1995 UNIT OPTION PLAN
                                       FOR
                         HALLWOOD ENERGY PARTNERS, L.P.


     SECTION 1.     PURPOSE.   The  purpose of  this 1995  Unit Option  Plan for
Hallwood Energy  Partners, L.P. is to  advance the interests of  Hallwood Energy
Partners, L.P., a Delaware limited partnership (the "PARTNERSHIP"), by providing
an additional incentive to attract and retain qualified and competent directors,
employees  and  consultants for  the Partnership,  its  general partner  and the
subsidiaries of  the general partner and the Partnership, upon whose efforts and
judgment  the success  of  the Partnership  is  largely dependent,  through  the
encouragement of ownership in the Partnership by such persons.

     SECTION 2.     DEFINITIONS.  As used herein, the following terms shall have
the meaning indicated:

          (a)  "ACT" shall mean the Securities Exchange Act of 1934, as amended.

          (b)  "BOARD" shall mean the Board of Directors of the General Partner.

          (c)  "BUSINESS DAY"  shall mean (i) if  the Units trade  on a national
     securities exchange, any day that the national securities exchange on which
     the Units  trade is open or  (ii) if the Units  do not trade  on a national
     securities exchange, any day that commercial banks in the City  of New York
     are open.

          (d)  "COMMITTEE" shall mean the Compensation Committee of the Board or
     other committee,  if any,  appointed by  the Board  pursuant to  SECTION 13
     hereof.

          (e)  "CONTINUING DIRECTOR" shall mean  (i) any member of the  Board on
     the effective  date of  this  Plan and  (ii)  any person  who  subsequently
     becomes  a member of the Board if  such person's nomination for election or
     election  to the  Board is  recommended or  approved by  a majority  of the
     Continuing Directors.

          (f)  "DATE  OF GRANT" shall mean the date on which the Committee takes
     formal action  to grant an  Option to  an Eligible Person,  provided it  is
     followed, as soon as reasonably possible, by written notice to the Eligible
     Person of the grant.

          (g)  "DIRECTOR" shall mean a member of the Board.

          (h)  "ELIGIBLE PERSON(S)"  shall mean those persons  who are Directors
     or  are employees  of,  or consultants  to,  the Partnership,  the  General
     Partner or any Subsidiary.

          (i)  "FAIR MARKET VALUE"   of a  Unit on any  date of reference  shall
     mean 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  Units
     on any business day  shall be: (i) if the Units are  listed or admitted for
     trading  on any United States  national 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  Units  on such  exchange or  system, as  reported  in any  newspaper of
     general  circulation; (ii) if  Units 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 Units on such system; (iii) if neither  clause (i) nor (ii)
     is applicable, the  mean between the high bid and  low asked quotations for
     Units  as reported  by the  National Quotation  Bureau, Incorporated  if at
     least  two securities dealers have  inserted both bid  and asked quotations
     for Units on at least five of the  ten preceding days; or, (iv) in lieu  of
     the  above,  if  actual  transactions  in  the  Units  are  reported  on  a
     consolidated transaction reporting system, the last sale price of the Units
     for such day and on such system.

          (j)  "GENERAL  PARTNER"shall  mean   Hallwood  Energy  Corporation,  a
     Delaware corporation, or any successor thereof.

          (k)  "NONQUALIFIED  UNIT OPTION" shall mean  an option that  is not an
     incentive stock  option as defined  in Section 422 of  the Internal Revenue
     Code.

          (l)  "OPTION" (when  capitalized) shall mean any  option granted under
     this Plan.

          (m)  "OPTIONEE" shall mean  a person to  whom an Option is  granted or
     any successor to the rights of such Option under this Plan.

          (n)  "PARTNERSHIP"  shall  mean  Hallwood  Energy  Partners,  L.P.,  a
     Delaware limited partnership.

          (o)  "PERSON shall mean any individual, corporation, limited liability
     company, partnership, joint venture or other legal entity.

          (p)  "PLAN"  shall mean this 1995 Unit Option Plan for Hallwood Energy
     Partners, L.P.

          (q)  "SAR" shall mean a stock appreciation right as defined in Section
     9 hereof.

          (r)  "UNIT(S)" shall mean units representing limited partner interests
     in the Partnership.

          (s)  "SUBSIDIARY" shall mean (i) any  corporation of which a  majority
     of the outstanding stock  having by the terms thereof ordinary voting power
     to elect a  majority of the directors of such  corporation, irrespective of
     whether at the time stock of any other class or classes of such corporation
     shall  have or might have  voting power by  reason of the  happening of any
     contingency, is at the time, directly or indirectly, owned or controlled by
     the Partnership,  General Partner or by one or more Subsidiaries, or by the
     Partnership, the General  Partner and one or more Subsidiaries  or (ii) any
     partnership, joint venture or limited liability company of which at least a
     majority  of the  equity  ownership, whether  in  the form  of  membership,
     general, special or limited partnership interests or otherwise, is directly
     or indirectly owned or  controlled by the Partnership, the  General Partner
     or by one or more  Subsidiaries or by the Partnership, the  General Partner
     and one or more Subsidiaries.

     SECTION 3.     UNITS AND OPTIONS.    The Partnership may grant  to Eligible
Persons from time to time Options to purchase an aggregate of up to Four Hundred
Twenty-Five  Thousand (425,000)  Units.   If any  Option granted under  the Plan
shall  terminate, expire, or  be cancelled or  surrendered as to  any Units, new
Options  may  thereafter be  granted  covering such  Units.   An  Option granted
hereunder shall be a Nonqualified Unit Option.

     SECTION 4.     CONDITIONS FOR GRANT OF OPTIONS.

     (a)  Each Option shall be evidenced by an option agreement that may contain
any term deemed necessary or desirable by the Committee, provided such terms are
not inconsistent with this Plan or any applicable law.  Optionees shall be those
persons selected by the Committee  from Eligible Persons.  Any Person  who files
with the Committee, in a form satisfactory to the Committee, a written waiver of
eligibility  to receive  any Option  under this  Plan shall  not be  eligible to
receive any Option under this Plan for the duration of such waiver.

     (b)  In granting Options,  the Committee shall take  into consideration the
contribution the  Person has made or may make  to the success of the Partnership
or its  Subsidiaries and such  other factors  as the Committee  shall determine.
The  Committee  shall  also  have the  authority  to  consult  with  and receive
recommendations  from officers and other  personnel of the  General Partner, the
Partnership and  a Subsidiary with regard  to these matters.   The Committee may
from time to time  in granting Options under the Plan prescribe such other terms
and  conditions  concerning such  Options  as it  deems  appropriate, including,
without  limitation,  relating  an  Option  to  achievement  of  specific  goals
established by the Committee or  the continued employment of the Optionee  for a
specified  period of time, provided that such  terms and conditions are not more
favorable to an Optionee than those expressly permitted herein.

     (c)  The  Committee in  its sole  discretion shall  determine in  each case
whether  periods   of  military  or   government  service  shall   constitute  a
continuation of employment for the purposes of this Plan or any Option.

     SECTION 5.     EXERCISE PRICE.  The  exercise price per Unit of  any Option
shall be any price determined by the Committee.

     SECTION 6.     EXERCISE OF  OPTIONS.  An  Option shall be  deemed exercised
when  (i)  the  Partnership has  received  written notice  of  such  exercise in
accordance  with the  terms of the  Option, (ii)  full payment  of the aggregate
exercise price of  the Units as to which the Option  is exercised has been made,
and  (iii) arrangements  that  are satisfactory  to the  Committee  in its  sole
discretion  have been made for the Optionee's  payment to the Partnership of the
amount, if any,  that the Committee determines to be  necessary for the employer
of the  Optionee to  withhold in  accordance  with applicable  federal or  state
income tax withholding requirements.  Unless further limited by the Committee in
any Option, the option price  of any Units purchased  shall be paid in cash,  by
certified or cashier's check, by  money order, with Units (provided that  at the
time  of exercise  the Committee in  its sole  discretion does  not prohibit the
exercise  of  Options  through the  delivery  of already-owned  Units)  or  by a
combination of  the above;  provided, however,  that the Committee  in its  sole
discretion  may accept a personal check in full or partial payment of any Units.
If the exercise price  is paid in whole or in part with  Units, the value of the
Units surrendered shall be their Fair Market Value.  The Partnership in its sole
discretion, and  on  such  terms as  it  may determine,  may  lend money  to  an
Optionee, guarantee  a loan to an  Optionee, or otherwise assist  an Optionee to
obtain the cash  necessary to  exercise all or  a portion  of an Option  granted
hereunder  or to  pay any  tax liability  of the  Optionee attributable  to such
exercise.

     SECTION 7.     EXERCISABILITY OF OPTIONS.

     (a)    Any Option  shall become  exercisable in  such  amounts and  at such
intervals as  the Committee  shall provide  in any  Option, except  as otherwise
provided  in this  SECTION 7;  provided in  each  case that  the Option  has not
expired on the date of exercise.

     (b)  The expiration date  of an Option shall be determined by the Committee
at the Date of Grant, but in no  event shall an Option be exercisable after  the
expiration of ten (10) years from the Date of Grant.

     (c)  The Committee may in its sole discretion accelerate the date on  which
any Option may be exercised.

     (d)  Unless otherwise provided in any Option, each outstanding Option shall
become fully exercisable immediately upon any of the  following dates unless, in
each  case,  the applicable  transaction is  approved  in advance  by Continuing
Directors:

            (i)     ten  (10) days prior to  the date of  any transaction (which
          shall include a  series of  transactions occurring within  60 days  or
          occurring pursuant to a  plan), which has the result  that unitholders
          of the Partnership immediately before  such transaction would cease to
          own at least 66 % of the voting ownership interests of the Partnership
          or   of  any  entity  that  results  from  the  participation  of  the
          Partnership  in a reorganization,  consolidation, merger, liquidation,
          dissolution or any other comparable form of transaction;

           (ii)     ten  (10) days preceding the record date for the approval by
          the  unitholders of  the  Partnership  of  a plan  of  reorganization,
          consolidation,  merger, liquidation,  dissolution or  other comparable
          form of  transaction in which the Partnership does not survive or as a
          result of which the unitholders of  the Partnership immediately before
          such transaction  would cease  to  own at  least  66 % of  the  voting
          ownership interests of the Partnership; 

          (iii)     ten  (10) days preceding the record date for the approval by
          the  unitholders of  the Partnership of  a plan  for the  sale, lease,
          exchange or  other disposition  of 50%  or  more of  the property  and
          assets of the Partnership;

           (iv)     ten  (10) days preceding the record date for the approval by
          the  unitholders  of the  Partnership of  the  removal of  the General
          Partner as general partner of the Partnership;

            (v)     ten  (10) days preceding the record date for the approval by
          the   unitholders  of  the   Partnership  of  the   amendment  of  the
          Partnership's  or any  operating  partnership's  agreement of  limited
          partnership; or

           (vi)     the date any tender offer or  exchange offer is made by  any
          person, which, if successfully completed, would result in  such person
          beneficially  owning (within  the  meaning  of Rule 13d-3  promulgated
          under  the Act) either 33 %  or more of  the Partnership's outstanding
          Units  or interests  in the  Partnership  having 33 %  or more  of the
          combined  voting power  of the  Partnership's then  outstanding voting
          interests.

     (e)  Notwithstanding any provisions  hereof to the contrary,  if any Option
is accelerated under SUBSECTION 7(C) or (D), the portion of such Option that may
be exercised to acquire Units that the Optionee would not be entitled to acquire
but for such  acceleration (the "ACCELERATION UNITS"), is limited to that number
of Acceleration Units that can be acquired without causing the  Optionee to have
an "excess parachute payment"  under Section 280G of the Internal  Revenue Code,
determined by taking  into account  all of the  Optionee's "parachute  payments"
determined under Section 280G of  the Code.  If  as a result of this  SUBSECTION
7(E),  the Optionee  may not  acquire all  of the  Acceleration Units,  then the
Acceleration Units  that the Optionee may  acquire shall be the  last Units that
the Optionee  would have  been  entitled to  acquire had  this  Option not  been
accelerated.

     SECTION 8.     TERMINATION OF OPTION PERIOD.

     (a)  Unless otherwise provided in any Option, the unexercised portion of an
Option shall automatically and without notice terminate and become null and void
at the time of the earliest to occur of the following:

            (i)     the date on which  the Optionee's employment by  the General
          Partner or a  Subsidiary is  terminated for any  reason other than  by
          reason of:   (A) retirement (which,  for purposes of this  Plan, shall
          mean any termination of  employment after an Optionee has  reached the
          age  of sixty-five  (65));  (B) a  mental  or physical  disability  as
          determined by  a  medical doctor  satisfactory to  the Committee;  (C)
          death; or (D) termination resulting from any transaction described  in
          SECTION 7(D) hereof;

           (ii)     three (3)  months after  the  date on  which the  Optionee's
          employment by the  General Partner  or a Subsidiary  is terminated  by
          reason of retirement;

          (iii)     twelve (12)  months after the  date on which  the Optionee's
          employment by the  General Partner  or a Subsidiary  is terminated  by
          reason of  a mental or physical disability  as determined by a medical
          doctor satisfactory to the Committee;

           (iv)     ten (10) years after the date of grant of such Option;

            (v)     (A)  twelve (12) months after the date of termination of the
          Optionee's employment by the General Partner or a Subsidiary by reason
          of death of the Optionee; (B) three (3) months after the date on which
          the Optionee shall  die if  such death shall  occur during the  three-
          month period specified  in SECTION 8(A)(II) hereof or the twelve-month
          period specified in SECTION  8(A)(III) hereof; or (C) three  (3) years
          after the  termination  of the  employee's employment  by the  General
          Partner  or a  Subsidiary  by reason  of  a transaction  specified  in
          SECTION 7(D) hereof.

          (b)  If  provided in an Option,  the Committee in  its sole discretion
     shall have the  power to cancel, effective upon the  date determined by the
     Committee  in its sole discretion, all or any portion of any Option that is
     then exercisable (whether or not accelerated by the Committee) upon payment
     to the  Optionee of cash in an  amount that, in the  absolute discretion of
     the Committee, is determined to be equal to the excess of (i) the aggregate
     Fair Market Value of the Units subject to such Option on the effective date
     of the cancellation over (ii) the aggregate exercise price of such Option.

     9.   STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS.

     (a)  The Board shall have  authority to grant an SAR or  a Limited SAR with
respect to all  or some of the Units  covered by any Option  ("RELATED OPTION").
An SAR  or Limited  SAR may be  granted on or  after the  Date of Grant  of such
Related Option.

     (b)  For  the purposes of this  SECTION 9, the  following definitions shall
apply:

       (i)     The  term "OFFER" shall mean  any tender offer  or exchange offer
     for twenty-five  percent (25%)  or more  of the  outstanding  Units of  the
     Partnership,  other than  one made  by the  Partnership; provided  that the
     corporation,  person  or  other  entity making  the  Offer  acquires  Units
     pursuant to such Offer.

      (ii)     The term  "OFFER PRICE PER UNIT" shall mean the highest price per
     Unit  paid in  any Offer that  is in effect  at any time  during the period
     beginning on the 60th day prior to the date that a Limited SAR is exercised
     and ending on the  date that the Limited SAR is exercised.   Any securities
     or properties that  are a part or  all of the  consideration paid or to  be
     paid for Units in the Offer shall be valued in determining  the Offer Price
     Per Unit at  the higher of (1)  the valuation placed on such  securities or
     properties by  the person making such Offer, or (2) the valuation placed on
     such securities or properties by the Board.

     (iii)     The term "LIMITED SAR" shall mean a right granted under this Plan
     that  shall entitle  the Holder  to an  amount in cash  equal to  the Offer
     Spread in the event an Offer is made.

      (iv)     The  term "OFFER SPREAD" shall mean, with respect to each Limited
     SAR, an amount equal to the  product obtained by multiplying (1) the excess
     of (A)  the Offer Price Per Unit immediately preceding the date of exercise
     over (B) the Option Price per Unit  of the Related Option multiplied by (2)
     the  number of  Units  with respect  to  which such  Limited  SAR is  being
     exercised.

       (v)     The term  "SAR" shall mean a  right granted under  this Plan that
     shall entitle  the Holder thereof  to an amount  in cash  equal to the  SAR
     Spread.

      (vi)     The  term "SAR  SPREAD" shall mean  with respect  to each  SAR an
     amount equal to the product of (1) the excess of (A)  the Fair Market Value
     per Unit on the  date of exercise over (B) the Option Price per Unit of the
     Related Option multiplied by (2) the number of Units with  respect to which
     such SAR is being exercised.

     (c)  To exercise the SAR or Limited SAR, the Holder shall:

       (i)     Give written  notice thereof  to the Partnership,  specifying the
     SAR or Limited SAR being exercised and the number or Units with respect  to
     which such SAR or Limited SAR is being exercised, and

      (ii)     If requested by the Partnership, deliver within a reasonable time
     the agreement evidencing  the SAR or Limited  SAR being exercised,  and the
     Related Option agreement to the Secretary  of the General Partner who shall
     endorse or cause  to be endorsed  thereon a notation  of such exercise  and
     return all agreements to the Holder.

     (d)  As soon  as practicable after the  exercise of an SAR  or Limited SAR,
the  Partnership shall pay to  the Holder (i)  cash, (ii) at the  request of the
Holder and  the approval of  the Board, or in  accordance with the  terms of the
Related Option, Units, or (iii)  a combination of cash and Units,  having a Fair
Market Value equal to either the SAR Spread, or to the Offer Spread, as the case
may be;  provided, however, that  the Partnership may,  in its sole  discretion,
withhold from such  payment any amount necessary to satisfy the Partnership's or
a Subsidiary's obligation for  federal and state withholding taxes  with respect
to such exercise.

     (e)  An SAR or Limited SAR may be  exercised only if and to the extent that
the Related Option is eligible to be exercised; provided, however, a Limited SAR
may be exercised only during the period beginning on the first day following the
date of expiration of the Offer and ending on the 30th day following such date.

     (f)  Upon the  exercise of  an  SAR or  Limited SAR,  the  Units under  the
Related  Option to  that  such exercised  SAR  or Limited  SAR  relate shall  be
released, but  such released  Units shall  never again  be  Units available  for
grant.

     (g)  Upon  the exercise  or  termination of  a Related  Option, the  SAR or
Limited SAR with respect to such Related Option likewise shall terminate.

     (h)  An  SAR or Limited  SAR shall be  transferable only to  the extent, if
any, that the Related Option is transferable, and under the same conditions.

     (i)  Each SAR  or Limited SAR  shall be  on such terms  and conditions  not
inconsistent with this Plan as the Board may determine and shall be evidenced by
a written agreement.

     (j)  The Holder  shall have no rights  as a unitholder with  respect to the
related Units as a result of the grant of an SAR or Limited SAR.

     SECTION 10.    ADJUSTMENT OF UNITS.

     (a)  If at  any time while the Plan is in effect or unexercised Options are
outstanding, there shall be any increase or decrease in the number of issued and
outstanding  Units through  the declaration of  a unit  dividend or  through any
recapitalization resulting in a unit split-up, combination or exchange of Units,
then and in such event.

            (i)     appropriate adjustment  shall be made in  the maximum number
     of Units then subject  to being optioned under  the Plan, so that  the same
     proportion of the Partnership's issued and outstanding Units shall continue
     to be subject to being so optioned; and

           (ii)     appropriate  adjustment shall be made in the number of Units
     and  the  exercise  price per  Unit  thereof  then  subject to  outstanding
     Options,  so that  the  same proportion  of  the Partnership's  issued  and
     outstanding  Units shall remain subject  to purchase at  the same aggregate
     exercise price.

     (b)  The Committee may change  the terms of Options outstanding  under this
Plan, with respect to the exercise price  or the number of Units subject to  the
Options, or both,  when, in  the Committee's sole  discretion, such  adjustments
become appropriate by reason of any transaction.

     (c)  Except as  otherwise expressly  provided herein,  the issuance  by the
Partnership  of any class, or securities convertible into ownership interests of
any class,  either in connection with direct sale or upon the exercise of rights
or warrants to subscribe therefor, or  upon conversion of shares or  obligations
of  the  Partnership   convertible  into  such  ownership   interests  or  other
securities, shall not affect, and no adjustment by reason thereof  shall be made
with  respect to the number of Units reserved for issuance under the Plan or the
number of or exercise price of Units then subject to outstanding Options granted
under the Plan.

     (d)  Without  limiting the generality  of the  foregoing, the  existence of
outstanding Options  granted under the Plan  shall not affect in  any manner the
right or power of  the Partnership to make, authorize  or consummate (1) any  or
all  adjustments, recapitalizations,  reorganizations  or other  changes in  the
Partnership's capital structure or its business; (2) any merger or consolidation
of the  Partnership; (3)  any issue  by the Partnership  of debt  securities, or
partnership interests that  would rank  above the Units  subject to  outstanding
Options; (4)  the dissolution or  liquidation of the Partnership;  (5) any sale,
transfer or  assignment of  all or  any part of  the assets  or business  of the
Partnership; or  (6) any  other  partnership act  or  proceeding, whether  of  a
similar character or otherwise.

     SECTION 11.    TRANSFERABILITY OF  OPTIONS.   Each Option may  provide that
such Option may be transferrable by the Optionee in the Optionee's discretion.

     SECTION 12.    ISSUANCE OF UNITS.  No  person shall be, or have any  of the
rights or privileges of, a  unitholder of the Partnership with respect to any of
the Units subject to  an Option unless and until certificates  representing such
Units  shall have been issued  and delivered to such person.   As a condition of
any  transfer  of  the certificate  for  Units, the  Committee  may  obtain such
agreements or  undertakings, if any,  as it may  deem necessary or  advisable to
assure  compliance with any provision of the  Plan, the agreement evidencing the
Option or any law or regulation including, but not limited to, the following:

            (i)     A representation,  warranty or agreement by  the Optionee to
     the  Partnership at  the time any  Option is  exercised that  he or  she is
     acquiring the Units to be issued to him or  her for investment and not with
     a view to,  or for sale  in connection with, the  distribution of any  such
     Units; and

           (ii)     A representation, warranty  or agreement to be  bound by any
     legends that are, in the opinion of the Committee, necessary or appropriate
     to comply  with  the  provisions  of  any securities  laws  deemed  by  the
     Committee  to  be applicable  to the  issuance of  the  Units and  that are
     endorsed upon the Unit certificates.

     SECTION 13.    ADMINISTRATION OF THE PLAN.

     (a)   The Plan may  be administered  by the Compensation  Committee of  the
Board or  other committee thereof as  appointed by the Board  (herein called 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.
Except for the powers  set forth in SECTION 16, the Committee  shall have all of
the powers of  the Board with respect to the Plan.   Any member of the Committee
may  be removed at any time,  with or without cause, by  resolution of the Board
and any vacancy occurring in  the membership of the  Committee may be filled  by
appointment by the Board.

     (b)  The Committee, from time to time, may adopt rules and regulations  for
carrying  out   the  purposes  of  the   Plan.    The   determinations  and  the
interpretation and construction of  any provision of the  Plan 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.

     (d)  Subject  to the express provisions  of this Plan,  the Committee shall
have the authority, in its sole and absolute discretion (i) to adopt, amend, and
rescind  administrative and interpretive rules  and regulations relating to this
Plan or any Option; (ii) to construe the terms of this Plan or any Option; (iii)
as  provided  in  SUBSECTION 10(A),  upon  certain  events to  make  appropriate
adjustments to the exercise price  and number of Units subject to  this Plan and
Option; and  (iv) to make  all other determinations  and perform all  other acts
necessary  or advisable for administering this Plan, including the delegation of
such ministerial acts and  responsibilities as the Committee  deems appropriate.
The Committee  may correct any  defect or supply  any omission or  reconcile any
inconsistency in  this Plan or  any Option in  the manner and  to the  extent it
shall deem expedient to carry it into effect, and it shall be the sole and final
judge of such expediency.   The Committee shall have full discretion to make all
determinations on the  matters referred  to in this  SUBSECTION 13(D), and  such
determinations shall be final, binding and conclusive.

     SECTION 14.    GOVERNMENT REGULATIONS.

     This Plan,  Options and  the obligations  of  the Partnership  to sell  and
deliver Units  under any Options, shall be subject to all applicable laws, rules
and regulations, and to such approvals  by any governmental agencies or national
securities exchanges as may be required.

     SECTION 15.    MISCELLANEOUS.

     (a)  The grant  of an Option shall be in addition to any other compensation
paid to the Optionee or other employee benefit plans of the General Partner or a
Subsidiary  or other  benefits  with respect  to  Optionee's position  with  the
General Partner or a Subsidiary.   The grant of an Option shall  not confer upon
the Optionee  the right to  continue in the  Optionee's employment position,  or
interfere in any way with the rights of the Optionee's employer to terminate his
or her 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 Plan  or any  Option, 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
Partnership  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 Partnership,  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)  Any  issuance or  transfer of Units  to an  Optionee, or  to his legal
representative,  heir, legatee, distributee or assignee,  in accordance with the
provisions of  this Plan or the applicable Option, shall, to the extent thereof,
be in  full satisfaction  of all  claims of such  persons under  the Plan.   The
Committee  may  require  any  Optionee,  legal  representative,  heir,  legatee,
distributee or  assignee as a condition precedent to such payment or issuance or
transfer of Units, to execute a release and receipt for such payment or issuance
or transfer of Units in such form as it shall determine.

     (d)  Neither the Committee nor  the Partnership guarantees Units  from loss
or depreciation.

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

     (f)  Records  of the Partnership shall be conclusive for all purposes under
this Plan or any Option, unless determined by the Committee to be incorrect.

     (g)  The Partnership shall, upon request or as may be specifically required
under this  Plan or any  Option, 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 Plan or any Option.

     (h)  The  Partnership 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.

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

     (j)  Whenever any notice  is required  or permitted under  this Plan,  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  this Plan  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 SUBSECTION  15(J) or,  if by courier,
seventy-two  (72) hours  after  it  is  sent, addressed  as  described  in  this
SUBSECTION  15(J).  The Partnership 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  Plan, the address of the Partnership  is 4582 South Ulster Street Parkway,
Suite  1700, Denver,  Colorado 80237  and  the address  of the  Optionee is  the
Optionee's address in the records of the Optionee's employer.

     (k)  Any person entitled to notice under this Plan may waive such notice.

     (l)  Each  Option   shall  be   binding  upon   the  Optionee,  his   legal
representatives, heirs, legatees and distributees  and upon the Partnership, its
successors, and assigns, and upon the Board, the Committee and its successors.

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

     (n)  Words  used in  the  masculine  shall  apply  to  the  feminine  where
applicable, and wherever the context of  this Plan dictates, the plural shall be
read as the singular and the singular as the plural.

     SECTION 16.    AMENDMENT AND  DISCONTINUATION OF  THE PLAN.   The Committee
may from  time to time amend  the Plan or  any Option; provided,  however, that,
except to the extent provided  in SECTION 8, no  amendment or suspension of  the
Plan or any Option  issued hereunder shall, except as specifically  permitted in
any Option, substantially impair  any Option previously granted to  any Optionee
without the consent of such Optionee.

     SECTION 17.    EFFECTIVE  DATE AND TERMINATION DATE.  The effective date of
the Plan  is January 31, 1995,  which is the  date the Board  adopted this Plan.
The Plan shall terminate on the tenth anniversary of the effective date.

     Executed to evidence the 1995 Unit Option Plan of Hallwood Energy Partners,
L.P. adopted by the Board on January 31, 1995.


                              HALLWOOD ENERGY PARTNERS, L.P.
                              By:  Hallwood Energy Corporation, 
                                   its general partner


                                   By:  /s/William L. Guzzetti
                                        --------------------------
                                   Name:     William L. Guzzetti
                                   Title:    President