[CONFORMED COPY]


                 AMENDMENT NO. 3 AND WAIVER TO CREDIT AGREEMENT


         AMENDMENT  AND WAIVER  dated as of April 27,  2000 to the  Amended  and
Restated Credit  Agreement dated as of June 8, 1999, as amended by Amendment No.
1 dated as of October 15, 1999 and  Amendment No. 2 dated as of January 23, 2000
(as so amended,  the "Credit  Agreement"),  among HALLWOOD  ENERGY  CORPORATION,
HALLWOOD ENERGY PARTNERS,  L.P. and HALLWOOD CONSOLIDATED  RESOURCES CORPORATION
(collectively,  the "Borrowers"),  the BANKS party thereto (the "Banks"),  FIRST
UNION  NATIONAL BANK, as Collateral  Agent and MORGAN  GUARANTY TRUST COMPANY OF
NEW YORK, as Agent (the "Agent").

                                      W I T N E S S E T H :

         WHEREAS, the parties hereto desire to amend the Credit Agreement as set
forth  herein and the Banks have agreed to grant a waiver of certain  provisions
thereof as set forth herein;

         NOW, THEREFORE, the parties hereto agree as follows:

     Section 1. Defined Terms; References. Unless otherwise specifically defined
herein,  each term used herein which is defined in the Credit  Agreement has the
meaning  assigned  to such  term in the  Credit  Agreement.  Each  reference  to
"hereof",  "hereunder",  "herein" and "hereby" and each other similar  reference
and  each  reference  to  "this  Agreement"  and each  other  similar  reference
contained in the Credit  Agreement  shall,  on and after the Effective  Date (as
defined in Section 8 below), refer to the Credit Agreement as amended hereby.

     Section 2. Resetting of the Availability  Limit and the Debt Limit. (a) The
definition  of  "Availability  Limit"  set forth in  Section  1.01 of the Credit
Agreement is amended by to read in its entirety as follows:

         "Availability  Limit" means, on any date, an amount equal to the lesser
of  (i)  the  aggregate  amount  of  the  Commitments  at  such  date  and  (ii)
$75,175,000.  The  Availability  Limit may be increased  only by an amendment in
accordance  with Section  8.05,  which the Banks may agree to or not agree to in
their sole discretion.

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         (b) Effective on and as of the  Effective  Date,  the "Debt Limit",  as
determined  in  accordance  with  subsection  (b) of Section  4.17 of the Credit
Agreement, shall be $75,175,000.

         Section 3. Waiver of the Asset Sale  Covenant.  The Banks  hereby waive
compliance by the Borrowers  with the  requirement  in subsection (b) of Section
4.27 of the Credit  Agreement  that the net proceeds of all sales of Property by
HEC  and its  Subsidiaries  not  exceed  $5,000,000  during  any  period  of six
consecutive  calendar months,  such waiver being granted for the limited purpose
of  permitting  HEC and its  Subsidiaries  to sell all of the  Properties of the
Borrowers  located in Toole County,  Montana for an aggregate  purchase price of
approximately $1,650,000,  respectively, in each case substantially on the terms
described by HEC to the Banks prior to the date hereof.

         Section  4. No  Other  Waivers.  Other  than as  specifically  provided
herein,  this  Amendment  and Waiver shall not operate as a waiver of any right,
remedy, power or privilege of the Agent, the Collateral Agent or the Banks under
the Credit  Agreement  or any other  Financing  Document or of any other term or
condition thereof.

         Section 5.  Representations of Borrowers.  The Borrowers  represent and
warrant that (i) the  representations  and warranties of the Borrowers set forth
in Article 3 of the Credit  Agreement  are true on and as of the date hereof and
(ii) no Default has occurred and is continuing.

         Section 6.  Governing Law.  This Amendment and Waiver shall be
governed by and construed in accordance with the laws of the State of New York.

         Section 7. Counterparts. This Amendment and Waiver may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.

         Section  8.  Effectiveness.  This  Amendment  and Waiver  shall  become
effective  on the date (the  "Effective  Date") on which  the Agent  shall  have
received (i) from the  Borrowers  and the Banks a  counterpart  hereof signed by
such party or facsimile or other written  confirmation (in form  satisfactory to
the Agent)  that such party has signed a  counterpart  hereof and (ii)  evidence
reasonably  satisfactory  to it  that  the  sale of all  the  Properties  of the
Borrowers  located  in  Toole  County,   Montana  shall  have  been  consummated
substantially  on the  terms  described  by HEC to the  Banks  prior to the date
hereof, for an unadjusted purchase price of not less than $1,650,000.

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         IN WITNESS  WHEREOF,  the parties hereto have caused this Amendment and
Waiver to be duly executed as of the date first above written.


                                            HALLWOOD ENERGY CORPORATION



                                            By:   /s/ William J. Baumgartner
                                                  Title:   Vice President


                                            HALLWOOD CONSOLIDATED
                                                RESOURCES CORPORATION



                                            By:   /s/ William J. Baumgartner
                                                  Title:   Vice President



                                            HALLWOOD ENERGY PARTNERS, L.P.


                                            By: HEC Acquisition Corp., its
                                                   General Partner

                                                 By:  /s/ William J. Baumgartner
                                                        Title:   Vice President




(NY) 27008/757/AMEND/amend00.3conf




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                                            MORGAN GUARANTY TRUST
                                                  COMPANY OF NEW YORK



                                            By:   /s/ John Kowalczuk
                                                  Title:   Vice President


                                            FIRST UNION NATIONAL BANK



                                            By:   /s/ Robert R. Wetteroff
                                                  Title:   Senior Vice President


                                            BANK OF AMERICA, N.A., formerly
                                                  NATIONSBANK, N.A.



                                            By:   /s/ James R. Allred
                                                  Title:   Managing Director

(NY) 27008/757/AMEND/amend00.3conf




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Acknowledged by:

                                    HALLWOOD LA PLATA, LLC
                                    LA PLATA ASSOCIATES, LLC

                                    By: HALLWOOD PETROLEUM, INC.

                                    By:/s/ William J. Baumgartner
                                         Title: Vice President

                                    The Manager of Hallwood La Plata LLC and La
                                            Plata Associates LLC

                                    CONCISE OIL AND GAS PARTNERSHIP
                                    EM NOMINEE PARTNERSHIP COMPANY
                                    MAY ENERGY PARTNERS OPERATING
                                                 PARTNERSHIP LTD.

                                    By: HEC ACQUISITION CORP.

                                    By:/s/ William J. Baumgartner
                                         Title: Vice President

                                    The  General  Partner of Concise Oil and Gas
                                    Partnership, EM Nominee Partnership Company,
                                    May Energy  Partners  Operating  Partnership
                                    LTD.

                                    HALLWOOD CONSOLIDATED PARTNERS,
                                    L.P.

                                    By: HALLWOOD CONSOLIDATED
                                    RESOURCES CORPORATION

                                    By:/s/ William J. Baumgartner
                                         Title: Vice President

                                    The General Partner of Hallwood Consolidated
                                            Partners, L.P.


(NY) 27008/757/AMEND/amend00.3conf




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                                           SCHEDULE A


                                  [to be provided by Hallwood]

(NY) 27008/757/AMEND/amend00.3conf



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