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


     SECTION 1.     PURPOSE.  This 1995 Unit Option Plan Loan Program for
Hallwood Energy Partners, L.P. (this "Loan Program") has been established in
connection with the adoption of the 1995 Unit Option Plan for Hallwood Energy
Partners, L.P. (the "Option Plan").  This Loan Program provides for the making
of loans by Hallwood Energy Partners, L.P. (the "Partnership"), upon the terms
and conditions hereinafter set forth, to the recipients of options to purchase
units representing limited partnership interests in the Partnership 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 Partnership 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)  "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;

               (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.

          (C)  "FULLY SECURED" shall mean that the Optionee shall have created
     in favor of the Partnership a perfected security interest in (i) the Units
     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).

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

          (E)  "LOAN DATE" shall mean, with respect to any Loan, the date on
     which such Loan is made by the Partnership.

          (F)  "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 Units acquired upon exercise of the Related Option.

          (G)  "OTHER COLLATERAL" shall mean any property of an Optionee other
     than Units acquired upon exercise of a Related Option that is pledged to
     secure any portion of a Loan.

          (H)  "PARTNERSHIP INTEREST RATE" shall mean the rate of interest
     payable by the Partnership with respect to its revolving line of credit
     with its primary lender.

          (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 Units 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 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 Partnership a perfected security
     interest in such property.

          (K)  "TAX PAYMENTS" shall mean payments to the Partnership 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 the
     National Association of Securities Dealers Automated Quotation System
     ("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 creditobligation 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 Partnership, 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
Partnership 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 Partnership Interest Rate in effect as of
                    the Loan Date; and

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

     (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 Partnership 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 Partnership'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
Partnership 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 Units having a Fair Market Value as of the date
of such repayment equal to such principal balance.

     (E)  The Partnership 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 Partnership be required to make a Loan if, as
reflected on the Partnership's latest regularly prepared books and records, the
Partnership 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 Partnership'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
Partnership 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 Partnership 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
more.  Furthermore, if the Partnership has registered on Form FR G-1, then the
Partnership 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 Partnership or other
benefits with respect to Optionee's position with the Partnership or its
Subsidiaries.  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
Partnership 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 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
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)  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.

     (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 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
Loan Program or any Required Loan Document.

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

     (f)  The Partnership 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 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.

     (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 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 Loan Program, the Partnership 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 Partnership, its
successors, and assigns, and upon the Board, the Committee and its successors.

     (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:  JANUARY 31, 1995


                                    EXHIBIT A

                         OPTIONEE LOAN APPLICATION FORM


1.   Name of Optionee:                                                .

2.   Number of Units Subject to Option:                               .
3.   Number of Units being acquired 
     pursuant to exercise of such Option:                                  .

4.   Exercise price per Unit 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:


                                    EXHIBIT B

                                 PROMISSORY NOTE


$_________                                                  _____________, 199__

     ____________________________________ ("Maker"), for value received,
promises and agrees to pay, as herein provided, to the order of Hallwood Energy
Partners, L.P., a Delaware limited partnership ("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 1995
Unit Option Plan Loan Program for Hallwood Energy Partners, L.P. as in effect on
the date hereof (the "Loan Program").

     1.  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 ___________ (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. 

     2.   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
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 __________.

     (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.

     3.  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.

     4.  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.
 
     5.  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 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.

     6.  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.

     7.  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.

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

     9.   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 ___________.




                                   (Name of Maker)




                                    EXHIBIT C

                                PLEDGE AGREEMENT


     This PLEDGE AGREEMENT (this "Agreement"), dated as of _______________,
19___, is entered into by and between ______________________________ ("Pledgor")
and Hallwood Energy Partners, L.P., a Delaware limited partnership (the
"Partnership"), in order to secure the payment of the indebtedness hereinafter
referred to of Pledgor to the Partnership.

                                 R E C I T A L S

     As a condition to the Partnership 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 Partnership 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 1.  DEFINITIONS.  Capitalized terms used herein shall have the
meaning specified herein.

     SECTION 2.  PLEDGE.  Pledgor hereby pledges, assigns, transfers and
delivers to the Partnership, 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 3.  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 Partnership in
the principal amount of $_______________ (the "Note") and (ii) the reimbursement
of all costs incurred by the Partnership to obtain, preserve and enforce this
Agreement, collect the Secured Obligations and maintain and preserve the
Collateral, including without limitation the Partnership's reasonable attorneys'
fees, disbursements and legal expenses.

     SECTION 4.  DELIVERY OF COLLATERAL.  Upon the execution hereof, Pledgor
shall deliver to the Partnership 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 Partnership.  Upon the occurrence and
during the continuance of an Event of Default, the Partnership shall have the
right, at any time in its discretion and without notice to Pledgor, to transfer
to or to register in the name of the Partnership any or all of the Collateral.

     SECTION 5.  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 6.  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
Partnership may reasonably request, in order to perfect and protect the Security
Interest granted or purported to be granted hereby or to enable the Partnership
to exercise and enforce the rights and remedies hereunder with respect to any
Collateral.

     SECTION 7.  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 Partnership shall continue in
such Collateral or any part thereof notwithstanding such sale or other
disposition, and Pledgor will deliver any proceeds thereof to the Partnership to
be held as Collateral hereunder.

     SECTION 8.  PARTNERSHIP APPOINTED ATTORNEY-IN-FACT.  Pledgor hereby
irrevocably appoints the Partnership 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 Partnership's discretion, to take any action and to execute
any instrument that the Partnership 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 9.  PARTNERSHIP 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 Partnership may itself perform, or
cause performance of, such agreement, and the expenses of the Partnership
incurred in connection therewith shall be payable by Pledgor under SECTION 12.

     SECTION 10.  REASONABLE CARE.  The Partnership shall have an obligation to
exercise reasonable care with respect to Collateral in its possession; provided,
however, that the Partnership shall be deemed to have exercised reasonable care
if the Collateral is accorded treatment substantially comparable to that which
the Partnership accords its own property or treatment substantially in
accordance with actions requested by Pledgor in writing (although the
Partnership 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 11.  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 Partnership 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 Partnership
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 Partnership 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 ____________ at that time, and the Partnership 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 Partnership'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 Partnership 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 Partnership 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 Partnership 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 Partnership 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 Partnership 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
amount in excess of the purchase price, and (c) the Partnership 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
Partnership 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 Partnership accepts the first offer received and does not offer the
Collateral to more than one offeree (other than the Partnership or an affiliate
of the Partnership), unless such sale was not commercially reasonable under the
circumstances.

     To the extent notice of sale shall be required by law, the Partnership
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
Partnership, 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 Partnership the whole or any part of the
Collateral.  The Partnership shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given.  The Partnership 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 Partnership until the sale price is paid by the purchaser
or purchasers thereof, but the Partnership 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 Partnership 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 ____________ from time to
time.

     As an alternative to exercising the power of sale herein conferred upon it,
the Partnership 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 Partnership as Collateral and all cash
proceeds received by the Partnership 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 Partnership as collateral for
the Note, and (ii) following the occurrence of an Acceleration may be held by
the Partnership as Collateral and/or then or at any time thereafter applied as
follows: (x) first, to the payment to the Partnership 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
Partnership pursuant to SECTION 12, and (y) second, to the Partnership for
application against or on account of all or any part of the Notes.

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

     SECTION 12.  EXPENSES.  The Partnership 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 Partnership 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 Partnership hereunder, or (iv) the
failure by Pledgor to perform or observe any of the provisions hereof.

     SECTION 13.  SECURITY INTEREST ABSOLUTE.  All rights of the Partnership
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 14.  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 Partnership and Pledgor, and then such waiver or consent shall be
effective only for the specific purpose for which given.

     SECTION 15.  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 Partnership 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 Partnership preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy.  All remedies hereunder are cumulative and are not exclusive of any
other remedies provided by law.

     SECTION 16.  TERMINATION.  This Agreement shall terminate upon the payment
in full of the Secured Obligations.  Upon such termination, the Partnership
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
Partnership 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
Partnership and at the expense of Pledgor.

     SECTION 17.  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 Partnership (until notice of a change thereof is given as
provided in this SECTION 17), and the address of the Partnership (until notice
of a change thereof is given as provided in this SECTION 17) shall be as
follows:





     SECTION 18.  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 Partnership and their respective successors
and assigns, and (iii) inure, together with the rights, powers and remedies of
Pledgor and the Partnership hereunder, to the benefit of Pledgor, the
Partnership and their respective successors, transferees and assigns, as the
case may be.

     SECTION 19.   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 __________.

     SECTION 20.  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 Partnership 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.

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

                              PARTNERSHIP:

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



                                   By:
                                   Name:
                                   Title:



                              PLEDGOR:




                              Print Name:


                                    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 the 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 licences
                      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;

PROVIDE 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, 
       Date                        Mortgage, Assent, Etc.)                      
       Parties












            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: