCEPT AS SUCH LAWS ARE PREEMPTED BY APPLICABLE FEDERAL LAWS.

         This Note is executed as of the 30th of March, 2001.

                                                     MAKER:
                                                     -----

                                                     HALLWOOD INVESTMENT COMPANY


                                                     By:  /s/ MELVIN J. MELLE
                                                          ----------------------
                                                          Melvin J. Melle
                                                          Vice President



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                                     ANNEX A

                            Form of Conversion Notice

                                CONVERSION NOTICE

         This Conversion Notice is delivered by the undersigned, the legal and
beneficial holder (the "Holder") of that certain Convertible Unsecured
Promissory Note (the "Note") issued by Hallwood Investment Company ("HIC") to
Hallwood Investments Limited, dated March 30, 2001, to HIC pursuant to the terms
and provisions of the Note. All capitalized terms used herein and not
specifically defined shall have the meanings given them in the Note.

         Holder hereby exercises its right to convert $______________ of
outstanding principal and $_________ of accrued interest on the Note into
______________ shares of Hallwood Stock pursuant to Section 6 of the Note. Such
number of shares of Hallwood Stock has been computed by dividing the Conversion
Amount of $_____________ [the sum of the two blanks above] by the Conversion
Price of $___________ [the Conversion Price stated in the Note or such
Conversion Price as adjusted in accordance with the Note].

Check the appropriate box

         [ ] Such Conversion Amount represents all of the outstanding principal
and accrued interest on the Note.

         [ ] Such Conversion Amount done not represent all of the outstanding
principal and accrued interest on the Note. Holder hereby directs that a new
promissory note in the principal amount of $_____________ [representing the
portion of outstanding principal not being converted into shares of Hallwood
Stock] be issued to Holder along with delivery of the appropriate number of
shares of Hallwood Stock as stated above.

         IN WITNESS WHEREOF, this Conversion Notice is executed and delivered
this ___ day of ___________, 200[ ].

                                                 HOLDER:

                                                 [Name of Holder]


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


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                                   EXHIBIT B

                      Form of Capital Contribution Notice


                          CAPITAL CONTRIBUTION NOTICE


         This Capital Contribution Notice is delivered by HALLWOOD INVESTMENT
COMPANY ("Sub") to THE HALLWOOD GROUP INCORPORATED ("Parent") pursuant to that
certain Contribution Agreement between Parent and Sub, dated as of March 30,
2001 (the "Contribution Agreement"). All capitalized terms used herein and not
specifically defined shall have the meanings given them in the Contribution
Agreement.


         Sub has received a written notice from the holder of the Note
exercising its option to convert $__________ of outstanding principal and
accrued interest into shares of Hallwood Stock, a copy of which notice is
attached hereto. The Delivery Date of the issuance of the shares of Hallwood
Stock to the holder of the Note is ______________, 200[ ].

         Sub hereby directs that Parent, at its option, make the necessary
capital contribution to Sub of (a) the appropriate number of duly authorized and
fully paid and nonassessable shares of Hallwood Stock, or (b) cash or other
current funds necessary to enable Sub to purchase the appropriate number of duly
authorized and fully paid and nonassessable shares of Hallwood Stock (and
deliver such shares to Sub against payment by Sub of the contributed cash or
other current funds) to enable Sub to satisfy its obligations to the holder of
the Note. Such shares of Hallwood Stock, issued in the name of Sub, are to be
delivered to Sub on or before ______________________, 200[ ] [a date two days
before the Delivery Date].

         IN WITNESS WHEREOF, this Capital Contribution Notice is executed and
delivered this ____ day of ___________, 200[ ].



                                         HALLWOOD INVESTMENT COMPANY



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