1997 STOCK OPTION PLAN LOAN PROGRAM
                                       FOR
                   HALLWOOD CONSOLIDATED RESOURCES CORPORATION


     Section 1.  Purpose.  This 1997 Stock Option Plan Loan Program for Hallwood
Consolidated Resources Corporation (this "Loan Program") has been established in
connection  with  the  adoption  of the 1997  Stock  Option  Plan  for  Hallwood
Consolidated  Resources  Corporation  (the  "Option  Plan").  This Loan  Program
provides for the making of loans by Hallwood Consolidated  Resources Corporation
(the "Corporation"), upon the terms and conditions hereinafter set forth, to the
recipients of options to purchase  shares of the common stock of the Corporation
granted  pursuant to the Option  Plan.  The  purpose of this Loan  Program is to
provide such  Optionees with funds to pay the exercise price of such options and
any  additional  amounts to be paid to the  Corporation  in order to comply with
applicable federal or state income tax withholding requirements.

     Section 2. Definitions.  As used herein, the following terms shall have the
meanings indicated:

     (a) "Accelerated  Option" shall mean any Option the exercisability of which
has been accelerated pursuant to Section 7 of the Option Plan.

     (b) "Corporation  Interest Rate" shall mean the rate of interest payable by
the  Corporation  with respect to its revolving  line of credit with its primary
lender.

     (c) "Fair Market Value" shall mean:

          (i) with respect to any Traded  Securities  on any date of  reference,
     the Closing  Price on the business  day  immediately  preceding  such date,
     unless the Committee in its sole discretion shall determine  otherwise in a
     fair and uniform manner. For this purpose,  the closing price of the Traded
     Securities on any business day shall be: (A) if the Traded  Securities  are
     listed  or  admitted  for  trading  on  any  United   States   national  or
     international securities exchange or included in the National Market System
     of the National  Association  of  Securities  Dealers  Automated  Quotation
     System ("NASDAQ"), the last reported sale price of the Traded Securities on
     such  exchange  or  system,   as  reported  in  any  newspaper  of  general
     circulation;  (B) if the Traded  Securities  are  quoted on NASDAQ,  or any
     similar  system of automated  dissemination  of  quotations  of  securities
     prices in common use,  the mean  between the closing high bid and low asked
     quotations  for such day of the Traded  Securities  on such system;  (C) if
     neither clause (A) nor (B) is applicable, the mean between the high bid and
     low asked quotations for the Traded  Securities as reported by the National
     Quotation  Bureau,  Incorporated,  if at least two securities  dealers have
     inserted  both bid and asked  quotations  for the Traded  Securities  on at
     least five of the ten  preceding  days;  or,  (D) in lieu of the above,  if
     actual transactions in the Traded Securities are reported on a consolidated
     transaction  reporting system, the last sale price of the Traded Securities
     for such day and on such system;


                                        1

          (ii) with respect to any U.S.  Government  Obligations  on any date of
     reference,  the mean  between  the bid and asked  quotations  for such U.S.
     Government Obligations for the business day immediately preceding such date
     as set forth in any newspaper of general circulation; and

          (iii)  with  respect  to any  foreign  or  domestic  real or  personal
     property other than Traded Securities or U.S. Government  Obligations,  the
     fair  market  value of such  property  as  determined  by an  appraiser  of
     recognized  standing  duly  qualified  in the  jurisdiction  in which  such
     appraiser practices.

     (d) "Fully  Secured"  shall mean that the  Optionee  shall have  created in
favor  of the  Corporation  a  perfected  security  interest  in (i) the  Shares
acquired upon exercise of the Related Option as security for such portion of the
Loan equal to the Margin Loan Amount and (ii) Other  Collateral  that has a Fair
Market Value equal to the amount of the remaining portion of the Loan (including
any portion attributable to Tax Payments).

     (e) "Loan"  shall mean any loan  extended to an  Optionee  pursuant to this
Loan Program.

     (f) "Loan  Date" shall mean,  with  respect to any Loan,  the date on which
such Loan is made by the Corporation.

     (g) "Margin Loan Amount"  shall mean,  with respect to any Loan,  an amount
equal to fifty percent (50%) of the Fair Market Value as of the Loan Date of the
Shares acquired upon exercise of the Related Option.

     (h) "Other  Collateral"  shall mean any property of an Optionee  other than
Shares  acquired upon exercise of a Related Option that is pledged to secure any
portion of a Loan.

     (i)  "Related  Option"  shall  mean the  Option  with  respect to which the
proceeds of a particular  Loan shall be used for payment of the  exercise  price
thereunder.

     (j) "Required Loan Documents"  shall mean (i) the Optionee Loan Application
Form,  in  substantially  the  form of  Exhibit  A  attached  hereto,  (ii)  the
Promissory Note, in substantially  the form of Exhibit B attached hereto,  (iii)
in the case of a Loan pursuant to Section 3(a) hereof, the Pledge Agreement,  in
substantially  the form of  Exhibit  C  attached  hereto,  covering  the  Shares
acquired upon the exercise of a Related Option and any Traded Securities or U.S.
Government Obligations included as Other Collateral,  (iv) in the case of a Loan
pursuant to Section 3(a) hereof, Federal Reserve Form FR G-3, (v) in the case of
a Loan pursuant to Section 3(a) that is secured by Other  Collateral  consisting
of real or personal  property  located in a foreign  jurisdiction,  the Standard
Form All- Monies Legal Charge,  in substantially  the form of Exhibit D attached
hereto, and (vi) in the case of a Loan pursuant to Section 3(a) that is secured

                                        2

by Other Collateral  consisting of real or personal  property located within the
United States, any other  documentation  required by the Committee,  in its sole
discretion,  to create in favor of the Corporation a perfected security interest
in such property.

     (k) "Tax  Payments"  shall mean payments to the  Corporation  in compliance
with applicable federal or state income tax withholding requirements.

     (l)  "Traded  Securities"  shall  mean any  securities  that are  listed or
admitted for trading on any United States national or  international  securities
exchange  or  included in the  National  Market  System of NASDAQ or any similar
system of automated  dissemination of quotations of securities  prices in common
use.

     (m) "U.S. Government Obligations" shall mean securities that are (i) direct
obligations  of the United  States of America  for the payment of which its full
faith and credit is pledged or (ii) the  obligations of an entity  controlled or
supervised by and acting as an agency or instrumentality of the United States of
America  the timely  payment of which is  unconditionally  guaranteed  as a full
faith and credit obligation of the United States of America.

All  capitalized  terms not  otherwise  defined  herein  shall have the meanings
assigned to them in the Option Plan.

     Section 3. Loans.

     (a)  The  Corporation,  upon  the  receipt  of each  of the  Required  Loan
Documents,  properly  completed and signed by an Optionee,  shall extend to such
Optionee a Loan in the amount  indicated  on such form  (subject to the terms of
this Section 3). The Required Loan Documents must be provided to the Corporation
prior to or concurrently with such Optionee's  written notice of exercise of the
Related  Option.  Subject to Section  3(b) below,  the Loan shall be made on the
following terms and conditions:

          (i) the amount of the Loan may not exceed the aggregate exercise price
     for the Related Option plus the amount of any Tax Payments;

          (ii) the amount of the Loan must be Fully Secured;

          (iii) the  principal  balance of the Loan shall become due and payable
     on the fifth anniversary of the Loan Date;

          (iv) the principal balance of the Loan shall accrue interest at a rate
     equal to the Corporation Interest Rate in effect as of the Loan Date; and

          (v) accrued  interest  shall be payable on the last day of each of the
     Corporation's fiscal quarters during which the Loan remains outstanding.


                                        3

     (b)  In the  event  that  (i)  any  portion  of the  Related  Option  is an
Accelerated  Option and (ii) the  Optionee  was not a member of the Board at the
time the  Related  Option  was  granted,  then  the  Loan  may be  made,  at the
discretion of the Optionee, on the following terms and conditions:

          (i) the amount of the Loan may not exceed the aggregate exercise price
     for the Related Option plus the amount of any Tax Payments;

          (ii) the Loan may be unsecured;

          (iii) the  principal  balance of the Loan shall become due and payable
     on the first anniversary of the Loan Date;

          (iv) the principal balance of the Loan shall accrue interest at a rate
     equal to the  Corporation  Interest Rate in effect as of the Loan Date plus
     two percent (2%); and

          (v) accrued  interest  shall be payable on the last day of each of the
     Corporation's fiscal quarters during which the Loan remains outstanding.

     (c) The proceeds of the Loan may be used by the Optionee solely for (i) the
payment, whether full or partial, of the aggregate exercise price of the Related
Option and (ii) the payment of any funds by the Optionee to the  Corporation  in
order to  comply  with  applicable  federal  or  state  income  tax  withholding
requirements.

     (d) The principal  balance of the Loan may be repaid by the Optionee either
in cash or by the  surrender of Shares having a Fair Market Value as of the date
of such repayment equal to such principal balance.

     (e) The  Corporation  shall not be obligated to make any Loan if the amount
of such Loan is less than $25,000.

     (f) In no event  shall the  Corporation  be  required to make a Loan if, as
reflected on the Corporation's  latest regularly prepared books and records, the
Corporation  does not have  available  sufficient  cash or the  availability  of
additional  borrowings under its revolving line of credit in a sufficient amount
to make the Loan after taking into account all of the Corporation's  commitments
for cash expenditures and budgeted receipts for at least a one year period after
the Loan Date.

     Section  4.  Compliance  with  Applicable  Laws.  It is the  intent  of the
Corporation  that this Loan Program and the Loans made hereunder comply with all
applicable laws,  including without limitation  Regulation G issued by the Board
of Governors of the Federal Reserve System.  Accordingly,  the Corporation shall
register  on  Federal  Reserve  Form FR G-1  within 30 days after the end of any
calendar  quarter  during which (i) the aggregate  amount of the Loans  extended
during such quarter equals $200,000 or more or (ii) the aggregate  amount of the
Loans outstanding at any time during that calendar quarter equals $500,000 or

                                        4

more.  Furthermore,  if the  Corporation has registered on Form FR G-1, then the
Corporation shall,  within 30 days following June 30 of every year, file Federal
Reserve Form FR G-4.

     Section 5. Administration of Loan Program; Amendments.

     (a) This Loan Program may be administered by the Compensation  Committee of
the  Board  or  other   committee   thereof  as  appointed  by  the  Board  (the
"Committee");  or, if the Board so determines, by the Board and in such case all
references to the Committee  shall be deemed to be references to the Board.  The
Committee may from time to time amend this Loan Program; provided, however, that
no such amendment shall apply to any Loans  outstanding prior to the adoption of
such amendment.

     (b) The Committee,  from time to time, may adopt rules and  regulations for
carrying  out the  purposes of this Loan  Program.  The  determinations  and the
interpretation  and  construction  of any  provision of this Loan Program by the
Committee shall be final and conclusive.

     (c) Any and all decisions or  determinations of the Committee shall be made
either (i) by a majority  vote of the members of the  Committee  at a meeting or
(ii)  without a meeting by the written  approval of a majority of the members of
the Committee.

     Section 6. Miscellaneous.

     (a) The provision of a Loan shall be in addition to any other  compensation
paid to the Optionee or other employee benefit plans of the Corporation or other
benefits with respect to Optionee's  position with the Corporation,a  Subsidiary
or an Affiliate.  The provision of a Loan shall not confer upon the Optionee the
right to continue as an employee, or interfere in any way with the rights of the
employer to terminate the Optionee's status as an employee.

     (b) Neither the members of the Board nor any member of the Committee  shall
be liable for any act,  omission,  or determination  taken or made in good faith
with respect to this Loan Program or any Loan,  and members of the Board and the
Committee  shall,  in  addition  to all  other  rights  of  indemnification  and
reimbursement,   be  entitled  to  indemnification   and  reimbursement  by  the
Corporation  in respect  of any  claim,  loss,  damage,  or  expense  (including
attorneys'  fees,  the costs of settling any suit,  provided such  settlement is
approved by independent  legal counsel selected by the Corporation,  and amounts
paid in satisfaction of a judgment,  except a judgment based on a finding of bad
faith)  arising  from such claim,  loss,  damage,  or expense to the full extent
permitted by law and under any  directors'  and  officers'  liability or similar
insurance coverage that may from time to time be in effect.

     (c)  The  provision  of a  Loan  to an  Optionee  in  accordance  with  the
provisions  of this  Loan  Program  shall,  to the  extent  thereof,  be in full
satisfaction  of all  claims  of such  Optionee  under  this Loan  Program.  The
Committee  may  require  any  Optionee,  legal  representative,  heir,  legatee,
distributee or assignee as a condition  precedent to the provision of such Loan,
to  execute  a  release  and  receipt  for  such  Loan in such  form as it shall
determine.


                                        5

     (d) All expenses incident to the administration, termination, or protection
of this Loan Program,  including, but not limited to, legal and accounting fees,
shall be paid by the Corporation; provided, however, the Corporation may recover
any and all damages,  fees,  expenses and costs arising out of any actions taken
by the Corporation to enforce its rights under this Loan Program or any Required
Loan Document.

     (e) Records of the  Corporation  shall be conclusive for all purposes under
this  Loan  Program  or any  Loan,  unless  determined  by the  Committee  to be
incorrect.

     (f) The Corporation shall, upon request or as may be specifically  required
under this Loan Program or any Required  Loan  Document,  furnish or cause to be
furnished all of the information or documentation  that is necessary or required
by the Committee to perform its duties and functions  under this Loan Program or
any Required Loan Document.

     (g) The  Corporation  assumes no  liability  to any  Optionee  or his legal
representatives,  heirs,  legatees or distributees for any act of, or failure to
act on the part of, the Committee.

     (h) If any  provision of this Loan Program or any Required Loan Document is
held to be illegal or invalid for any reason, the illegality or invalidity shall
not affect the  remaining  provisions of this Loan Program or such Required Loan
Document,  but such provision shall be fully severable,  and the Loan Program or
Required Loan Document, as applicable, shall be construed and enforced as if the
illegal or invalid  provision  had never been  included  in the Loan  Program or
Required Loan Document, as applicable.

     (i) Whenever any notice is required or permitted  under this Loan  Program,
such  notice  must be in writing  and  personally  delivered  or sent by mail or
delivery by a nationally  recognized  courier  service.  Any notice  required or
permitted to be delivered under any Required Loan Document shall be deemed to be
delivered  on the date on which  it is  personally  delivered,  or,  if  mailed,
whether  actually  received  or not,  on the  third  Business  Day  after  it is
deposited in the United States mail,  certified or registered,  postage prepaid,
addressed to the person who is to receive it at the address that such person has
previously specified by written notice delivered in accordance with this Section
6(i) or, if by courier,  seventy-two  (72) hours after it is sent,  addressed as
described in this Section 6(i). The  Corporation or the Optionee may change,  at
any time and from time to time, by written notice to the other, the address that
it or he had  previously  specified  for  receiving  notices.  Until  changed in
accordance  with this Loan  Program,  the  Corporation  and the  Optionee  shall
specify as its and his  address for  receiving  notices the address set forth in
this Loan Program or any Required Loan Document to which such notice relates.

     (j) Any person  entitled to notice  under this Loan Program or any Required
Loan Document may waive such notice.

     (k) This  Loan  Program  shall be  binding  upon the  Optionee,  his  legal
representatives,  heirs,  legatees and distributees  upon the  Corporation,  its
successors, and assigns, and upon the Board, the Committee and its successors.


                                        6

     (l) The titles and headings of Sections are  included  for  convenience  of
reference  only  and are  not to be  considered  in  construction  of this  Loan
Program's provisions.

Effective Date:  September __, 1997




                                        7


                                    EXHIBIT A

                         OPTIONEE LOAN APPLICATION FORM


1.  Name of Optionee:                                                          .

2.  Number of Shares Subject to Option:                                        .

3.  Number of Shares being acquired
    pursuant to exercise of such Option:                                       .

4. Exercise price per Share for such Option: .

5. Amount of Loan requested: .

6.  Is the above-referenced Option an
    Accelerated Option?                             Yes               No

7.  If the above-referenced Option is an Accelerated Option, then the Loan shall
    be made pursuant to which section
    of the Loan Program (designate one):             Section 3(a)
                                                     Section 3(b)

                                        OPTIONEE:



Date:______________
                                       Print Name:____________________________


                                        8

                                    EXHIBIT B

                                 PROMISSORY NOTE


$_________                                               _____________, 199__

     ____________________________________   ("Maker"),   for   value   received,
promises  and  agrees to pay,  as  herein  provided,  to the  order of  Hallwood
Consolidated  Resources Corporation,  a Delaware corporation ("Payee"),  at such
address or to such bank  account  as Payee may  direct,  in lawful  money of the
United      States      of      America,      the      principal      sum     of
____________________________________ Dollars ($_________). This note ("Note") is
issued  under the terms of that  certain 1997 Stock Option Plan Loan Program for
Hallwood Consolidated Resources Corporation as in effect on the date hereof (the
"Loan Program").

     7. Payment of Principal  and Interest.  (a) The  principal  balance of this
Note and all accrued  and unpaid  interest  thereon  shall be due and payable on
______________, _____ (the "Maturity Date"); provided, however, that if such day
is not a day on which  banks are open for  business  in the State of Colorado (a
"Business  Day"),  then  such  payment  shall  be due on the  Business  Day next
succeeding the Principal Payment Date. The principal balance of this Note may be
repaid either in cash or by the surrender of certificates  representing units of
limited partnership  interests in Payee having a fair market value equal to such
principal balance (as determined in accordance with the Loan Program).

     (b) The  principal  balance  outstanding  from time to time under this Note
(after  giving effect to all  adjustments  thereto made pursuant to the terms of
this Note)  shall bear  interest  at a rate of  __________  percent  (____%) per
annum. In no event shall the interest rate payable  hereunder exceed the maximum
rate of  nonusurious  interest  allowed from time to time by applicable law (the
"Highest   Lawful   Rate").   Maker   shall   pay  to   Payee,   commencing   on
_________________  and on the last  day of each  succeeding  three-month  period
until the  Maturity  Date,  all accrued and unpaid  interest on the  outstanding
principal  balance as of such  date,  unless  such day is not a Business  Day in
which case such payment  shall be due on the Business Day next  succeeding  such
day.

     8. Maximum  Interest  Rate.  (a) It is the  intention of Maker and Payee to
conform strictly to applicable usury laws. Accordingly,  if the interest payable
on  this  Note  would  be  usurious  under   applicable   law,  in  that  event,
notwithstanding  anything to the contrary herein,  it is agreed as follows:  (i)
the aggregate of all consideration  which constitutes  interest under applicable
law that is taken, reserved, contracted for, charged or received under this Note
shall under no  circumstances  exceed the maximum amount of interest  allowed by
applicable  law,  and  any  excess  shall  be  canceled  automatically  and,  if
theretofore  paid,  shall be credited on this Note by the holder  hereof (or, to
the  extent  that this Note  shall  have been or would  thereby be paid in full,
refunded  to  Maker);  and  (ii) in the  event  that  maturity  of this  Note is
accelerated  for any  reason,  or in the  event  of any  required  or  permitted
prepayment,  then such consideration that constitutes interest may never include
more than the maximum amount allowed by applicable law, and excess interest,  if
any,  provided for in this Note or otherwise shall be canceled  automatically as
of the date of such acceleration or prepayment and, if theretofore paid, shall

                                        9

be  credited  on this Note (or,  to the extent that this Note shall have been or
would thereby be paid in full, refunded to Maker). All sums paid or agreed to be
paid to the holder hereof for the use, forbearance or detention of sums included
in the amounts owing to such holder by Maker shall,  to the extent  permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of this Note until  payment in full so that the rate or amount of  interest
on account of indebtedness does not exceed the applicable usury ceiling, if any.
As used in this Note, the term  "applicable law" shall mean the law of the State
of Colorado.

     (b) If at  maturity  or final  payment  of this  Note the  total  amount of
interest paid or accrued  under the foregoing  provisions is less than the total
amount of interest  which would have accrued if an interest rate per annum equal
to the Interest  Rate had at all times been in effect,  then Maker agrees to pay
to Payee,  to the  extent  allowed by  applicable  law,  an amount  equal to the
difference between (a) the lesser of (i) the amount of interest which would have
accrued on this Note if the Highest  Lawful Rate had at all times been in effect
or (ii) the amount of interest  which would have accrued if an interest rate per
annum equal to the  Interest  Rate had at all times been in effect,  and (b) the
amount of interest accrued in accordance with the other provisions of this Note.

     9. Waiver.  Maker  expressly  waives  demand and  presentment  for payment,
notice of nonpayment,  protest, notice of protest, notice of dishonor, notice of
intent to accelerate  the maturity  hereof,  notice of the  acceleration  of the
maturity hereof,  bringing of suit and diligence in taking any action to collect
amounts  called for  hereunder  and in the  handling of  securities  at any time
existing in connection herewith.

     10.  Amendments.  Any term or provision of this Note and any  obligation of
Maker hereunder or with respect hereto, may be changed or modified, partially or
completely,  or  noncompliance  may be  consented to or  authorized,  by written
agreement between Maker and Payee.

     11.  Events  of  Default.  The  occurrence  and  continuance  of any of the
following  events shall be considered an "Event of Default" for purposes of this
Note:  (a) if Maker uses the proceeds of this Note for any purpose other than in
accordance  with the terms of the Loan  Program;  (b)  default  is made (and not
cured within 10 calendar  days) in the payment of principal or interest  hereon;
(c) any involuntary case or other  proceeding  shall be commenced  against Maker
that seeks liquidation, reorganization or other relief with respect to it or its
debts or other liabilities under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the  appointment  of a trustee,  receiver,
liquidator  or custodian  unless  dismissed  or stayed  within 90 days after the
institution  thereof (provided that upon  ineffectiveness of any stays, an Event
of Default shall exist);  and (d) Maker shall commence a voluntary case or other
proceeding seeking  liquidation,  reorganization or other relief with respect to
itself or its debts or other  liabilities  under any  bankruptcy,  insolvency or
other  similar law now or  hereafter in effect or seeking the  appointment  of a
trustee, receiver, liquidator,  custodian or other similar official with respect
to the Maker,  or shall consent to any such relief or to the  appointment of, or
taking  possession  by,  any  such  official  in an  involuntary  case or  other
proceeding  commenced  against  it, or shall make a general  assignment  for the
benefit of creditors or shall fail generally or shall

                                       10

admit in writing its inability to pay its debts  generally as they become due or
shall take any corporate action to authorize or effect any of the foregoing.

     12.  Remedy.  Upon the  occurrence  of any  Event of  Default,  the  entire
principal  amount of the Note then  outstanding  together with interest  accrued
thereon shall become immediately due and payable, all without written notice and
without presentment, demand, protest, notice of protest or dishonor or any other
notice of default of any kind, all of which are hereby  expressly  waived by the
Maker.

     13. Costs and  Attorneys'  Fees.  If default is made in the payment of this
Note at maturity  (regardless  of how its maturity may be brought about) and the
same is placed  in the hands of an  attorney  for  collection,  or suit is filed
hereon,   or  proceedings   are  had  in  bankruptcy,   probate,   receivership,
reorganization, arrangement, or other judicial proceedings for the establishment
or collection of any amount called for hereunder, or any amount payable or to be
payable hereunder is collected through any such proceedings, Maker agrees to pay
to the owner  and  holder of this Note  reasonable  attorneys'  fees and  costs,
including the fees and costs incurred in any appeals,  and any  collection  fees
incurred in collection of this Note.

     14.  Security.  The payment and  performance of this Note is secured by the
security  interest  described  by that certain  Pledge  Agreement by and between
Maker and Payee.

     15. Governing Law. This Note and the rights and obligations hereunder shall
be governed by and  construed  and enforced in  accordance  with the laws of the
State of Colorado.




                                           [Name of Maker]




                                       11

                                    EXHIBIT C


                                PLEDGE AGREEMENT


     This PLEDGE  AGREEMENT  (this  "Agreement"),  dated as of  _______________,
19___, is entered into by and between ______________________________ ("Pledgor")
and Hallwood  Consolidated  Resources  Corporation,  a Delaware corporation (the
"Corporation"),  in order to secure the payment of the indebtedness  hereinafter
referred to of Pledgor to the Corporation.

                                 R E C I T A L S

     As a condition to the Corporation providing a loan to Pledgor in the amount
of $_________,  which loan is evidenced by a Promissory  Note dated of even date
herewith,  Pledgor has agreed to pledge to the Corporation all of the securities
that are described on Exhibit A hereto (the "Pledged Securities").

                                A G R E E M E N T

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto agree as follows:

     Section  16.  Definitions.  Capitalized  terms used  herein  shall have the
meaning specified herein.

     Section 17. Pledge. Pledgor hereby pledges, assigns, transfers and delivers
to the  Corporation,  and  hereby  grants a  security  interest  (the  "Security
Interest") in, the following (the  "Collateral"):  the Pledged  Securities,  the
certificates  representing  such Pledged  Securities  and all  dividends,  cash,
securities,  instruments  and other property from time to time paid,  payable or
otherwise  distributed  in  respect  of or in  exchange  for  any or all of such
Pledged Securities.

     Section 18. Secured Obligations.  The Security Interest shall secure, under
the circumstances  set forth herein,  the Secured  Obligations.  For purposes of
this Agreement,  the term "Secured Obligations" shall mean the following (i) the
due and punctual  payment and  performance of the Promissory  Note,  dated as of
_______________,  made by Pledgor and payable to the order of the Corporation in
the principal amount of $_______________ (the "Note") and (ii) the reimbursement
of all costs incurred by the  Corporation  to obtain,  preserve and enforce this
Agreement,  collect  the Secured  Obligations  and  maintain  and  preserve  the
Collateral, including without limitation the Corporation's reasonable attorneys'
fees, disbursements and legal expenses.

     Section 19.  Delivery of  Collateral.  Upon the execution  hereof,  Pledgor
shall deliver to the Corporation the certificates representing or evidencing the
Collateral,  in suitable form for transfer by delivery,  or  accompanied by duly
executed  instruments  of  transfer  or  assignment  in  blank,  all in form and
substance  reasonably  satisfactory to the Corporation.  Upon the occurrence and
during the continuance of an Event of Default, the Corporation shall have the

                                       12

right, at any time in its discretion and without notice to Pledgor,  to transfer
to or to register in the name of the Corporation any or all of the Collateral.

     Section 20.  Representations and Warranties.

     Pledgor represents and warrants as follows:

          (i) The Security  Interest  constitutes  a valid and, upon delivery of
     the  certificates  evidencing  the  Pledged  Securities,   first  perfected
     security  interest in all of the Collateral for payment and  performance of
     the Secured Obligations.

          (ii) The  Collateral  is owned by Pledgor  free and clear of any lien,
     claim or encumbrance except for the Security Interest.

All representations and warranties of Pledgor contained herein shall survive the
execution,  delivery and performance of this Agreement until termination of this
Agreement under Section 16.

     Section 21.  Further  Assurances.  Pledgor agrees that at any time and from
time to time, at Pledgor's  expense,  Pledgor will promptly  execute and deliver
all further  instruments  and  documents,  and take all further  action that the
Corporation may reasonably request, in order to perfect and protect the Security
Interest  granted or purported to be granted hereby or to enable the Corporation
to exercise  and enforce the rights and remedies  hereunder  with respect to any
Collateral.

     Section 22.  Releases of  Collateral.  Pledgor  shall not sell or otherwise
dispose of the Collateral,  or any part thereof or any interest therein.  If the
Collateral,  or any part thereof,  is sold or otherwise disposed of in violation
of these provisions,  the Security Interest of the Corporation shall continue in
such  Collateral  or  any  part  thereof  notwithstanding  such  sale  or  other
disposition, and Pledgor will deliver any proceeds thereof to the Corporation to
be held as Collateral hereunder.

     Section  23.  Corporation   Appointed   Attorney-in-Fact.   Pledgor  hereby
irrevocably  appoints the Corporation as Pledgor's  attorney-in-fact,  with full
authority in the place and stead of Pledgor and in its name or  otherwise,  from
time to time in the Corporation's  discretion, to take any action and to execute
any instrument that the  Corporation may deem reasonably  necessary or advisable
to accomplish the purposes of this Agreement,  including, without limitation, to
receive,   endorse  and  collect  all   instruments   made  payable  to  Pledgor
representing any dividend,  interest payment or other distribution in respect of
the Collateral or any part thereof and to give full discharge for the same, when
and to the extent permitted by this Agreement.

     Section 24.  Corporation  May Perform.  Upon the  occurrence and during the
continuance of an Event of Default (including an Event of Default resulting from
a failure  to perform  any  agreement  contained  herein),  if Pledgor  fails to
perform any agreement  contained herein, the Corporation may itself perform,  or
cause performance of, such agreement, and the expenses of the Corporation

                                       13

incurred in connection therewith shall be payable by Pledgor under Section 12.

     Section 25.  Reasonable  Care. The Corporation  shall have an obligation to
exercise reasonable care with respect to Collateral in its possession; provided,
however,  that the Corporation shall be deemed to have exercised reasonable care
if the Collateral is accorded treatment  substantially  comparable to that which
the  Corporation  accords  its  own  property  or  treatment   substantially  in
accordance  with  actions   requested  by  Pledgor  in  writing   (although  the
Corporation  shall not be  obligated  to comply  with any such  requests  and no
failure to do so shall be deemed to be a failure to exercise reasonable care).

     Section 26. Events of Default: Remedies Upon Default. An "Event of Default"
hereunder  occurs if Pledgor fails to pay any amount when due under the Note and
the Corporation accelerates the payment of the principal and interest thereunder
such that such  Secured  Obligations  shall become  immediately  due and payable
(herein called an "Event of Default").

     If upon or after the  occurrence of any Event of Default,  the  Corporation
elects to exercise  remedies under this  Agreement  (the  occurrence of any such
event shall be referred  to as an  "Acceleration"),  then upon thirty (30) days'
advance notice to the Pledgor:

     (a) The  Corporation  may  exercise  (in  compliance  with  all  applicable
securities  laws) in respect of the Collateral,  in addition to other rights and
remedies  provided for herein or  otherwise  available to it, all the rights and
remedies of a secured party after default under the Uniform  Commercial  Code in
effect in the State of  Colorado  at that time,  and the  Corporation  may also,
without  notice  except as  specified  below,  sell the  Collateral  or any part
thereof in one or more parcels at public or private sale, at any exchange,  over
the counter or at the Corporation's offices or elsewhere, for cash, on credit or
for future  delivery,  and at such price or prices and upon such other  terms as
the Corporation may deem commercially  reasonable or otherwise in such manner as
necessary to comply with  applicable  federal and state  securities  laws.  Upon
consummation of any such sale, the  Corporation  shall have the right to assign,
transfer and deliver to the  purchaser or  purchasers  at any such sale and such
purchasers shall hold the property sold absolutely, free from any claim or right
on the part of Pledgor,  and Pledgor  hereby waives (to the extent  permitted by
law) all rights of  redemption,  stay or appraisal that it now has or may at any
time in the  future  have  under  any rule of law or  statute  now  existing  or
hereafter enacted.

     Pledgor  agrees that the  Corporation  shall not be required to register or
qualify any of the Collateral under applicable state or federal  securities laws
in  connection  with any  such  sale if the sale is  effected  in a manner  that
complies with all  applicable  federal and state  securities  laws or exemptions
therefrom.  The Corporation shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers to persons
who will  represent and agree that they are  purchasing the Collateral for their
own  account  for  investment  and not with a view to the  distribution  or sale
thereof.  In the event that any such Collateral is sold at private sale, Pledgor
agrees that if such  Collateral is sold for a price that the Corporation in good
faith believes to be reasonable under the circumstances then existing,  then (a)
the sale shall be deemed to be  commercially  reasonable  in all  respects,  (b)
Pledgor shall not be entitled to a credit against the Secured Obligations in an

                                       14

amount in excess of the purchase price, and (c) the Corporation  shall not incur
any   liability  or   responsibility   to  Pledgor  in   connection   therewith,
notwithstanding  the possibility  that a  substantially  higher price might have
been realized at a public sale.  Pledgor  hereby  waives any claims  against the
Corporation  arising by reason of the fact that the price at that the Collateral
may have been sold at such private sale was less than the price which might have
been obtained at a public sale or was less than the Secured Obligations, even if
the  Corporation  accepts  the  first  offer  received  and does not  offer  the
Collateral to more than one offeree (other than the  Corporation or an affiliate
of the Corporation),  unless such sale was not commercially reasonable under the
circumstances.

     To the extent  notice of sale shall be  required  by law,  the  Corporation
shall give  Pledgor at least ten (10) days' (or such  longer  period as shall be
specified by applicable laws) notice of the time and place of any public sale or
the time after which any private sale is to be made,  which Pledgor agrees shall
constitute  commercially  reasonable   notification.   At  any  such  sale,  the
Corporation, to the extent permitted by law, may bid (which bid may be, in whole
or in part, in the form of cancellation of Secured Obligations) for and purchase
for the account of the Corporation the whole or any part of the Collateral.  The
Corporation shall not be obligated to make any sale of Collateral  regardless of
notice of sale  having  been given.  The  Corporation  may adjourn any public or
private  sale from  time to time by  announcement  at the time and  place  fixed
therefor,  and such sale may,  without further  notice,  be made at the time and
place to which it was so adjourned. If sale of all or any part of the Collateral
is made on credit or for future delivery, the Collateral so sold may be retained
by the  Corporation  until the sale price is paid by the purchaser or purchasers
thereof,  but the  Corporation  shall not incur any  liability  in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure,  such  Collateral  may be sold again upon like
notice.  Pledgor  agrees  that  any  sale  of the  Collateral  conducted  by the
Corporation  in accordance  with the foregoing  provisions of this Section 11(a)
shall  be  deemed  to  be a  commercially  reasonable  sale  under  the  Uniform
Commercial Code as in effect in the State of Colorado from time to time.

     As an alternative to exercising the power of sale herein conferred upon it,
the  Corporation may proceed by a suit or suits at law or in equity to foreclose
the security  interest  granted under this Agreement and to sell the Collateral,
or any portion thereof, pursuant to a judgment or decree of a court or courts of
competent jurisdiction.

     (b) Any cash held by the  Corporation  as Collateral  and all cash proceeds
received by the Corporation in respect of any sale of, collection from, or other
realization  upon all or any part of the  Collateral (i) prior to the occurrence
of an Acceleration  shall be held by the Corporation as collateral for the Note,
and  (ii)  following  the  occurrence  of an  Acceleration  may be  held  by the
Corporation  as  Collateral  and/or  then or at any time  thereafter  applied as
follows:  (x) first, to the payment to the Corporation of the costs and expenses
of retaking,  holding and  preparing  for sale of the  Collateral  and any other
fees, expenses,  claims,  demands,  losses,  judgments,  damages and liabilities
arising  out of or  related  to any  loan  document  which  are  payable  to the
Corporation  pursuant  to Section  12, and (y) second,  to the  Corporation  for
application against or on account of all or any part of the Notes.


                                       15

     (c) Any surplus of such cash or cash proceeds held by the  Corporation  and
remaining  after  payment  in full of all the  Notes  shall  be  reassigned  and
redelivered as provided in Section 16 hereof.

     Section 27. Expenses. The Corporation shall be entitled to receive from any
proceeds  of the  Collateral,  the  amount of any and all  reasonable  expenses,
including  the fees and  expenses  of its  counsel and of any experts and agents
which the  Corporation may incur in connection  with (i) the  administration  of
this Agreement,  (ii) the custody or preservation of, or the sale of, collection
from, or other  realization  upon, any of the Collateral,  (iii) the exercise or
enforcement  of any of the  rights  of the  Corporation  hereunder,  or (iv) the
failure by Pledgor to perform or observe any of the provisions hereof.

     Section  28.  Security  Interest  Absolute.  All rights of the  Corporation
hereunder,  the interest,  and all  obligations of Pledgor  hereunder,  shall be
absolute and unconditional irrespective of:

          (i) any lack of validity or  enforceability of the Note or the Secured
     Obligations  or any other  agreement or instrument  relating to the Note or
     the Secured Obligations;

          (ii) any change in the time,  manner or place of payment of, or in any
     other  term of,  the Note or the  Secured  Obligations,  or any  renewal or
     extension of the Note or the Secured  Obligations or any other amendment or
     waiver of or any consent to any departure  from this Agreement or any other
     agreement or instrument;

          (iii)  any  sale,  exchange,  release  or  nonperfection  of any other
     collateral,  or any release of any  guarantor  or any person  liable in any
     manner for the  collection of the Note or the Secured  Obligations,  or any
     amendment or waiver of or consent to or departure  from any  guaranty,  for
     the Note or the Secured Obligations; or

          (iv) any other circumstance that might otherwise  constitute a defense
     available  to, or a  discharge  of,  Pledgor  in respect of the Note or the
     Secured Obligations or in respect of this Agreement.

     Section 29. Amendments and Waivers. No amendment or waiver of any provision
of this Agreement nor consent to any departure by Pledgor  herefrom shall in any
event be  effective  unless  the same  shall be in  writing  and  signed  by the
Corporation and Pledgor, and then such waiver or consent shall be effective only
for the specific purpose for which given.

     Section 30. Time is of the Essence; No Waiver:  Cumulative  Remedies.  Time
and  exactitude of each of the terms,  obligations,  covenants and conditions of
this Agreement are hereby declared to be of the essence.  No failure on the part
of the Corporation to exercise, and no delay in exercising,  any right, power or
remedy  hereunder  shall  operate as a waiver  thereof,  nor shall any single or
partial exercise of any such right, power or remedy by the Corporation  preclude
any other or further exercise thereof or the exercise of any other right,  power
or remedy.

                                       16


All  remedies  hereunder  are  cumulative  and are not  exclusive  of any  other
remedies provided by law.

     Section 31. Termination. This Agreement shall terminate upon the payment in
full of the Secured  Obligations.  Upon such termination,  the Corporation shall
reassign and redeliver (or cause to be reassigned and  redelivered)  to Pledgor,
or to such person or persons as Pledgor  shall  designate  or to whomever may be
lawfully  entitled  to  receive  such  surplus,  against  receipt,  such  of the
Collateral  (if any) as shall  not have been sold or  otherwise  applied  by the
Corporation  pursuant  to the  terms  hereof  and  shall  still  be  held  by it
hereunder,  together with  appropriate  instruments of reassignment and release.
Any  such  reassignment  shall  be  without  recourse  upon or  warranty  by the
Corporation and at the expense of Pledgor.

     Section 32. Addresses for Notices.  Any notice or communication to be given
or made hereunder shall be in writing  (including  facsimile  communication) and
may be given or made  personally  or by first class  letter,  telecopy,  courier
telex or tested telex, telegram or cable (confirmed,  in the case of a telecopy,
telex, telegram or cable, by a letter delivered personally within, or dispatched
by first class mall within,  twenty-four hours of the dispatch of such telecopy,
telex, telegram or cable) and shall be effective when actually received. For the
purposes hereof,  the address of the Pledgor shall be address  maintained in the
records  of the  Corporation  (until  notice  of a  change  thereof  is given as
provided in this Section 17), and the address of the  Corporation  (until notice
of a change  thereof  is given  as  provided  in this  Section  17)  shall be as
follows:

                Hallwood Consolidated Resources Corporation 4582
                South Ulster Street Parkway, Suite 1700
                Denver, Colorado  80237
                Attn:  Legal Department

     Section 33. Continuing Security Interest; Assignments. This Agreement shall
create a continuing  security interest in the Collateral and shall (i) remain in
full force and effect  until  termination  as  provided  in Section  16, (ii) be
binding upon  Pledgor,  the  Corporation  and their  respective  successors  and
assigns,  and (iii)  inure,  together  with the rights,  powers and  remedies of
Pledgor  and  the  Corporation  hereunder,   to  the  benefit  of  Pledgor,  the
Corporation and their  respective  successors,  transferees and assigns,  as the
case may be.

     Section 34.   Governing Law. This Agreement and the rights and obligations
of the  parties  hereto  shall be  governed  by and  construed  and  enforced in
accordance with the laws of the State of Colorado.

     Section  35.  Severability.  Wherever  possible,  each  provision  of  this
Agreement  shall  be  interpreted  in such  manner  as to be  effective.  If any
provisions of this  Agreement or any lien,  security  interest or other right of
the Corporation hereunder shall be held to be invalid,  illegal or unenforceable
under applicable law, such invalidity,  illegality or unenforceability shall not
affect any other provision herein or any lien,  security interest or other right
granted hereby.


                                       17


     IN WITNESS WHEREOF, the parties hereto have executed this Agreement,  as of
the date first above written.

                              CORPORATION:

                              Hallwood Consolidated Resources Corporation


                              By:
                              Name:
                              Title:


                              PLEDGOR:



                                                                              --
                              Print Name:



                                       18

                                    Exhibit A


                               Pledged Securities


                          Record Owner      Number of
Title of Securities       and Address       Shares or Units      Certificate No.




                                    EXHIBIT D


This  form is  applicable  to  FREEHOLDS  and  LEASEHOLDS  whether  the title is
registered or unregistered and whether given by one or more than one Mortgagor.



This Legal Charge
made the ________ day of _____________________ 19___

Between (1) (Insert full name(s) and address(es) of the Mortgagor(s))





(hereinafter called "the  Mortgagor")and  (2)___________________________________
(hereinafter called "the Bank")

Witnesses and it is agreed and declared as follows:

1. The  Mortgagor  hereby  covenants  with the Bank that the  Mortgagor  will on
demand in writing made to the  Mortgagor pay or discharge to the Bank all moneys
and  liabilities  which shall for the time being (and  whether on or at any time
after such demand) be due owing or incurred to the Bank by the Mortgagor whether
actually or contingently and whether solely or jointly with any other person and
whether as principal or surety including  interest discount  commission or other
lawful  charges and  expenses  which the Bank may in the course of its  business
charge in respect of any of the matters aforesaid or for keeping the Mortgagor's
account and so that interest shall be computed and  compounded  according to the
usual  mode of the Bank as well  after as before  any  demand  made or  judgment
obtained  hereunder and will on such demand also retire all bills or notes which
may for the  time  being  be under  discount  with  the  Bank  and to which  the
Mortgagor is a party whether as drawer  acceptor  maker or indorser  without any
deduction whatsoever.

2. The Mortgagor as Beneficial Owner hereby charges by way of legal mortgage ALL
THAT  property  referred  to in the  schedule  hereto  (hereinafter  called "the
Mortgaged Property") with the payment or discharge of all moneys and liabilities
hereby covenanted to be paid or discharged by the Mortgagor.

3. A demand for payment or any other demand or notice under this security may be
made or given by any manager or officer of the Bank or of any branch  thereof by
letter  addressed to the Mortgagor and sent by post to or left at the last known
place of business or abode of the  Mortgagor or at the option of the Bank if the
Mortgagor is a company its registered office and if sent by post shall be deemed
to have been made or given at noon on the day  following  the day the letter was
posted.

4.  During the  continuance  of this  security  no  statutory  or other power of
granting or agreeing to grant or of accepting  or agreeing to accept  surrenders
of leases or tenancies of the  Mortgaged  Property or any part thereof  shall be
capable of being  exercised by the  Mortgagor  without the  previous  consent in
writing of the Bank nor shall section 93 of the Law of Property Act 1925 dealing
with the consolidation of mortgages apply to this security.

5.  Section  103 of the said  Act  shall  not  apply  to this  security  but the
statutory  power of sale shall as between the Bank and a purchaser from the Bank
arise on and be  exercisable  at any time after the  execution of this  security
provided  that the Bank shall not exercise the said power of sale until  payment
of the moneys hereby secured has been demanded but this proviso shall not affect
a purchaser or put him upon inquiry whether such demand has been made.

6.(a)At any time  after the Bank  shall  have  demanded  payment  of any  moneys
     hereby  secured or if  requested by the  Mortgagor  the Bank may appoint by
     writing any person or persons (whether an officer of the Bank or not) to be
     receiver and manager or  receivers  and  managers  (hereinafter  called the
     "Receiver"  which  expression shall where the context so admits include the
     plural and any substituted  receiver and manager or receivers and managers)
     of all or any part of the Mortgaged Property.


(b)  The Bank may from time to time determine the  remuneration  of the Receiver
     and may remove  the  Receiver  and  appoint  another in his place.  (c) The
     Receiver  shall (so far as the law  permits) be the agent of the  Mortgagor
     (who  shall  alone  be   personally   liable  for  his  acts  defaults  and
     remuneration)  and  shall  have and be  entitled  to  exercise  all  powers
     conferred  by the  Law of  Property  Act  1925  in the  same  way as if the
     Receiver had been duly  appointed  thereunder  and in  particular by way of
     addition to but without  hereby  limiting any general  powers  hereinbefore
     referred  to  (and  without  prejudice  to any of the  Bank's  powers)  the
     Receiver  shall have power in the name of the  Mortgagor or otherwise to do
     the following things namely:-- (i) to take possession of collect and get in
     all or any part of the Mortgaged  Property and for that purpose to take any
     proceedings  as he shall think fit;  (ii) to commence  and/or  complete any
     building  operations on the  Mortgaged  Property or any part thereof and to
     apply for and obtain any planning permissions building regulation approvals
     and any other  permissions  consents  or licenses in each case as he may in
     his absolute  discretion  think fit;  (iii) to raise money from the Bank or
     others on the  security of the  Mortgaged  Property or  otherwise;  (iv) to
     provide such  facilities  and services for tenants and  generally to manage
     the  Mortgaged  Property in such  manner as he shall think fit;  (v) if the
     Mortgaged Property is leasehold to vary the terms of or surrender any lease
     and/or to take a new lease  thereof or of any part thereof on such terms as
     he shall think fit and so that any such new lease  shall ipso facto  become
     charged to the Bank on the terms hereof so far as applicable and to execute
     a formal legal charge over any such new lease in favour of the Bank in such
     form as it may  require;  (vi) to sell let or lease or  concur  in  selling
     letting or leasing and to vary the terms of terminate or accept  surrenders
     of leases or  tenancies  of the  Mortgaged  Property or any part thereof in
     such  manner and for such term with or without a premium  with such  rights
     relating to other parts thereof and  containing  such covenants on the part
     of the Mortgagor and generally on such terms and conditions  (including the
     payment of money to a lessee or tenant on a  surrender)  as in his absolute
     discretion he shall think fit; (vii) to make any  arrangement or compromise
     which the Bank or he shall think fit; (viii) to make and effect all repairs
     improvements and insurances;  (ix) to appoint managers officers contractors
     and agents for the aforesaid purposes upon such terms as to remuneration or
     otherwise as he may determine;  (x) to do all such other acts and things as
     may be  considered  to be  incidental or conducive to any of the matters or
     powers aforesaid and which he lawfully may or can do; PROVIDED NEVERTHELESS
     THAT the Receiver  shall not be authorised to exercise any of the aforesaid
     powers if and insofar and so long as the Bank shall in writing  exclude the
     same whether in or at the time of his appointment or subsequently.  (d) The
     statutory  powers of sale leasing and accepting  surrenders  exercisable by
     the Bank hereunder are hereby  extended so as to authorise the Bank whether
     in its own name or in that of the  Mortgagor  to grant a lease or leases of
     the whole or any part or parts of the  Mortgaged  Property with such rights
     relating to other parts thereof and  containing  such covenants on the part
     of the Mortgagor and generally on such terms and conditions  (including the
     payment of money to a lessee or tenant on a  surrender)  and whether or not
     at a premium as the Bank in its absolute discretion shall think fit.



(e)  In no circumstances shall the Bank be liable to account to the Mortgagor as
     a mortgagee in possession or otherwise for any moneys not actually received
     by the Bank. (f) The Mortgagor hereby irrevocably appoints the Bank and the
     Receiver  jointly and also  severally  the  Attorney  and  Attorneys of the
     Mortgagor  for the  Mortgagor  and in his name and on his behalf and as his
     act and deed or otherwise to sign seal  deliver and  otherwise  perfect any
     deed assurance agreement  instrument or act which may be required or may be
     deemed  proper  for any of the  purposes  aforesaid.  (g) All powers of the
     Receiver  hereunder may be exercised by the Bank whether as attorney of the
     Mortgagor or otherwise.

7. The Mortgagor  hereby  covenants with the Bank that the Mortgagor  during the
continuance  of this  security will keep all buildings now or for the time being
subject to this security  insured  against loss or damage by fire and such other
risks as the Bank may from time to time  require to the full  replacement  value
thereof with an insurance office or underwriters approved by the Bank in writing
from  time to time  and if so  required  by the Bank in the  joint  names of the
Mortgagor and the Bank and will duly pay all premiums and other moneys necessary
for effecting and keeping up such insurance within one week of the same becoming
due and will on demand  produce to the Bank the policies of such  insurance  and
the receipts for such  payments And will keep all  buildings now or for the time
being subject to this security in good repair And will duly and with  reasonable
expedition  complete  any  building  operations  commenced  at any  time  by the
Mortgagor on the Mortgaged  Property And at any time after payment of the moneys
hereby secured has been demanded or if default shall be made by the mortgagor in
performing any of the above  obligations  the Bank may as the case may be insure
and keep  insured  the  said  buildings  in any sum  which  the  Bank may  think
expedient  or may repair and keep in repair the said  buildings  or may complete
any such building  operations  (with power to enter upon the Mortgaged  Property
for any of those purposes  without  thereby  becoming a mortgagee in possession)
And all moneys  expended by the Bank under this provision  shall be deemed to be
properly paid by the Bank.

8. All moneys received on any insurance  whatsoever in respect of loss or damage
by fire or  otherwise  to the said  buildings  or any part of  thereof  (whether
effected or maintained by the Mortgagor in pursuance of his obligation under the
covenant  in that behalf  contained  in clause 7 hereof or  independently  of or
otherwise  than in  pursuance  of such  obligation)  shall as the Bank  requires
either be  applied  in making  good the loss or damage in  respect  of which the
moneys are  received or be paid to the Bank in or towards  payment of the moneys
for the time being hereby secured.

9. All costs charges and expenses  incurred  hereunder by the Bank and all other
moneys paid by the Bank or the Receiver in perfecting or otherwise in connection
with this security or in respect of the Mortgaged  Property  including  (without
prejudice to the generality of the  foregoing)  all moneys  expended by the Bank
under  clause  7  hereof  and  all  costs  of the  Bank or the  Receiver  of all
proceedings for enforcement of the security hereby  constituted or for obtaining
payment of the moneys hereby secured or arising out of or in connection with the
acts  authorised by clause 6 hereof (and so that any taxation of the Banks costs
charges and expenses shall be on the basis of solicitor and own client) shall be
recoverable  from the  Mortgagor  as a debt and may be debited to any account of
the Mortgagor and shall bear  interest  accordingly  and shall be charged on the
Mortgaged  Property  and the charge  hereby  conferred  shall be in addition and
without  prejudice to any and every other remedy lien or security which the Bank
may have or but for the said charge would have for the moneys hereby  secured or
any part thereof.

10. The Bank shall be at liberty  from time to time to give time for  payment of
any bills of exchange  promissory  notes or other securities which may have been
discounted for or received on account from the Mortgagor by the Bank or on which
the  Mortgagor  shall or may be liable  as drawer  acceptor  maker  indorser  or
otherwise to any parties  liable  thereon or thereto as the Bank in its absolute
discretion  shall think fit without  releasing  the  Mortgagor or affecting  the
Mortgagor's liability under these presents or the security thereby created.

11. This security shall be a continuing security to the Bank notwithstanding any
settlement  of  account  or other  matter  or thing  whatsoever  and  shall  not
prejudice or affect any  security  which may have been created by any deposit of
title deeds or other  documents  which may have been made with the Bank prior to
the execution hereof relating to the Mortgaged Property or to any other property
or any other  security  which the Bank may now or at any time  hereafter hold in
respect  of the  moneys  hereby  secured  or any of  them  or any  part  thereof
respectively.

12. The Bank shall on receiving  notice that the  Mortgagor  has  incumbered  or
disposed of the Mortgaged  Property or any part thereof be entitled to close the
Mortgagor's  then  current  account  or  accounts  and to open a new  account or
accounts with the  Mortgagor and (without  prejudice to any right of the Bank to
combine  accounts) no money paid in or carried to the Mortgagor's  credit in any
such new account shall be appropriated towards or have the effect of discharging
any part of the amount due to the Bank on any such closed  account.  If the Bank
does not open a new account or accounts immediately on receipt of such notice it
shall  nevertheless be treated as if it had done so at the time when it received
such notice and as from that time all payments made by the Mortgagor to the Bank
shall be credited  or be treated as having been  credited to such new account or
accounts  and shall not operate to reduce the amount due from the  Mortgagor  to
the Bank at the time when it received such notice.

13. At any time after payment of the moneys hereby secured has been demanded and
any part thereof  remains  unpaid the Bank may as agent of the Mortgagor  remove
and sell any  chattels on the  Mortgaged  Property  and the new proceeds of sale
thereof shall be paid to the Mortgagor on demand and the Bank shall not have the
right to retain or set off such proceeds of sale against any indebtedness of the
Mortgagor.

14.  The  Mortgagor  hereby  covenants  with the Bank to pay any sums  which may
become  payable by the Mortgagor  under the  Agricultural  Holdings Act 1986 for
compensation  costs or  otherwise to a tenant of the  Mortgaged  Property or any
part thereof failing which the Bank may pay the said sum or discharge and charge
created in  pursuance  of the said Act for securing the same and any moneys paid
by the Bank under this clause shall be deemed to be expenses  properly  incurred
by the Bank hereunder.

15. The Mortgagor hereby covenants with the Bank that:

(a)  if and so long as the title to the  Mortgaged  Property or any part thereof
     is not registered under the Land  Registration  Acts 1925 to 1971 no person
     shall during the continuance of this security be registered  under the said
     Acts as proprietor of the  Mortgaged  Property or any part thereof  without
     the  consent  in writing of the Bank.  (b) upon any such  registration  the
     Mortgagor will forthwith deliver to the Bank all Land Certificates relating
     to the Mortgaged  Property unless such  certificates are deposited with the
     Land Registry.

16. Any party  hereto  which is a company  certifies  that this  charge does not
contravene any of the provisions of its Memorandum and Articles of Association.

17. In these presents where the context so admits the expression "the Mortgagor"
shall include  persons  deriving title under the Mortgagor or entitled to redeem
this security and the expression "the Bank" shall include persons deriving title
under the Bank and any reference herein to any statute or section of any statute
shall  be  deemed  to  include  reference  to  any  statutory   modification  or
re-enactment thereof for the time being in force.

18. If there are two or more  parties  hereto of the first  part the  expression
"the Mortgagor"  shall  throughout mean and include such two or more parties and
each of them or (as the case may  require)  such two or more  parties  or any of
them and shall so far as the context  admits be  construed as well in the plural
as in the singular and all covenants charges agreements and undertakings  herein
expressed  or implied on the part of the  Mortgagor  shall be deemed to be joint
and several covenants charges agreements and undertakings by such parties And in
particular  this  security and the covenant in clause 1 hereof and the remaining
covenants charges agreements and undertakings  herein contained shall extend and
apply to any moneys owing or liabilities  incurred by any of such parties to the
Bank  whether  solely or jointly  with each  other or with any other  person and
references  to the  Mortgagor  in  relation  to the  retirement  of bills and in
clauses 3, 9, 10 and 12 shall mean and include  any one or more of such  parties
as well as such parties jointly.

In Witness  whereof the Mortgagor has executed  these presents as a deed the day
and year first above written.



                                          The Schedule above referred to

The property known as or being comprised in the document(s) particulars of which
are set out below:--

                   Description (Conveyance, Lease, Assignment,
                         Mortgage, Assent, Etc.) Parties
Date:_________________


===============================================================================


Last Certificate(s) Title No.(s)                       County/London Borough

===============================================================================
Signed sealed and delivered by the above named

-------------------------------------------------------------------------------
in the presence of
SIGNATURE OF WITNESS-----------------------------------------------------------

NAME OF WITNESS----------------------------------------------------------  SEAL

ADDRESS-------------------------------------------------------------------------

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

OCCUPATION----------------------------------------------------------------------

Signed sealed and delivered by the above named

--------------------------------------------------------------------------------
in the presence of
SIGNATURE OF WITNESS------------------------------------------------------------

NAME OF WITNESS----------------------------------------------------------  SEAL

ADDRESS-------------------------------------------------------------------------

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

OCCUPATION----------------------------------------------------------------------

EXECUTED AND DELIVERED AS A DEED BY

-----------------------------------------------------------------------DIRECTOR

----------------------------------------------------------------------SECRETARY
Company's registered number---------------------------------------------------

The address of the Bank for service (if title is registered) is: