CONFORMED COPY


                   THIRD AMENDED AND RESTATED CREDIT AGREEMENT
                   AMENDMENT NO. 10 TO NOTE PURCHASE AGREEMENT


                  THIRD AMENDED AND RESTATED  CREDIT  AGREEMENT  dated as of May
31, 1997 among HALLWOOD ENERGY PARTNERS,  L.P. ("HEP"),  HEP OPERATING PARTNERS,
L.P., EDP OPERATING,  LTD., EM NOMINEE PARTNERSHIP COMPANY,  CONCISE OIL AND GAS
PARTNERSHIP, MAY ENERGY PARTNERS OPERATING PARTNERSHIP LTD. (collectively,  with
HEP,  the  "Borrowers"),  the BANKS  listed on the  signature  pages hereof (the
"Banks"),  First Union  National  Bank,  as  collateral  agent (the  "Collateral
Agent"),  MORGAN  GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent") and
AMENDMENT  dated as of May 31, 1997  between the  Borrowers  and THE  PRUDENTIAL
INSURANCE COMPANY OF AMERICA ("Prudential").


                              W I T N E S S E T H :


                  WHEREAS,  the Borrowers,  the Banks,  the Collateral Agent and
the Agent are party to a Second Amended and Restated  Credit  Agreement dated as
of March 31, 1995 (as amended  prior to the Effective  Date (as defined  below),
the "Original  Credit  Agreement"  and as amended and restated by this Amendment
and Restatement, the "Credit Agreement"); and

                  WHEREAS,  pursuant  to  the  Original  Credit  Agreement,  the
Borrowers have issued to the order of each Bank promissory  notes (the "Original
Notes") substantially in the form of Exhibit A to the Original Credit Agreement;
and

                  WHEREAS,  the Borrowers,  the Banks,  the Collateral Agent and
the Agent desire to amend the Original Credit  Agreement as set forth herein and
to restate the Original Credit Agreement in its entirety to read as set forth in
the Original Credit Agreement with the amendments specified below;

                  WHEREAS,  the  Borrowers and  Prudential  have entered into an
Amended and Restated Note Purchase Agreement dated as of May 7, 1990 (as amended
prior to the Effective Date, the "Original Note Purchase Agreement"); and



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                  WHEREAS,  the Borrowers have asked Prudential,  and Prudential
has  agreed,  on the terms and  conditions  set forth  below,  to amend  certain
provisions of the Original Note Purchase Agreement;

                  NOW, THEREFORE, the parties hereto agree as follows:

                  SECTION 1. Definitions;  References; Amendment and Restatement
of the Original  Credit  Agreement  and  Amendment of Note  Purchase  Agreement.
Unless  otherwise  specifically  defined herein,  each term used herein which is
defined  in  the  Original  Credit  Agreement  or  the  Original  Note  Purchase
Agreement,  as the case may be (including any Schedule thereto),  shall have the
meaning assigned to such term therein. 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 Original
Credit  Agreement or the Original Note Purchase  Agreement,  as the case may be,
shall, from and after the Effective Date, refer to the Original Credit Agreement
as amended and  restated  hereby or the  Original  Note  Purchase  Agreement  as
amended  hereby.  Effective on and as of the Effective Date, the Original Credit
Agreement  shall be amended and restated in its entirety to read as set forth in
the Original  Credit  Agreement with the  amendments  specified  below,  and the
Original Note Purchase  Agreement  shall be amended by the amendments  specified
below.

                  SECTION 2.  Increase  in  Commitments.  With  effect  from and
including the Effective  Date,  the  Commitment of each Bank shall be the amount
set forth opposite the name of such Bank on the signature pages hereof,  as such
amount may be reduced  from time to time  pursuant to Section 2.09 of the Credit
Agreement.

                  SECTION 3.  Amendments  to the  Definitions  Contained  in the
Original Credit  Agreement.  (a) The definitions of "Drawdown  Termination Date"
and "Term Date" contained in Section 1.01 of the Original  Credit  Agreement are
amended to read in their entirety as follows:

                  "Drawdown  Termination Date" means the earlier to occur of May
         31, 1999 or the date on which the Borrowers  elect to commence the Term
         Period.

                  "Term  Date" means the earlier to occur of May 31, 1999 or the
         last day of May, August,  November or February which first occurs after
         the date on which the Borrowers elect to commence the Term Period.

                  (b)  Definitions  of   "Availability   Limit",   "CD  Margin",
"Commitment Fee Rate", "Euro-Dollar Margin", "Level I Status", "Level II Status"
and "Level III Status" are added in  alphabetical  order in Section  1.01 of the
Original Credit Agreement, to read in their entirety as follows:



<PAGE>


                  "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) $51,000,000.  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.

                  "CD Margin" means,  on any date,  (i) 1.375%,  if on such date
         Level I Status  exists,  (ii)  1.625%,  if on such date Level II Status
         exists and (iii) 1.875%, if on such date Level III Status exists.

                  "Commitment  Fee Rate" means,  on any date,  (i) .375%,  if on
         such date Level I Status or Level II Status exists and (ii) .50%, if on
         such date Level III Status exists.

                  "Euro-Dollar Margin" means, on any date, (i) 1.25%, if on such
         date Level I Status exists, (ii) 1.50%, if on such date Level II Status
         exists and (iii) 1.75%, if on such date Level III Status exists.

                  "Level  I  Status"  exists  on any  date if on such  date  the
         aggregate outstanding principal amount of the Loans is less than 50% of
         the Availability Limit.

                  "Level II  Status"  exists on any date if on such date (i) the
         aggregate  outstanding  principal  amount  of the Loans is less than or
         equal to 85% of the Availability Limit and (ii) Level I Status does not
         exist on such date.

                  "Level III Status"  exists on any date if on such date neither
         Level I Status nor Level II Status exists.

                  SECTION 4. Change in the Interest  Rate  Applicable  to the
Loans.  (a) The first  sentence of Section  2.04(a) of the Original  Credit
Credit  Agreement is amended to read in its entirety as follows:

         Each Bank's CD Loans shall bear interest on the unpaid principal amount
         thereof  until payment in full thereof at a rate per annum equal to the
         sum of (i) the  Adjusted CD Rate for each  Interest  Period  applicable
         thereto plus (ii) the CD Margin,  but in no event to exceed the Highest
         Lawful Rate of such Bank;  provided  that if any CD Loan or any portion
         thereof  shall,  as a result of clause (2) (b) (i) of the definition of
         Interest Period,  have an Interest Period of less than 30 days, such CD
         Loan or portion thereof shall bear interest during such Interest Period
         at the rate applicable to Base Rate Loans during such period.



<PAGE>



                  (b) The first  sentence  of Section  2.04(b)  of the  Original
Credit Agreement is amended to read in its entirety as follows:


         Each  Bank's  Euro-Dollar  Loans  shall  bear  interest  on the  unpaid
         principal  amount  thereof  until payment in full thereof at a rate per
         annum equal to the sum of (i) the  Adjusted  Euro-Dollar  Rate for each
         Interest Period  applicable  thereto plus (ii) the Euro-Dollar  Margin,
         but in no event to exceed the Highest Lawful Rate of such Bank.

                  (c) Section 2.04(f) of the Original Credit Agreement is
deleted in its entirety.

                  (d) Section 2.04(g) of the Original Credit Agreement is
renumbered as Section 2.04(f).

                  SECTION 5.  Change in Calculation of Commitment Fee.
Section 2.20 of the Original Credit Agreement is amended to read in its entirety
as follows:

                    SECTION 2.20.  Commitment Fees.  During the Revolving Credit
               Period,  the Borrowers  shall pay to the Agent for the account of
               each  Bank  (which  payment  shall be  distributed  to each  Bank
               ratably in accordance  with each Bank's  Commitment) a commitment
               fee at the  Commitment  Fee Rate  calculated  for each day on the
               daily average amount by which the Availability  Limit exceeds the
               aggregate  outstanding  principal amount of the Loans. Subject to
               Section  2.09(b)  hereof,  such commitment fees shall accrue from
               and including the Effective Date to but excluding the last day of
               the  Revolving  Credit  Period and shall be payable  quarterly on
               each March 31, June 30,  September  30 and December 31 during the
               Revolving  Credit  Period  and on the last  day of the  Revolving
               Credit Period.

                  SECTION 6. Additional Condition to Borrowing.  Section 6.03 of
the Original Credit  Agreement is amended by adding the following new subsection
(f)  immediately  after  subsection  (e)  thereof,  to read in its  entirety  as
follows:

                  (f) the fact  that,  immediately  after  such  Borrowing,  the
         aggregate outstanding principal amount of the Loans will not exceed the
         Availability Limit.

                  SECTION 7.  Change in  Amendments  Section.  Section  8.05 of
the  Original Credit Agreement is amended as follows:

                  (a) by deleting the "or" at the end of clause (iii)  thereof
and  replacing it with a comma;



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         (b) by deleting the period at the end of clause (iv) thereof and
replacing it with an "or"; and


         (c) by adding a new clause (v)  immediately  after clause (iv) thereof,
to read it its entirety as follows:

         (v) increase  the amount set forth in the  definition  of  Availability
Limit or change the provisions of Section 6.03(f).

                  SECTION 8.  Amendment  to Exhibit A. Exhibit A to the Original
Credit  Agreement  is amended to read in its  entirety as set forth on Exhibit A
hereto.

                  SECTION 9.  Amendments to Schedule B. Section 20 of Schedule B
to the Original  Credit  Agreement and the Original  Note Purchase  Agreement is
amended to read in its entirety as follows:



<PAGE>



                  Section 20. Distributions,  Etc. No Borrower will make, pay or
         declare any dividend or  distribution  on any class of its stock or any
         distribution  of profits or purchase,  redeem or otherwise  acquire for
         value any  shares  of any class of its stock or any of the  partnership
         interests  in any Borrower  now or  hereafter  outstanding,  return any
         capital to its Partners,  or make any distribution of its assets to its
         Partners  as such  ("Distributions")  (a) if an  Event of  Default  has
         occurred and is continuing  and the Majority  Lenders have notified the
         Borrowers  in  writing  not  to  make  such  Distributions;  (b) if the
         aggregate Debt of the Borrowers  exceeds,  or would  immediately  after
         such Distribution exceed, 100% of the Debt Limit; or (c) on any date (a
         "Measuring  Date") in any fiscal  quarter  of HEP if at such  Measuring
         Date, after giving effect to any such proposed  Distribution to be made
         on such Measuring Date, the aggregate amount of  Distributions  made in
         the  period  of  twelve  consecutive  calendar  months  ended  on  such
         Measuring  Date would exceed the  Distribution  Percentage of an amount
         equal to (A) the sum of the amounts  which are set forth  opposite  the
         captions "Cash provided by operations  before working capital  changes"
         and "Distributions received from affiliates" on consolidated statements
         of cash flows of HEP for the period of four consecutive fiscal quarters
         most recently ended on or prior to such Measuring Date and with respect
         to which the  Borrowers  have  delivered  to the Lenders the  financial
         statements  required  to  delivered  by them  pursuant to Section 1 (it
         being  understood  that  such  financial  statements  are  prepared  in
         accordance with generally  accepted  accounting  principles  consistent
         with those  utilized in preparing the  consolidated  statements of cash
         flows  of HEP as  filed in HEP's  annual  report  on Form  10-K for the
         fiscal year ended  December 31, 1994 with the  Securities  and Exchange
         Commission  pursuant to the Securities  Exchange Act of 1934) minus (B)
         the  aggregate  amount of  payments  made by HEP in such period to make
         purchases  permitted  by Section  19(n);  provided,  however,  that the
         provisions  of  subparagraphs  (b) and (c) of this Section 20 shall not
         prevent  the  payment  of  any  Distribution  within  60  days  of  the
         declaration  thereof, if at said date of declaration such payment would
         have complied with the provisions hereof; and provided,  further,  that
         for  purposes  of this  Section 20 no  Distribution  from any  Borrower
         directly  or  indirectly  to another  Borrower  shall be deemed to be a
         Distribution hereunder. In addition, for purposes of this Section 20:


                   "Distribution  Percentage" means, at any date, (i) 65%, if on
         such date  Monthly  Exposure is less than 50% of the Debt Limit on such
         date and (ii) otherwise, 50%.

                  "Monthly  Exposure"  means,  on any date,  the  daily  average
outstanding  principal  amount of Debt of the Borrowers  and their  Subsidiaries
(including  without  limitation the loans under the Credit Agreement) during the
30-day period ending on the date immediately preceding such date.

                  SECTION  10.  Amendments  to  Schedule  D.  Schedule  D to the
Original Credit Agreement and the Original Note Purchase Agreement is amended to
read in its entirety as set forth on Schedule D hereto.

                  SECTION 11 .  Transitional  Provisions.  On the Effective Date
but subject to the  conditions set forth in Section 14 hereof,  the  Euro-Dollar
Loans and Domestic  Loans  outstanding  to each Bank under the  Original  Credit
Agreement shall be deemed to be the initial Euro-Dollar Loans or Domestic Loans,
as the case may be, made by such Bank under the Credit  Agreement,  it being the
intention  of the parties  hereto  that (i) all  indebtedness  evidenced  by the
Original Notes shall,  on and after the Effective  Date, be solely  evidenced by
the Notes (as defined in the Credit Agreement), (ii) the Loans outstanding under
the Original Agreement on the Effective Date shall continue to be outstanding on
such  date as  Domestic  Loans or  Euro-Dollar  Loans,  as  appropriate,  having
Interest Periods determined in accordance with the Original Credit Agreement and
bearing  interest as provided  with respect to Loans in Article II of the Credit
Agreement  and  (iii) the  liens  created  by the  Collateral  Documents  on the
properties and assets described therein shall be carried forward and continue in
full force and effect for the purpose of securing the Notes. Upon receipt of its
Note, each Bank will mark its Original Note AReplaced@ and send in due course to
HEP evidence that such Original Note has been so marked.

                  SECTION 12.  Governing Law.   This Amendment and Restatement
shall be governed by and construed in accordance with the laws of the State of
New York.

                  SECTION 13.  Counterparts.  This Amendment and Restatement 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.


<PAGE>


                  SECTION 14.  Effectiveness.  This Amendment and Restatement
shall become effective on the date (the "Effective Date") when each of the
following conditions shall have been satisfied:


                  (a) this  Amendment  and  Restatement  shall  have  been  duly
         executed and  delivered by the  Borrowers,  the Banks,  the  Collateral
         Agent,  the Agent and  Prudential  (or,  in the case of any party as to
         which an executed  counterpart shall not have been received,  the Agent
         shall have received  telegraphic,  telex or other written  confirmation
         from such party of execution of a counterpart hereof by such party);

                  (b) the Agent shall have received for the account of each Bank
         an  executed  Note  substantially  in the form of  Exhibit  A, duly and
         validly issued and in the amount of such Bank's Commitment as set forth
         on the signature pages hereof, dated on or prior to the Effective Date;

                  (c)  the  Agent  shall  have  received  a  signed  copy  of  a
         certificate  of  the  Secretary  or an  Assistant  Secretary  or  other
         appropriate  officer of each of the Borrowers (or if such Borrower is a
         partnership,  a General  Partner of such  Borrower)  certifying (i) the
         names and true signatures of the Authorized  Persons authorized to sign
         the Notes,  and the Collateral  Documents to which the Borrowers or the
         General Partners are or will be a party (including  without  limitation
         any Collateral  Documents Amendments referred to in subsection (f)) and
         the other documents or certificates to be delivered  pursuant  thereto,
         (ii) the resolutions of the Board of Directors (or equivalent  body) of
         the Borrowers and of each General Partner  authorizing the transactions
         contemplated  hereby to which the  Borrowers  or such  General  Partner
         are/is or will be a party, together with all documents evidencing other
         necessary  partnership or corporate action with respect to any thereof,
         (iii) no  amendments to the true copies of the  Partnership  Agreements
         delivered  to the  Agent  prior  to the  Effective  Date,  and  (iv) no
         amendments  to the  true  copy of the  Articles  of  Incorporation  and
         By-Laws of Hallwood G.P.  delivered to the Agent prior to the Effective
         Date;

                  (d) the  Agent  shall  have  received  from  King &  Spalding,
         counsel for the Borrowers,  an opinion  substantially  to the effect of
         Exhibit B hereto and covering such  additional  matters as the Majority
         Lenders may reasonably request;

                  (e) the Agent shall have  received from Davis Polk & Wardwell,
         special counsel for the Agent, an opinion in substantially  the form of
         Exhibit C hereto;



<PAGE>



                  (f) the  Collateral  Agent shall have  received  duly executed
         counterparts of the documents numbered (C)(1)(f),  (C)(2)(e),  C(3)(d),
         (D)(4)(h),   (D)(5)(d),  (D)(5)(d),  (D)(6)(d),  (D)(7)(c),  (E)(2)(e),
         (E)(5)(e)  listed  on  Schedule  D hereto  (the  "Collateral  Documents
         Amendments"); and


                  (g) the  Collateral  Agent shall have  received  from  counsel
         satisfactory  to  it in  each  jurisdiction  in  which  any  Collateral
         Documents  Amendments  are to be recorded or filed a favorable  written
         opinion  as to the  validity  and  binding  effect  of  the  Collateral
         Documents and the perfection of the Liens created  thereunder under the
         law of such  jurisdiction  and as to such other matters incident to the
         transactions herein contemplated as the Majority Lenders may reasonably
         request.


<PAGE>





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



                              BORROWERS:

                              HALLWOOD ENERGY PARTNERS, L.P.
                              HEP OPERATING PARTNERS, L.P.
                              EDP OPERATING, LTD.

                                   By: HEPGP LTD., its general partner
                                   By: HALLWOOD G.P., INC.,
                                         its general partner


                                   By: /s/   Robert S. Pfeiffer
                                   Title:    Vice President



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


                                   By:  HALLWOOD G.P., INC.,
                                        formerly known as QUINOCO ENERGY, INC.


                                   By:   /s/   Robert S. Pfeiffer
                                   Title:      Vice President


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



<PAGE>





                              BANKS:

Commitment

$25,000,000                   MORGAN GUARANTY TRUST COMPANY
                                 OF NEW YORK


                                   By:   /s/   John Kowalczuk
                                   Title:      Vice President



$25,000,000                   FIRST UNION NATIONAL BANK


                                   By:   /s/   Michael J. Kolosowsky
                                   Title:      Vice President



$25,000,000                    NATIONSBANK OF TEXAS, N.A.


                               By:      /s/   Richard P. Stults
                               Title:         Vice President

================
Total Commitment:

$75,000,000
================


                               MORGAN GUARANTY TRUST COMPANY
                                  OF NEW YORK, as Agent


                               By:      /s/   John Kowalczuk
                               Title:         Vice President




<PAGE>



                               FIRST UNION NATIONAL BANK,

                               as Collateral Agent


                               By:      /s/   Michael J. Kolosowsky
                               Title:         Vice President


                               PRUDENTIAL:

                               THE PRUDENTIAL INSURANCE
                                  COMPANY OF AMERICA


                               By:      /s/   Randall M. Kob
                               Title:         Vice President