CONFORMED COPY

                                  $105,000,000

                              AMENDED AND RESTATED
                                CREDIT AGREEMENT

                                   dated as of

                                  June 8, 1999

                                      among

                          HALLWOOD ENERGY CORPORATION,
                        HALLWOOD ENERGY PARTNERS, L.P.,
                                      and
                  HALLWOOD CONSOLIDATED RESOURCES CORPORATION
                                 as Borrowers,

                            THE BANKS LISTED HEREIN,

                           FIRST UNION NATIONAL BANK,
                               as Collateral Agent

                                       and

                   MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
                                    as Agent



                          J.P. Morgan Securities Inc.,
                                    Arranger

                           First Union National Bank,
                               Syndication Agent

                               NationsBank, N.A.,
                              Documentation Agent

(NY) 27008/757/CA99/ca.99.conf.wpd



<PAGE>



                                        TABLE OF CONTENTS

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

                                                                           PAGE

ARTICLE 1
DEFINITIONS

SECTION 1.01.  Definitions.....................................................2
SECTION 1.02.  Accounting Terms and Determinations............................19

ARTICLE 2
AMOUNTS AND TERMS OF LOAN

SECTION 2.01.  The Loans and Commitment.......................................19

SECTION 2.02.  Principal Repayments...........................................20

SECTION 2.03.  Borrowing Alternatives.........................................20

SECTION 2.04.  Interest Rate..................................................20

SECTION 2.05.  Computation of Interest........................................23

SECTION 2.06.  Borrowing Procedure............................................23

SECTION 2.07.   Continuation Options..........................................24

SECTION 2.08.  Conversion Options.............................................25

SECTION 2.09.  Optional Prepayments, Termination or Reduction of
         Commitments..........................................................26
SECTION 2.10.  Mandatory Prepayments..........................................26
SECTION 2.11.  Payments.......................................................27
SECTION 2.12.  Interest.......................................................27
SECTION 2.13.  Reimbursement of Certain Funding Losses........................28
SECTION 2.14.  Increased Costs................................................29
SECTION 2.15.  Basis for Determining Fixed Rates Inadequate...................30
SECTION 2.16.  Illegality.....................................................32
SECTION 2.17.  Foreign Taxes..................................................32
SECTION 2.18.  Substitution of Banks..........................................34
SECTION 2.19.  Participants' Expenses.........................................34
SECTION 2.20.  Commitment Fees................................................34
SECTION 2.21.  Engineering Fee................................................34
SECTION 2.22.  Agents' Fees...................................................34
SECTION 2.23.  Participation Fee..............................................34

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

SECTION 3.01.  Existence......................................................35
SECTION 3.02.  Authorization..................................................36

(NY) 27008/757/CA99/ca.99.conf.wpd



<PAGE>


                                                                            PAGE

SECTION 3.03.  Binding Obligations............................................36

SECTION 3.04.  No Legal Bar or Resultant Lien.................................36

SECTION 3.05.  No Consent.....................................................36

SECTION 3.06.  Financial Condition............................................37

SECTION 3.07.  Investments and Guaranties.....................................37

SECTION 3.08.  Liabilities; Litigation........................................37

SECTION 3.09.  Taxes; Governmental Charges....................................37

SECTION 3.10.  Titles, etc....................................................38

SECTION 3.11.  Defaults.......................................................38

SECTION 3.12.  Casualties; Taking of Property.................................38

SECTION 3.13.  Use of Proceeds; Margin Stock..................................38

SECTION 3.14.  Compliance with the Law........................................39

SECTION 3.15.  Compliance with Erisa..........................................39

SECTION 3.16.  No Material Misstatements......................................39

SECTION 3.17.  Investment Company Act.........................................39

SECTION 3.18.  Public Utility Holding Company Act.............................40

SECTION 3.19.  Corporate Documents and HEP Partnership Agreement..............40

SECTION 3.20.  Location of the Borrowers......................................40

SECTION 3.21.  Gas Imbalances.................................................40

SECTION 3.22.  Foreign Corporation............................................40

SECTION 3.23.  Other Financing Documents......................................41

SECTION 3.24.  Environmental Matters..........................................41

SECTION 3.25.  Subsidiaries...................................................41

SECTION 3.26.  Solvency, etc..................................................41

SECTION 3.27.  Year 2000 Compliance...........................................41

SECTION 3.28.  Reorganization.................................................42


ARTICLE 4
COVENANTS

SECTION 4.01.  Financial Statements and Reports...............................43

SECTION 4.02.  Annual Certificates of Compliance..............................44

SECTION 4.03.  Quarterly Certificates of Compliance...........................44

SECTION 4.04.  Taxes and Other Liens..........................................45

SECTION 4.05.  Maintenance; Abandonment.......................................45

SECTION 4.06.  Further Assurances.............................................45

SECTION 4.07.  Performance of Obligations.....................................46

SECTION 4.08.  Reimbursement of Expenses......................................46

SECTION 4.09.   Insurance.....................................................46

SECTION 4.10.  Right of Inspection............................................46

SECTION 4.11.  Notice of Certain Events.......................................47


(NY) 27008/757/CA99/ca.99.conf.wpd


                                           2

<PAGE>


                                                                            PAGE

SECTION 4.12.  ERISA Information and Compliance...............................47
SECTION 4.13.  Collateral Security............................................48
SECTION 4.14.  Performance of Partnership Agreement...........................49
SECTION 4.15.  Notice to Purchasers of Oil and Gas............................49
SECTION 4.16.   Engineering Reports...........................................49
SECTION 4.17.  Debt...........................................................50
SECTION 4.18.  Liens..........................................................52
SECTION 4.19.  Investments, Loans and Advances................................52
SECTION 4.20.  Subsidiaries...................................................54
SECTION 4.21.  Distributions, Etc.............................................54
SECTION 4.22.  Mergers, Etc...................................................55
SECTION 4.23.  Nature of Business.............................................55
SECTION 4.24.  ERISA Compliance...............................................55
SECTION 4.25.  Sale or Discount of Receivables................................56
SECTION 4.26.  Transactions with Affiliates...................................57
SECTION 4.27.  Sale of Assets.................................................57
SECTION 4.28.  Annual Coverage Ratio..........................................57
SECTION 4.29.  Additional Information.........................................58
SECTION 4.30.  Information Meetings...........................................58
SECTION 4.31.  Compliance with Laws, etc......................................58
SECTION 4.32.  Covenant to Secure Indebtedness Equally........................58
SECTION 4.33.  Inconsistent Provisions........................................58
SECTION 4.34.  Interest Coverage Ratio........................................58
SECTION 4.35.  Hedging Transactions...........................................59
SECTION 4.36. Incorporation By Reference of Certain Covenants.................59
SECTION 4.37. Restrictions with Respect to Subordinated Debt..................59
SECTION 4.38.  Additional Guarantors..........................................60

ARTICLE 5
DEFAULTS

SECTION 5.01.  Events of Defaults.............................................60
SECTION 5.02.  Notice of Default..............................................62

ARTICLE 6
CONDITIONS

SECTION 6.01.  Effectiveness..................................................63
SECTION 6.02.  Transitional Provisions........................................64
SECTION 6.03.  All Loans......................................................65


(NY) 27008/757/CA99/ca.99.conf.wpd


                                           3

<PAGE>


                                                                            PAGE

ARTICLE 7
THE AGENT AND THE COLLATERAL AGENT

SECTION 7.01.  Appointment and Authorization..................................66

SECTION 7.02.  Agent and Collateral Agent and Affiliates......................66

SECTION 7.03.  Action by Agent or Collateral Agent............................66

SECTION 7.04.  Consultation with Experts......................................66

SECTION 7.05.  Liability of Agent and Collateral Agent........................67

SECTION 7.06.  Indemnification................................................67

SECTION 7.07.  Credit Decision................................................67

SECTION 7.08.  Successor Agent or Collateral Agent............................68


ARTICLE 8
MISCELLANEOUS

SECTION 8.01.  Notices........................................................68

SECTION 8.02.  No Waivers.....................................................69

SECTION 8.03.  Expenses; Documentary Taxes....................................69

SECTION 8.04.  Sharing of Set-offs............................................69

SECTION 8.05.  Amendments and Waivers.........................................70

SECTION 8.06.  Successors and Assigns.........................................70

SECTION 8.07.  New York Law...................................................72

SECTION 8.08.  Counterparts; Integration......................................72

SECTION 8.09.  Collateral.....................................................72

SECTION 8.10.  WAIVER OF JURY TRIAL...........................................72

SECTION 8.11.  Joint and Several Obligations..................................72



(NY) 27008/757/CA99/ca.99.conf.wpd


                                           4

<PAGE>





                                            SCHEDULES

SCHEDULE A Compliance Certificate
SCHEDULE B Disclosure Schedule
SCHEDULE C Collateral Documents

                                            EXHIBITS

EXHIBIT A Note
EXHIBOpinions of Cathleen  Osborn,  General  Counsel of HEC and King & Spalding,
     special New York counsel to the Obligors
EXHIBIT C Opinion of Davis Polk & Wardwell, special counsel to the Agent
EXHIBIT D Assignment and Assumption Agreement
EXHIBIT E Guaranty Agreement

(NY) 27008/757/CA99/ca.99.conf.wpd



<PAGE>



                              AMENDED AND RESTATED CREDIT AGREEMENT


         AGREEMENT dated as of June 8, 1999 among HALLWOOD  ENERGY  CORPORATION,
HALLWOOD ENERGY PARTNERS,  L.P. and HALLWOOD CONSOLIDATED RESOURCES CORPORATION,
as  Borrowers,  the BANKS  listed on the  signature  pages  hereof,  FIRST UNION
NATIONAL  BANK, as Collateral  Agent,  and MORGAN  GUARANTY TRUST COMPANY OF NEW
YORK, as Agent.

         WHEREAS, Hallwood Energy Partners, L.P., a Delaware limited partnership
(with its successors,  "HEP"), HEP Operating Partners,  L.P., a Delaware limited
partnership,  EDP Operating,  Ltd., a Colorado limited  partnership,  EM Nominee
Partnership  Company,  a  Colorado  general  partnership,  Concise  Oil  and Gas
Partnership,  a Colorado  general  partnership,  May Energy  Partners  Operating
Partnership  LTD.,  a Texas  limited  partnership  (together  with HEP, the "HEP
Borrowers" and each, an "HEP Borrower"), the banks listed on the signature pages
thereof (the "HEP Banks"),  Morgan  Guaranty Trust Company of New York, as agent
and First Union  National  Bank,  as  collateral  agent,  are parties to a Third
Amended and  Restated  Credit  Agreement  dated as of May 31, 1997 (as in effect
immediately  prior to the  effectiveness  of this Amended  Agreement (as defined
below), the "Original HEP Agreement"); and
         WHEREAS,  Hallwood  Consolidated  Resources  Corporation,   a  Delaware
corporation (with its successors, "HCRC"), Hallwood Consolidated Partners, L.P.,
a Colorado limited  partnership  (with its successors,  "HCP" and, together with
HCRC,  the "HCRC  Borrowers"  and each,  an "HCRC  Borrower"),  the banks  party
thereto (the "HCRC Banks"),  First Union National Bank, as collateral  agent and
Morgan  Guaranty  Trust  Company of New York,  as agent are  parties to a Second
Amended and  Restated  Credit  Agreement  dated as of May 31, 1997 (as in effect
immediately prior to the effectiveness of this Amended Agreement,  the "Original
HCRC Agreement"); and
         WHEREAS, Hallwood Energy Corporation,  a Delaware corporation (with its
successors,  "HEC"),  HEP and HCRC are planning to  consummate a  reorganization
(the  "Reorganization"),  the terms and conditions of which are set forth in the
definitive Proxy Statement prepared by HEC, HEP and HCRC, first mailed on May 4,
1999 and supplemented on May 17, 1999 (the "Proxy  Statement"),  a copy of which
HEP and HCRC have delivered to each of the HEP Banks and the HCRC Banks; and

(NY) 27008/757/CA99/ca.99.conf.wpd



<PAGE>



         WHEREAS, in connection with the consummation of the Reorganization, the
HEP Borrowers  have asked the HEP Banks , and the HEP Banks have agreed,  on the
terms and  conditions  set forth  below,  to amend and restate the  Original HEP
Agreement as set forth below;
         WHEREAS, in connection with the consummation of the Reorganization, the
HCRC Borrowers have asked the HCRC Banks, and the HCRC Banks have agreed, on the
terms and  conditions  set forth below,  to amend and restate the Original  HCRC
Agreement as set forth below;
         NOW, THEREFORE,  the parties hereto hereby agree that, on and as of the
Effective  Date (as defined  below),  each of the Original HEP Agreement and the
Original  HCRC  Agreement  is hereby  amended and  restated  in its  entirety as
follows:

ARTICLE
DEFINITIONS
         SECTION .  Definitions.  The following terms as used herein, have the
following meanings:
         "Adjusted CD Rate" has the meaning set forth in Section .
         "Adjusted Euro-Dollar Rate" has the meaning set forth in Section .
         "Administrative Questionnaire" means, with respect to each Bank, an
administrative  questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrowers) duly completed by such Bank.
         "Advance Notice" means written, telegraphic or telecopier notice (which
in each case shall be irrevocable except as otherwise provided in Section ) from
the  Borrowers to be received by the Agent before 11:00 a.m.,  New York time, by
the number of Domestic Business Days or Euro-Dollar  Business Days in advance of
any borrowing,  conversion,  continuation  or prepayment of any Loan pursuant to
this Agreement as respectively indicated below:
         (a) CD Loans -- 2 Domestic Business Days;
         (b) Euro-Dollar Loans -- 3 Euro-Dollar Business Days; and
         (c) Base Rate Loans -- Same Day Notice

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                         2

<PAGE>



         For the purpose of determining the respectively  applicable Loan in the
case of the conversion from one type of Loan into another, the Loan with respect
to which the longer period applies shall control.
         "Affiliate" means each Person, other than an Obligor, who controls,  is
controlled  by or is  under  common  control  with  HEC.  For  purposes  of this
definition, the term "control" means possession,  directly or indirectly, of the
power to  direct or cause the  direction  of the  management  or  policies  of a
Person,  whether  through the  ownership  of voting  securities,  by contract or
otherwise.
         "Agent" means Morgan Guaranty Trust Company of New York in its capacity
as agent for the Banks under the Financing Documents, and its successors in such
capacity.
         "Agreement"  means the  Original HEP  Agreement  or the  Original  HCRC
Agreement,  as the context may require,  in each case as amended and restated by
this Amended  Agreement and as the same may be further amended from time to time
in accordance with the terms hereof.
         "Amended  Agreement"  means this Amended and Restated Credit  Agreement
dated as of June 8, 1999 among the Borrowers,  the Banks,  the Collateral  Agent
and the Agent.
         "Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office, and (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office.
         "Approved Petroleum Engineer" means Williamson Petroleum
Consultants, Inc. or any other independent petroleum engineers acceptable to the
Required Banks.
         "Assessment Rate" has the meaning set forth in Section .
         "Assignee" has the meaning set forth in Section .
         "Authorized Person" means (a) for a corporation, the chief executive
officer, chief financial officer, chief accounting officer, controller,  general
counsel  or  executive  vice  president  of  such  corporation,  and  (b)  for a
partnership,  the  chief  executive  officer,  chief  financial  officer,  chief
accounting officer,  controller,  general counsel or executive vice president of
each  general  partner of such  partnership;  provided  that for the purposes of
certificates  delivered pursuant to Article hereof,  Authorized Person means (x)
for a corporation, the chief executive officer, chief financial officer or chief
accounting officer of such

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                         3

<PAGE>



corporation,  and (y) for a  partnership,  the chief  executive  officer,  chief
financial  officer or chief  accounting  officer of each general partner of such
partnership.
         "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)
$84,500,000.  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.
         "Bank"  means each bank  listed on the  signature  pages  hereof,  each
Assignee  which  becomes a Bank  pursuant  to  Section  , and  their  respective
successors and assigns.
         "Base Rate" means, for any day, a rate per annum equal to the higher of
(a) the  Prime  Rate for such day and (b) the sum of 1/2 of 1% plus the  Federal
Funds Rate for such day.
         "Base Rate Loan"  means a Loan made by a Bank under this  Agreement  at
such time as it is made or  maintained  at an  interest  rate  based on the Base
Rate.
         "Base Rate Margin" means, on any date, (i) 0.25%, if on such date Level
I Status  exists,  (ii)  0.50%,  if on such date Level II Status  exists,  (iii)
0.75%,  if on such date  Level III  Status  exists  and (iv) 1%, if on such date
Level IV Status exists.
         "Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and  which is  maintained  or  otherwise  contributed  to by any  member  of the
Controlled Group.
         "Borrowing" means a borrowing hereunder consisting of Loans made to the
Borrowers  at the same time by the Banks  pursuant  to Article or  continued  or
converted  pursuant to Section or ,  respectively.  A  Borrowing  is a "Domestic
Borrowing" if such Loans are Domestic Loans or a "Euro-Dollar Borrowing" if such
Loans are  Euro-Dollar  Loans. A Domestic  Borrowing is a "CD Borrowing" if such
Domestic  Loans are CD Loans or a "Base Rate  Borrowing" if such Domestic  Loans
are Base Rate Loans.
         "CD Loan" means a Loan made by a Bank under this Agreement at such time
as it is made or maintained at an interest rate based on the Adjusted CD Rate.
         "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,  (iii)
1.875%, if on

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                         4

<PAGE>



such date Level III  Status  exists  and (iv)  2.125%,  if on such date Level IV
Status exists.
         "CD Rate" has the meaning set forth in Section .
         "CFADS" means, for any period,  gross cash operating  revenues properly
allocable to Petroleum  Property for such period less the following  cash items:
royalties,  operating  costs,  severance,  windfall  profits and other  wellhead
taxes,  general and  administrative  expenses and current income and other taxes
properly allocable to such period and cash capital expenditures made during such
period and properly allocable to Petroleum  Property.  CFADS shall be determined
by the Banks based on the most recent  Reserve  Report and financial  statements
(and supplemental  information),  as the case may be, furnished to the Banks and
prepared on the same basis as those provided under Section , subject to approval
of such Reserve Report (and supplemental information) by the Required Banks. For
purposes of Section , "general and administrative  expenses" shall mean for each
fiscal  year the higher of (a)  $2,000,000  or (b) the  product of (i) CFADS for
such  year  without  deduction  for  the  general  and  administrative  expenses
allocable  to that fiscal year  multiplied  by (ii) the previous  fiscal  year's
general  and  administrative  expenses  and then  divided by (iii) the  previous
year's  CFADS  without  deduction  for the general and  administrative  expenses
allocable to that fiscal year.
         "Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
         "Collateral" has the meaning set forth in Schedule C.
         "Collateral Agent" means First Union National Bank in its capacity as
collateral agent for the Banks under the Financing Documents, and its successors
in such capacity.
         "Collateral  Documents"  means, upon the execution and delivery thereof
pursuant  to  Section  ,  each  document  set  forth  in  Schedule  C,  and  all
supplementary    assignments,    security    agreements,    pledge   agreements,
acknowledgements or other documents delivered or to be delivered pursuant to the
Financing Documents. Until such time, "Collateral Documents" has the meaning set
forth in each of the Original HEP Agreement and the Original HCRC Agreement.
         "Commitment"  means,  with  respect to each Bank,  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 hereof.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                         5

<PAGE>



         "Commitment Fee Rate" means,  on any date, (i) 0.375%,  if on such date
Level I Status or Level II Status  exists and (ii) 0.50%,  if on such date Level
III Status or Level IV Status exists.
         "Concise"  means Concise Oil and Gas  Partnership,  a Colorado  general
partnership, and its successors.
         "Controlled   Group"  means  all  members  of  a  controlled  group  of
corporations and all trades or businesses  (whether or not  incorporated)  under
common control which,  together with HEC, are treated as a single employer under
Section 414 of the Code.
         "Debt" of any Person means at any date,  without  duplication,  (a) all
obligations  of such Person for  borrowed  money,  (b) all  obligations  of such
Person evidenced by bonds,  debentures,  notes or other similar instrument,  (c)
all obligations of such Person to pay the deferred purchase price of property or
services,  except  trade  accounts  payable  arising in the  ordinary  course of
business, (d) all obligations of such Person as lessee under capital leases, (e)
all  Reimbursement  Obligations,  except to the extent  (measured by  collateral
value) such  Reimbursement  Obligations  are (i) secured by cash,  United States
Treasury  obligations or time deposits or  certificates of deposit issued by any
Bank or any  other  bank or  savings  and  loan  association  rated  "AA" or its
equivalent by S&P and Moody's and (ii) payable to a Bank, (f) all Debt of others
secured  by a Lien on any  asset of such  Person,  whether  or not such  Debt is
assumed  by such  Person,  and (g) all Debt of  others  directly  or  indirectly
guaranteed  by such  Person or in  respect  of which  such  Person is  otherwise
liable, contingently or otherwise.
         "Debt Limit" has the meaning set forth in Section  hereof.
         "Default" means the occurrence of any of the events or conditions
specified in Section 5.01, whether or not any requirement for notice or lapse of
time or other condition precedent has been satisfied.
         "Derivative  Obligations"  means all  obligations  of any  Person  with
respect to any Hedging Transaction to which such Person is a party.
         "Dollars" and the sign "$" means lawful currencyof the United States of
America.
         "Domestic  Business  Day"  means any day except a  Saturday,  Sunday or
other day on which  commercial  banks in New York City are  authorized by law to
close.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                         6

<PAGE>



         "Domestic Lending Office" means, as to each Bank, its office located at
its address set forth in its Administrative  Questionnaire (or identified in its
Administrative  Questionnaire  as its  Domestic  Lending  Office)  or such other
office as such Bank may hereafter  designate as its Domestic  Lending  Office by
notice to the Borrowers  and the Agent;  provided that any Bank may so designate
separate  Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans,  on the other  hand,  in which case all  references  herein to the
Domestic  Lending Office of such Bank shall be deemed to refer to either or both
or such offices, as the context may require.
         "Domestic Loans" means CD Loans or Base Rate Loans or both.
         "Domestic Reserve Percentage" has the meaning set forth in Section
 .
         "Drawdown  Termination Date" means the earlier to occur of May 31, 2002
or the date on which the Borrowers elect to commence the Term Period.
         "Effective  Date"  means  the  date  this  Amended   Agreement  becomes
effective in accordance with Section .
         "Enron  Agreement"  means the Loan  Agreement  dated as of December 29,
1994 between HSDC and Joint Energy Development Investments Limited
Partnership, as amended from time to time.
         "Environmental  Laws"  means  any and all  federal,  state,  local  and
foreign statutes,  laws, judicial  decisions,  regulations,  ordinances,  rules,
judgments, orders, decrees, plans, injunctions,  permits,  concessions,  grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment,  the effect of the environment on human health or to emissions,
discharges  or releases of  pollutants,  contaminants,  petroleum  or  petroleum
products,  chemicals or industrial, toxic or hazardous substances or wastes into
the  environment  including,  without  limitation,  ambient air,  surface water,
ground water,  or land, or otherwise  relating to the  manufacture,  processing,
distribution,  use,  treatment,  storage,  disposal,  transport  or  handling of
pollutants,   contaminants,   petroleum  or  petroleum  products,  chemicals  or
industrial,  toxic or  hazardous  substances  or wastes or the clean-up or other
remediation thereof.
         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended, or any successor statute.
         "Euro-Dollar  Business  Day" means any  Domestic  Business Day on which
commercial  banks are open for  international  business  (including  dealings in
dollar deposits) in London.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                         7

<PAGE>



         "Euro-Dollar Lending Office" means, as to each Bank, its office, branch
or   affiliate   located  at  its  address  set  forth  in  its   Administrative
Questionnaire  (or  identified  in  its  Administrative   Questionnaire  as  its
Euro-Dollar  Lending  Office) or such other office,  branch or affiliate of such
Bank as it may hereafter  designate as its Euro-Dollar  Lending Office by notice
to the Borrowers and the Agent.
         "Euro-Dollar  Loan" means a loan made by a Bank under this Agreement at
such time as it is made or  maintained at an interest rate based on the Adjusted
Euro-Dollar Rate.
         "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, (iii)
1.75%,  if on such date  Level III  Status  exists  and (iv) 2%, if on such date
Level IV Status exists.
         "Euro-Dollar Rate" has the meaning set forth in Section .
         "Euro-Dollar Reserve Percentage" has the meaning set forth in Section
 .
         "Event of Default" has the meaning set forth in Section 5.01 hereof.
         "Excepted Liens" means: (i) Liens for taxes, assessments or other
governmental  charges or levies not yet due or which are being contested in good
faith  by  appropriate   action  and  for  which  adequate  reserves  have  been
established in accordance with generally accepted  accounting  principles;  (ii)
Liens in connection with workmen's compensation, unemployment insurance or other
social security, old age pension or public liability obligations; (iii) legal or
equitable  encumbrances  deemed to exist by reason of negative pledge  covenants
(such as those made in Section  hereof);  (iv) legal or  equitable  encumbrances
deemed to exist by reason of the  existence  of any  litigation  or other  legal
proceeding or arising out of a judgment or award with respect to which an appeal
is  being  prosecuted,  but  only so  long as  execution  of such  judgment  and
enforcement of such Lien is effectively stayed and the amount thereof (in excess
of  applicable  insurance  coverage)  does not  exceed,  individually  or in the
aggregate,  $1,000,000; (v) vendors',  carriers',  warehousemen's,  repairmen's,
mechanics', workmen's,  materialmen's,  construction or other like Liens arising
by operation of law in the ordinary  course of business  incident to obligations
which are not yet due or which are being  contested in good faith by appropriate
proceedings  by or on  behalf  of HEC or any  of its  Subsidiaries;  (vi)  Liens
arising in the ordinary course of business under gas sales contracts,  operating
agreements,  unitization and pooling agreements, and such other documents as are
customarily   found  in  connection  with  comparable   drilling  and  producing
operations,  incident  to  obligations  which are not yet due or which are being
contested in good faith by

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                         8

<PAGE>



appropriate  proceedings by or on behalf of HEC or any of its  Subsidiaries  and
for which adequate  reserves have been  established in accordance with generally
accepted accounting principles; (vii) minor irregularities in title which do not
materially interfere with the occupation, use and enjoyment by HEC or any of its
Subsidiaries  of their  respective  Property in the normal course of business as
presently  conducted or materially  impair the value thereof for such  business;
(viii) Liens on cash,  United States  Treasury  obligations  or time deposits or
certificates of deposit issued by any Bank or any other bank or savings and loan
association rated "AA" or its equivalent by S&P and Moody's in an aggregate face
amount at any one time  subject  to such  Liens not in excess of  $3,000,000  to
secure  Reimbursement  Obligations and obligations incurred pursuant to interest
rate or commodities  swap, or similar hedging,  transactions;  and (ix) Liens on
the Collateral securing Derivative Obligations of any Borrower in respect of any
Hedging Transaction between such Borrower and any Bank or affiliate of any Bank.
         "Federal  Funds Rate" means,  for any day, the rate per annum  (rounded
upward,  if  necessary,  to the  nearest  1/100th  of 1%) equal to the  weighted
average of the rates on overnight Federal funds transactions with members of the
Federal  Reserve  System  arranged  by Federal  funds  brokers  on such day,  as
published by the Federal  Reserve Bank of New York on the Domestic  Business Day
next  succeeding  such  day,  provided  that (i) if such  day is not a  Domestic
Business  Day,  the  Federal  Funds Rate for such day shall be such rate on such
transactions on the next preceding  Domestic Business Day as so published on the
next succeeding  Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding  Domestic  Business Day, the Federal Funds Rate for such
day shall be the average  rate quoted to Morgan  Guaranty  Trust  Company of New
York on such day on such transactions as determined by the Agent.
         "Financial  Statements" means (i) the pro forma consolidated  financial
statements of HEC and its  consolidated  Subsidiaries  for the fiscal year ended
December 31, 1998, (ii) the audited consolidated financial statements of HEP and
its  consolidated  Subsidiaries for the fiscal year ended December 31, 1998, and
(iii) the audited consolidated financial statements of HCRC and its consolidated
Subsidiaries for the fiscal year ended December 31, 1998.
         "Financing  Documents"  means this Agreement,  the Notes,  the Guaranty
Agreement and the Collateral Documents.
         "Fixed Rate Borrowing" means a CD Borrowing or a Euro-Dollar
Borrowing.
         "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or both.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                         9

<PAGE>



         "Foreign Taxes" has the meaning set forth in Section .
         "Guaranty Agreement" means the Guaranty Agreement dated as of the
Effective Date  substantially  in the form of Exhibit E among the Obligors party
thereto and the Agent, as amended from time to time.
         "Governmental  Requirement"  means any law, statute,  code,  ordinance,
order,  rule,  regulation,  judgment,  decree,  injunction,  franchise,  permit,
certificate,   license,   authorization   or  other   direction  or  requirement
(including,   without   limitation,   any  of  the  foregoing  which  relate  to
environmental standards or controls, energy regulations and occupational, safety
and health standards or controls) of any (domestic or foreign)  federal,  state,
county,  municipal or other government,  department,  commission,  board, court,
agency or any other instrumentality of any of them, which exercises jurisdiction
over HEC or any of its Subsidiaries or any of their respective Property.
         "Hallwood Group" has the meaning set forth in Section .
         "HCP" has the meaning set forth in the second WHEREAS clause to this
Amended Agreement.
         "HCRC" has the meaning set forth in the second WHEREAS clause to
this Amended Agreement.
         "HCRC Banks" has the meaning set forth in the second  WHEREAS clause to
this Amended Agreement.
         "HCRC Borrowers" has the meaning set forth in the second WHEREAS clause
to this Amended Agreement.
         "HEC" has the meaning set forth in the third WHEREAS clause to this
Amended Agreement.
         "HEP" has the meaning set forth in the first WHEREAS clause to this
Amended Agreement.
         "HEP Banks" has the meaning  set forth in the first  WHEREAS  clause to
this Amended Agreement.
         "HEP  Borrowers"  has the meaning set forth in the first WHEREAS clause
to this Amended Agreement.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        10

<PAGE>



         "HEP General Partner" means The Hallwood Group Incorporated, a Delaware
corporation,  in its capacity as general  partner of HEP, and its  successors in
such capacity.
         "HEP Partnership Agreement" means the Partnership Agreement dated as of
December 5, 1996, as amended from time to time.
         "Hedging  Transaction"  means any rate swap  transaction,  basis  swap,
forward rate transaction,  commodity swap,  commodity  option,  equity or equity
index swap,  equity or equity index option,  bond option,  interest rate option,
foreign  exchange  transaction,  cap  transaction,  floor  transaction,   collar
transaction,  currency swap transaction,  cross-currency  rate swap transaction,
currency  option or any other  similar  transaction  (including  any option with
respect  to  any of  the  foregoing  transactions)  or  any  combination  of the
foregoing transactions including,  without limitation,  any Swap Transaction (as
defined in the Master Exchange Agreement dated as of April 14, 1992 between HCRC
and Morgan Guaranty Trust Company of New York, as amended from time to time).
         "Highest  Lawful  Rate" means,  with  respect to any Bank,  the maximum
nonusurious  interest rate, if any, that at any time or from time to time may be
contracted  for, taken,  reserved,  charged or received on the Note of such Bank
under  laws  applicable  to such Bank which are  presently  in effect or, to the
extent  allowed by law,  under such  applicable  laws which may  hereafter be in
effect  and  which  allow  a  higher  maximum  nonusurious  interest  rate  than
applicable laws now allow.
         "HLP"  means  Hallwood  La Plata,  LLC,  a Colorado  limited  liability
company, and its successors.
         "HSDC" means Hallwood  Spraberry  Drilling Company,  L.L.C., a Colorado
limited liability company, and its successors.
         "Hydrocarbon  Property  Base" means the Petroleum  Properties  that are
owned directly by the Borrowers or the Property Base Subsidiaries.
         "Increased Costs" has the meaning set forth in Section .
         "Indebtedness" means any and all amounts owing or to be owing by the
Borrowers to the Banks,  the Agent and the Collateral Agent under this Agreement
and the other Financing  Documents and all other liabilities of the Borrowers to
the Banks,  the Agent and the Collateral  Agent from time to time existing under
the  Financing  Documents  and all  Derivative  Obligations  of any  Borrower in
respect of any Hedging Transaction between such Borrower and any Bank, and all

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        11

<PAGE>



renewals, extensions, rearrangements, amendments or supplements to any of the
foregoing.
         "Indemnitee" has the meaning set forth in Section  hereof.
         "Interest Period" means:(1) with respect to each Euro-Dollar Borrowing,
the  period  commencing  on the date of such  Borrowing  and ending 1, 2, 3 or 6
months thereafter,  as the Borrowers may elect in the applicable Advance Notice;
provided that:
         (a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding  Euro-Dollar
Business  Day unless such  Euro-Dollar  Business  Day falls in another  calendar
month,  in which  case such  Interest  Period  shall  end on the next  preceding
Euro-Dollar Business Day;
         (b) any Interest Period which begins on the last  Euro-Dollar  Business
Day  of a  calendar  month  (or  on a day  for  which  there  is no  numerically
corresponding  day in the  calendar  month at the end of such  Interest  Period)
shall,  subject to clause (c) below, end on the last Euro-Dollar Business Day of
a calendar month; and
         (c) if any  Interest  Period  includes  a date on  which a  payment  of
principal of the Loans is required to be made under  Section but does not end on
such  date,  then (i) the  principal  amount (if any) of each  Euro-Dollar  Loan
required to be repaid on such date shall have an Interest  Period ending on such
date and (ii) the remainder (if any) of each such Euro-Dollar Loan shall have an
Interest Period  determined as set forth above;  and (2) with respect to each CD
Borrowing,  the period  commencing on the date of such  Borrowing and ending 30,
60, 90 or 180 days  thereafter,  as the  Borrowers  may elect in the  applicable
Advance Notice; provided that:
         (a) any  Interest  Period  (other  than an Interest  Period  determined
pursuant to clause (b)(i) below) which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding  Euro-Dollar
Business Day; and
         (b) if any  Interest  Period  includes  a date on  which a  payment  of
principal of the Loans is required to be made under  Section but does not end on
such date, then (i) the principal amount (if any) of each CD Loan required to be
repaid on such date shall have an Interest  Period  ending on such date and (ii)
the  remainder  (if any) of each  such CD Loan  shall  have an  Interest  Period
determined as set forth above.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        12

<PAGE>



         "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 Debt Limit.
         "Level II Status"  exists on any date if on such date (i) the aggregate
outstanding principal amount of the Loans is less than 85% of the Debt Limit and
(ii) Level I Status does not exist on such date.
         "Level III Status" exists on any date if on such date (i) the aggregate
outstanding principal amount of the Loans is less than 95% of the Debt Limit and
(ii) neither Level I Status nor Level II Status exists on such date.
         "Level  IV  Status"  exists on any date if on such date none of Level I
Status, Level II Status or Level III Status exist.
         "Lien" means,  with respect to any asset, any mortgage,  lien,  pledge,
charge,  security  interest or  encumbrance of any kind in respect of such asset
(including without limitation any production payment,  any obligation to deliver
hydrocarbons in the future in  satisfaction  of any advance  payment  previously
received or any similar  arrangement  with  respect to minerals in place) or any
other   arrangement  the  economic  effect  of  which  is  to  give  a  creditor
preferential  access to such asset to satisfy  its claim,  whether or not filed,
recorded or otherwise  perfected  under  applicable  law. For the purpose of the
Financing  Documents,  a Person shall be deemed to own subject to a Lien (i) any
asset  that it has  acquired  or holds  subject to the  interest  of a vendor or
lessor  under any  conditional  sale  agreement,  capital  lease or other  title
retention  agreement  relating to such asset or any capitalized lease obligation
or (ii) any account  receivable  transferred by it with recourse  (including any
such transfer  subject to a holdback or similar  arrangement  which  effectively
imposes the risk of collectibility upon the transferor).
         "Loan" means a Domestic  Loan or a  Euro-Dollar  Loan and "Loans" means
Domestic Loans or Euro-Dollar Loans or both.
         "LPA"  means La Plata  Associates,  LLC, a Colorado  limited  liability
company, and its successors.
         "Material  Adverse Effect" means any material and adverse effect on the
properties,  business  or  financial  condition  of  HEC  and  its  consolidated
Subsidiaries,  taken as a whole,  determined  at any  time by  reference  to the
information  disclosed  to the  Banks  at the time of the  then  next  preceding
determination of the Debt Limit.
         "Material  Plan"  means at any time a Plan or  Plans  having  aggregate
Unfunded Liabilities in excess of $2,000,000.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        13

<PAGE>



         "Material  Subsidiary" means at any time any Subsidiary of HEC that (i)
on a consolidated  basis,  together with its Subsidiaries,  holds assets with an
aggregate  fair  market  value of at least  $2,500,000,  (ii) on a  consolidated
basis,  together  with  its  Subsidiaries,  accounts  for at  least  2.5% of the
consolidated  cash flows of HEC and its consolidated  Subsidiaries or (iii) on a
consolidated basis, together with its Subsidiaries, holds Proved Reserves with a
present value of at least $2,500,000. The determinations in clauses (i) and (ii)
shall be made on the  basis of the  financial  statements  of HEC most  recently
delivered by the Borrowers to the Banks pursuant to Section 3.06 or 4.01, as the
case may be. The determination in clause (iii) shall be made on the basis of the
Reserve Report most recently delivered by the Borrowers to the Banks pursuant to
Section 4.16.
         "MEPO" means May Energy Partners  Operating  Partnership  LTD., a Texas
limited partnership, and its successors.
         "Mortgaged Property" means the Property owned by or in which HEC or any
of its  Subsidiaries  owns an  undivided  interest  and which is  subject to the
Liens, privileges, priorities and security interests existing under the terms of
the Collateral Documents.
         "Moody's" means Moody's Investors Service, Inc., and its successors.
         "Multiemployer Plan" means at any time an employee pension benefit
plan  within the meaning of Section  4001(a)(3)  of ERISA to which any member of
the  Controlled  Group  is  then  making  or  accruing  an  obligation  to  make
contributions  or has within the preceding  five plan years made  contributions,
including  for these  purposes  any  Person  which  ceased to be a member of the
Controlled Group during such five year period.
         "Nominee"  means EM Nominee  Partnership  Company,  a Colorado  general
partnership, and its successors.
         "Notes" means promissory  notes of the Borrowers,  substantially in the
form of Exhibit A hereto,  evidencing  the  obligation of the Borrowers to repay
the  Loans,  together  with any and all  renewals,  extensions  for any  period,
increases or rearrangements thereof, and "Note" means any one of such promissory
notes issued hereunder.
         "Obligor"  means the  Borrowers  and each  Subsidiary of HEC party from
time to time to the Guaranty Agreement.
         "Original  Agreement"  means the Original HEC Agreement or the Original
HCRC Agreement, as the context may require, and "Original Agreements" means both
of them.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        14

<PAGE>



         "Original  HCRC  Agreement"  has the  meaning  set forth in the  second
WHEREAS clause to this Amended Agreement.
         "Original HEP Agreement" has the meaning set forth in the first WHEREAS
clause to this Amended Agreement.
         "Original HCRC Notes" and "Original HCRC Note" means,  respectively (i)
the promissory  notes of the HCRC Borrowers issued pursuant to the Original HCRC
Agreement to evidence loans made by the HCRC Banks  thereunder and (ii) a single
such Original HCRC Note.
         "Original HEP Notes" and "Original  HEP Note" means,  respectively  (i)
the promissory  notes of the HEP Borrowers  issued  pursuant to the Original HEP
Agreement to evidence  loans made by the HEP Banks  thereunder and (ii) a single
such Original HEP Note.
         "Original  Notes" means the  Original  HEC Notes or the  Original  HCRC
Notes, as the context may require, and "Original Notes" means all of them.
         "Parent" means, with respect to any Bank, any Person controlling such
Bank.
         "Participant" has the meaning set forth in Section .
         "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
         "Person" means any individual, corporation, partnership, joint venture,
association,  limited liability  company,  joint stock company,  trust,  estate,
unincorporated  organization,  government or any agency or political subdivision
thereof, or any other form of entity.
         "Petroleum  Property"  means  any  interest  in oil  and  gas  reserves
(including  without  limitation any production  payment with respect to any such
reserves) which is, or is to be taken into account in the  determination  of the
Debt Limit pursuant to Section .
         "Plan" means at any time an employee pension benefit plan (other than a
Multiemployer  Plan)  which is  covered  by Title IV of ERISA or  subject to the
minimum  funding  standards  under  Section  412 of the Code and  either  (i) is
maintained,  or  contributed  to,  by any  member  of the  Controlled  Group for
employees of any member of the  Controlled  Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        15

<PAGE>



was at such time a member of the  Controlled  Group for  employees of any Person
which was at such time a member of the Controlled Group.
         "Prime  Rate" means the rate of interest  publicly  announced by Morgan
Guaranty  Trust  Company  of New York in New York  City from time to time as its
Prime Rate.
         "Principal Repayment" means the repayment of principal on the Notes
required in Section .
         "Principal  Repayment  Dates" means the dates on which the principal of
the Loans is required to be repaid pursuant to Section .
         "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
         "Property Base Subsidiaries" means MEPO, Concise,  Nominee and HCP, and
any other  Subsidiary of any of the Borrowers agreed to from time to time by the
Borrowers and the Required Banks.
         "Proved Developed  Producing Reserves" has the meaning assigned to that
term by the Society of Petroleum Engineers,  as such meaning may be amended from
time to time, but generally means the subcategory of "Proved Developed Reserves"
(as defined by the Society of  Petroleum  Engineers)  which are  recoverable  by
natural  reservoir  energies from the  completion  intervals  currently open and
producing to market.  Additional oil and gas expected to be obtained through the
application  of  fluid  injection  or other  improved  recovery  techniques  for
supplementing  the natural  forces and  mechanisms  of primary  recovery will be
included as "Proved Developed  Producing Reserves" only after testing by a pilot
project or after the  operation of an installed  program has  confirmed  through
production  response  through  existing  completions  producing  to market  that
increased recovery will be achieved.  Proved Developed  Producing Reserves shall
not include any Proved Developed Non-Producing Reserves.
         "Proved Developed  Non-Producing  Reserves" has the meaning assigned to
that term by the Society of Petroleum Engineers,  as such meaning may be amended
from time to time,  but generally  means the  subcategory  of "Proved  Developed
Reserves" (as defined by the Society of Petroleum  Engineers)  which will become
"Proved Developed Producing Reserves" upon minor capital expenditures being made
with  respect  to  existing  wells  which  will  cause  formerly   non-producing
completions or intervals to become open and producing to market.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        16

<PAGE>



         "Proved Reserves" means and includes Proved Developed Producing
Reserves, Proved Developed Non-Producing Reserves and Proved Undeveloped
Reserves.
         "Proved Undeveloped  Reserves" has the meaning assigned to that term by
the Society of Petroleum Engineers,  as such meaning may be amended from time to
time, but generally  means those reserves that are expected to be recovered from
new wells on undrilled acreage,  or from existing wells where a relatively major
expenditure  is  required  for  recompletion.  Proved  Undeveloped  Reserves  on
undrilled acreage shall be limited to those drilling units offsetting productive
units that are reasonably certain of production when drilled. Proved Undeveloped
Reserves  for  other  undrilled  units  can  be  claimed  only  where  it can be
demonstrated with certainty that the undrilled units contain reserves that are a
continuation of those formations that are producing from the existing productive
formation.  Under no  circumstances  should  estimates  for  Proved  Undeveloped
Reserves  be  attributable  to any  acreage  for which an  application  of fluid
injection or other  improved  recovery  technique is  contemplated,  unless such
techniques  have been proved  effective  by actual  tests in the area and in the
same reservoir.
         "Proxy Statement" has the meaning set forth in the third WHEREAS clause
to this Amended Agreement.
         "Prudential" means The Prudential Insurance Company of America and
its successors and assigns.
         "Regulation  U" means  Regulation  U of the Board of  Governors  of the
Federal Reserve System as the same may be amended or  supplemented  from time to
time.
         "Regulatory  Change"  means any change  after the date of this  Amended
Agreement in United States federal,  state or foreign laws, rules or regulations
or the adoption or making after such date of any interpretations,  directives or
requests of or under any United States federal,  state or foreign laws, rules or
regulations  (whether  or  not  having  the  force  of  law)  by  any  court  or
governmental  authority or reserve bank or  comparable  agency  charged with the
interpretation or administration thereof.
         "Reimbursement Obligations" of any Person means all obligations of such
Person  (whether  fixed or  contingent) to reimburse any bank or other Person in
respect  of  amounts  paid or  payable  under a  letter  of  credit  or  similar
instrument.
         "Reorganization" has the meaning set forth in the third WHEREAS
clause to this Amended Agreement.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        17

<PAGE>



         "Reorganization Agreement" has the meaning set forth in Section
 .
         "Reorganization Documents" has the meaning set forth in Section
 .
         "Reorganization Parties" has the meaning set forth in Section .
         "Required Banks" means at any time Banks having at least 65% of the
aggregate  amount  of  Commitments  or,  if  the  Commitments  shall  have  been
terminated, holding Notes evidencing at least 65% of the aggregate unpaid amount
of the Loans.
         "Reserve Report" means a report delivered by the Borrowers  pursuant to
subsection (a), (b) or (c) of Section hereof.
         "Revolving  Credit  Period" means the period from the Effective Date to
and including the Drawdown Termination Date.
         "S&P"  means  Standard & Poor's  Rating  Services,  a  division  of the
McGraw-Hill Companies, Inc., and its successors.
         "Subordinated  Guaranty"  means the Subsidiary  Guaranty by the Initial
Subsidiary  Guarantors (as defined in the Subordinated  Notes Agreement) and HCP
in favor of Prudential dated as of June 8, 1999, as amended from time to time in
accordance with Section 4.37(b).
         "Subordinated  Notes" means the 10.32%  Senior  Subordinated  Notes Due
December 23, 2007 issued by HCRC pursuant to the Subordinated Notes Agreement.
         "Subordinated   Notes   Agreement"   means  the  Amended  and  Restated
Subordinated  Note and  Warrant  Purchase  Agreement  dated  as of June 8,  1999
between  HCRC,  HEC and  Prudential,  as amended from time to time in accordance
with Section 4.37(b).
         "Subsidiary"  means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons  performing similar functions are at the
time directly or indirectly owned by HEC.
         "Term  Date" means the earlier to occur of May 31, 2002 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.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        18

<PAGE>



         "Term  Period"  means  the  period  commencing  immediately  after  the
Drawdown Termination Date during which principal repayments are made pursuant to
Section .
         "Unfunded Liabilities" means, with respect to any Plan at any time, the
amount  (if any) by which (i) the  actuarial  present  value of all the  benefit
liabilities  (as  determined  for purposes of Title IV of ERISA) under such Plan
exceeds (ii) the fair market value of all Plan assets (excluding any accrued but
unpaid contributions)  allocable to such benefit liabilities (computed on a plan
termination basis in accordance with Title IV of ERISA) all determined as of the
then most recent  valuation date for such Plan, but only to the extent that such
excess  represents a potential  liability of a member of the Controlled Group to
the PBGC or any other Person under Title IV of ERISA.
         SECTION  .  Accounting  Terms  and  Determinations.   Unless  otherwise
specified  herein,  all  accounting  terms  used  in  this  Agreement  shall  be
interpreted,  all  accounting  determinations  hereunder  shall  be made and all
financial  statements  required to be delivered  hereunder  shall be prepared in
accordance with generally accepted accounting  principles as in effect from time
to time, applied on a basis consistent (except for changes concurred in by HEC's
independent  public  accountants)  with the  most  recent  audited  consolidated
financial statements of HEC delivered to the Banks from time to time pursuant to
Section or .

ARTICLE
AMOUNTS AND TERMS OF LOAN
         SECTION . The Loans and Commitment. Subject to the terms and conditions
and relying on the  representations  and  warranties  contained in the Financing
Documents,  the Banks severally agree to make during the Revolving Credit Period
revolving credit Loans to the Borrowers from time to time in such amounts as the
Borrowers  may  request  up to the  maximum  amount  hereinafter  stated and the
Borrowers  may make  borrowings  and  prepayments  (as  permitted or required in
Sections and hereof) and reborrowings in respect  thereof.  Each Borrowing under
this Section shall be made from the several Banks ratably in proportion to their
respective Commitments.
         To evidence the Loans made by each Bank pursuant to this  Section,  the
Borrowers  will issue,  execute and deliver to each Bank a Note in the principal
amount of the  Commitment  of such Bank and dated as of the  Effective  Date and
payable in installments as provided in Section .

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        19

<PAGE>



         SECTION .  Principal  Repayments.  Pursuant to Section , the  Borrowers
will  repay the  principal  amount  outstanding  on each Note in eight (8) equal
quarterly  installments,  commencing on the Term Date and thereafter on the last
day of each  consecutive 3 month period.  Any optional  prepayments of principal
made during the Term  Period  shall be applied  ratably to reduce the  remaining
quarterly  Principal  Repayments.  Any mandatory  prepayments  of principal made
during the Term Period as required by Section  hereof shall be applied to reduce
the  remaining  quarterly  Principal  Repayments  in the inverse  order of their
maturity.
         SECTION .  Borrowing Alternatives.
                         During the Revolving Credit Period, Loans may be either
(i) CD Loans,(ii)Euro-Dollar Loans, (iii) Base Rate Loans or (iv) a  combination
thereof, as elected by the Borrowers or otherwise  applicable in accordance with
Sections , , or or subsection 2.04(e).

         (b) During the Term Period,  the Borrowers may have  outstanding at any
time either (i) CD Loans, (ii) Euro-Dollar  Loans, (iii) Base Rate Loans or (iv)
a  combination  thereof as elected by the  Borrowers or otherwise  applicable in
accordance with Sections , or or subsection  2.04(e),  but no more than four (4)
Borrowings outstanding at any one time.
         SECTION .  Interest Rate.
                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.

          The "Adjusted CD Rate"  applicable to any Interest Period means a rate
per annum  (rounded  upwards,  if  necessary,  to the next  higher  1/100 of 1%)
determined according to the following formula:


[

]


ACDR =
[
CDR
]
+ AR


[

]


ACDR =
Adjusted CD Rate

CDR   =
 CD Rate

DRP =
 Domestic Reserve Percentage

 AR   =
Assessment Rate

         The "CD Rate" applicable to any Interest Period is the rate of interest
determined by the Agent to be the prevailing rate per annum bid at 10:00 AM (New
York City time) (or as soon  thereafter as practicable) on the first day of such
Interest  Period  by two or more New York  certificate  of  deposit  dealers  of
recognized  standing for the purchase of face value from Morgan  Guaranty  Trust
Company of New York of its  certificates  of deposit in an amount  comparable to
the unpaid  principal  amount of the CD Loan of such Bank to which such Interest
Period applies and having a maturity comparable to such Interest Period.
         "Domestic  Reserve  Percentage"  means  for  any  day  that  percentage
(expressed  as a decimal)  which is in effect on such day, as  prescribed by the
Board  of  Governors  of the  Federal  Reserve  System  (or any  successor)  for
determining the maximum reserve  requirement  (including  without limitation any
basic,  supplemental  or  emergency  reserves)  for a member bank of the Federal
Reserve System in New York City with deposits  exceeding five billion dollars in
respect of new  non-personal  time deposits in dollars in New York City having a
maturity  comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted  automatically  on and as of the
effective date of any change in the Domestic Reserve Percentage.
         "Assessment  Rate"  means  for any day the  annual  assessment  rate in
effect  on such day which is  payable  by a member  of the Bank  Insurance  Fund
classified as adequately  capitalized and within supervisory  subgroup "A" (or a
comparable successor  assessment risk  classification)  within the meaning of 12
C.F.R.  ss.  327.3(e)  (or  any  successor  provision)  to the  Federal  Deposit
Insurance  Corporation  (or any  successor)  for  such  Corporation's  (or  such
successor's) insuring time deposits at offices of such institution in the United
States.  The Adjusted CD Rate shall be adjusted  automatically  on and as of the
effective date of any change in the Assessment Rate.
                 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.

          The "Adjusted  Euro-Dollar  Rate"  applicable  to any Interest  Period
means a rate per annum (rounded upwards, if necessary,  to the next higher 1/100
of 1%) determined according to the following formula:

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        20

<PAGE>



AEDR =
Euro-Dollar Rate


 (1.00 - Euro-Dollar Reserve Percentage)

AEDR =
Adjusted Euro-Dollar Rate

         The "Euro-Dollar Rate" applicable to any Interest Period means the rate
per annum at which  deposits  in dollars are  offered to Morgan  Guaranty  Trust
Company of New York in the London  interbank  market at  approximately  11:00 AM
(London  time)  two  Euro-Dollar  Business  Days  before  the  first day of such
Interest Period in an amount  approximately equal to the principal amount of the
Euro-Dollar  Loan of such Bank to which such  Interest  Period is to apply for a
period of time comparable to such Interest Period.
         "Euro-Dollar  Reserve  Percentage"  means  for any day that  percentage
(expressed  as a decimal)  which is in effect on such day, as  prescribed by the
Board  of  Governors  of the  Federal  Reserve  System  (or any  successor)  for
determining  the maximum  reserve  requirement  for a member bank of the Federal
Reserve System in New York City with deposits  exceeding five billion dollars in
respect of  "Eurocurrency  liabilities"  (or in respect of any other category of
liabilities  which includes  deposits by reference to which the interest rate on
Euro-Dollar  Loans is determined  or any category of extensions  credit or other
assets which includes loans by a non-United  States office of any Bank to United
States residents). The Adjusted Euro-Dollar Rate shall be adjusted automatically
on  and as of the  effective  date  of any  change  in the  Euro-Dollar  Reserve
Percentage.
                   Each Bank's Base Rate Loans shall bear interest on the unpaid
principal  amount  thereof  until  payment in full thereof at a varying rate per
annum at all times equal to the sum of (i) the Base Rate plus (ii) the Base Rate
Margin, but in no event to exceed the Highest Lawful Rate of such Bank.

          Interest shall be payable (i) as to any Base Rate Loan on the last day
of each May, August, November and February, commencing on the first of such days
to occur  after such Loan is made,  and on the  maturity of each Bank's Note and
(ii)  as to any  Fixed  Rate  Loan,  on the  last  day of each  Interest  Period
applicable  thereto;  provided  that if any  Interest  Period of more than three
months or 90 days,  as  applicable,  is  selected  for any  Fixed  Rate Loan (if
permitted by other terms of this Agreement), interest shall also be payable with
respect to such Loan at intervals  of three  months or 90 days,  as the case may
be, after the first day thereof.

           On each day during which a Default shall occur and be continuing, all
outstanding  Loans of each Bank, and all interest which is past due to such Bank
on such day, shall bear interest at a rate per annum equal to the sum of 2% plus

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        21

<PAGE>



the Base Rate for such day, but in no event to exceed the Highest Lawful Rate of
such Bank.
         (f) The Agent shall  determine  each  interest  rate  applicable to the
Loans  hereunder.  The Agent shall give prompt  notice to the Borrowers and each
Bank of each rate of interest so determined, and its determination thereof shall
be  conclusive in the absence of manifest  error.  In the absence of notice from
any Bank to the  effect  that the rate of  interest  otherwise  payable  for its
account hereunder  (computed as provided herein) exceeds the Highest Lawful Rate
applicable to such Bank, which notice shall specify such Highest Lawful Rate and
the basis of computation  thereof,  the Agent may  conclusively  assume that the
rate of interest  provided for herein does not exceed such  Highest  Lawful Rate
and shall incur no liability to any party by virtue thereof.
         SECTION .  Computation  of Interest.  Interest  based on the Prime Rate
hereunder shall be computed on the basis of a year of 365 days (or 366 days in a
leap year) and paid for the actual number of days elapsed  (including  the first
day but excluding the last day).  Commitment  fees and all other interest on all
Loans and other  Indebtedness  shall be  computed on the basis of a 360 day year
and paid for the  actual  number of days  elapsed  (including  the first day but
excluding the last day), unless such computation would result in a usurious rate
for any Bank,  in which  case  interest  for the  account  of such Bank shall be
computed  on the  basis of a year of 365 or 366  days,  as the case may be.  The
Agent shall promptly notify the Borrowers of each  determination  of an Adjusted
CD Rate or an Adjusted Euro-Dollar Rate.
         SECTION .  Borrowing Procedure.
           The  Borrowers  shall give  Advance  Notice to the Agent prior to the
proposed  borrowing  date.  Such  notice  shall  specify  (i) the  amount  to be
borrowed; (ii) the borrowing date (which shall be a Euro-Dollar Business Day, in
the case of  Euro-Dollar  Loans,  or a Domestic  Business Day, in the case of CD
Rate  Loans or Base  Rate  Loans);  (iii)  whether  the  Loans  comprising  such
Borrowing  are  to  be  Euro-Dollar  Loans,  Base  Rate  Loans,  CD  Loans  or a
combination  thereof  (in which case the  portions  shall be  specified  in such
notice);  and (iv) in the case of a Fixed Rate  Borrowing,  the  duration of the
initial  Interest  Period  applicable  thereto,  subject  to the  definition  of
Interest  Period.  Each Borrowing shall be in the principal amount of $1,000,000
or any whole multiple of $1,000,000 in excess thereof or the amount of the total
remaining Commitment available for borrowing.
              Upon receipt of an Advance Notice, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's ratable share of such

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        22

<PAGE>



Borrowing  and such  Advance  Notice  shall not  thereafter  be revocable by the
Borrowers.

               Not later than (i) 12:00 Noon (New York City time) on the date of
each Fixed Rate  Borrowing  and (ii) 12:00 Noon (New York City time) on the date
of each Base Rate  Borrowing,  each Bank shall (except as provided in subsection
(d) of this Section) make  available  its ratable  share of such  Borrowing,  in
Federal or other funds  immediately  available in New York City, to the Agent at
its address  specified  in or pursuant to Section . Unless the Agent  determines
that any applicable  condition specified in Article has not been satisfied,  the
Agent will make the funds so received from the Banks  available to the Borrowers
at the Agent's aforesaid address.

                    If any Bank makes a new Loan hereunder on a day on which the
Borrowers  are to repay all or any part of an  outstanding  Loan from such Bank,
such Bank shall apply the  proceeds of its new Loan to make such  repayment  and
only an  amount  equal to the  difference  (if any)  between  the  amount  being
borrowed and the amount being repaid shall be made available by such Bank to the
Agent  as  provided  in  subsection  (c) of this  Section,  or  remitted  by the
Borrowers to the Agent as provided in Section , as the case may be.

            Unless the Agent shall have received notice from a Bank prior to the
date of any Borrowing  that such Bank will not make  available to the Agent such
Bank's  share of such  Borrowing,  the Agent may assume  that such Bank has made
such share  available to the Agent on the date of such  Borrowing in  accordance
with subsections (c) and (d) of this Section and the Agent may, in reliance upon
such  assumption,  make available to the Borrowers on such date a  corresponding
amount.  If and to the  extent  that such Bank shall not have so made such share
available to the Agent,  such Bank, on the one hand, and the  Borrowers,  on the
other  hand,  each  agree  to  repay  to the  Agent  forthwith  on  demand  such
corresponding  amount together with interest thereon, for each day from the date
such amount is made  available  to the  Borrowers  until the date such amount is
repaid to the Agent, at (i) in the case of the Borrowers, a rate per annum equal
to the higher of the Federal Funds Rate and the interest rate applicable thereto
pursuant to Section and (ii) in the case of such Bank,  the Federal  Funds Rate.
If such Bank shall repay to the Agent such corresponding  amount, such amount so
repaid shall constitute such Bank's Loan included in such Borrowing for purposes
of this  Agreement.  The failure of any Bank to make such share available to the
Agent on the date  specified  therefor  shall not  relieve any other Bank of its
obligation  to make its share  available to the Agent on such date,  but neither
any Bank nor the Agent shall be responsible for the failure of any other Bank to
make such share available to the Agent.

         SECTION .   Continuation Options.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        23

<PAGE>



                   The Borrowers may elect to continue all or any part of any CD
Borrowing  beyond the expiration of the then current  Interest  Period  relating
thereto by giving Advance  Notice to the Agent of such election,  specifying the
CD  Borrowing  or  portion  thereof  to be  continued  and the  Interest  Period
therefor.  In the absence of such a timely and proper  election,  the  Borrowers
shall be deemed to have  elected to  convert  such CD  Borrowing  to a Base Rate
Borrowing pursuant to subsection .

                      The Borrowers may elect to continue all or any part of any
Euro-Dollar  Borrowing beyond the expiration of the then current Interest Period
relating  thereto  by  giving  Advance  Notice  to the  Agent of such  election,
specifying the Euro-Dollar Borrowing or portion thereof to be continued.  In the
absence of such a timely and proper  election,  the Borrowers shall be deemed to
have elected to convert  such  Euro-Dollar  Borrowing  to a Base Rate  Borrowing
pursuant to subsection .

                 All or any part of any Fixed Rate Borrowing may be continued as
provided herein,  provided that (i) any continuation of any such Borrowing shall
be (as to each Borrowing as continued for an applicable  Interest Period) in the
principal  amount of  $1,000,000  or any whole  multiple of $1,000,000 in excess
thereof and (ii) no Default shall have occurred and be continuing.  If a Default
shall have  occurred  and be  continuing,  each Fixed  Rate  Borrowing  shall be
converted  to a Base  Rate  Borrowing  on the  last day of the  Interest  Period
applicable thereto.

         SECTION . Conversion Options. The Borrowers may elect to convert any CD
Borrowing on the last day of the then current  Interest Period relating  thereto
to a Euro-Dollar Borrowing or Base Rate Borrowing,  or a combination thereof, by
giving Advance Notice to the Agent of such election, specifying, if electing one
or more Euro-Dollar Borrowings, each Interest Period therefor.
                 The Borrowers may elect to convert any Euro-Dollar Borrowing on
the  last day of the then  current  Interest  Period  relating  thereto  to a CD
Borrowing or Base Rate Borrowing,  or a combination  thereof,  by giving Advance
Notice to the Agent of such election.

                 The Borrowers may elect to convert a Base Rate Borrowing at any
time or  from  time to time to a CD  Borrowing  or  Euro-Dollar  Borrowing  or a
combination  thereof  by giving  Advance  Notice to the Agent of such  election,
specifying each Interest Period therefor.

                All or any part of any outstanding Borrowing may be converted as
provided herein, provided that any conversion of any such Borrowing into a Fixed

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        24

<PAGE>



Rate  Borrowing  shall  be (as to each  such  Borrowing  into  which  there is a
conversion  for an  applicable  Interest  Period)  in the  principal  amount  of
$1,000,000 or any whole multiple of $1,000,000 in excess thereof.  If no Default
shall have  occurred  and be  continuing,  each  Borrowing  may be  converted as
provided in this Section. If a Default shall have occurred and be continuing, no
Borrowing may be converted into a Fixed Rate Borrowing.

         SECTION  .  Optional   Prepayments,   Termination   or   Reduction   of
Commitments.  The Borrowers may, at their option,  as to any Base Rate Borrowing
at any time and from time to time and as to any Fixed Rate Borrowing only on the
last day of the Interest Period  applicable  thereto,  prepay any Borrowing,  in
whole or in part, without premium or penalty,  upon giving Advance Notice to the
Agent.  Such  notice  shall  specify the date and amount of  prepayment  and the
Borrowing to which such prepayment is to be applicable.
         Upon receipt of a notice of prepayment  pursuant to this  Section,  the
Agent shall promptly notify each Bank of the contents thereof and of such Bank's
ratable  share of such  prepayment  and such  notice  shall  not  thereafter  be
revocable by the Borrowers. The payment amount specified in such notice shall be
due and payable on the date specified.  Each prepayment shall be, in the case of
any  Borrowing,  in the principal  amount of $1,000,000 or any whole multiple of
$1,000,000 in excess thereof or the balance outstanding of such Borrowing.  Each
such  optional  prepayment  shall be applied to prepay  ratably the Loans of the
several Banks included in such Borrowing.
           During the Revolving Credit Period,  the Borrowers may, upon at least
three  Domestic  Business  Days' notice to the Agent,  terminate at any time, or
proportionately reduce from time to time by an aggregate amount of $1,000,000 or
any whole multiple of $1,000,000 in excess  thereof,  the unused portions of the
Commitments.  If the Commitments  are terminated in their entirety,  all accrued
commitment fees shall be payable on the effective date of such termination.
         SECTION . Mandatory Prepayments. In the event that the aggregate unpaid
principal  amount of Debt of the  Borrowers  at any time  exceeds the Debt Limit
then most recently  determined,  the Borrowers  shall,  on or before thirty (30)
days from the  earlier of the  Agent's  notification  to the  Borrowers  of such
excess or the  Borrowers  otherwise  becoming  aware of such excess,  either (i)
cause additional Property to be added to the Hydrocarbon Property Base such that
the Debt Limit as  redetermined by the Banks after giving effect thereto will be
increased by an amount at least equal to such  excess,  and the  Borrowers  will
deliver to the Agent within said period (a) such title  opinions and other title
information  that the  Borrowers  have  access to  showing  that the  Borrowers,
individually or jointly,  have good and indefeasible  title to such Property and
(b) such Collateral Documents as are necessary to comply with Section based

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        25

<PAGE>



on such  increased  Hydrocarbon  Property  Base;  or (ii) prepay the Notes in an
aggregate  principal  amount  which is at least equal to such  excess;  or (iii)
eliminate  such excess by a combination of the actions  contemplated  by clauses
(i) and (ii);  provided that the provisions of this Section shall not prevent an
Event of Default from arising under the provisions of Section or 5.01(b).
         SECTION . Payments. All payments (including  prepayments) to be made by
the  Borrowers  on  account  of  principal,  interest  and fees  under a Note or
Commitment  or  any  other   Indebtedness   shall  be  made  without  setoff  or
counterclaim  not later  than  12:00  Noon (New York City time) on the date when
due, in Federal or other funds  immediately  available in New York City,  to the
Agent at its address  specified in Section . The Agent will promptly  distribute
to each Bank its ratable  share of each such  payment  received by the Agent for
the account of the Banks. If any payment under a Note (other than any payment on
a  Euro-Dollar  Loan)  becomes  due and  payable  on a day other than a Domestic
Business  Day, the  maturity  thereof  shall be extended to the next  succeeding
Domestic  Business  Day and with  respect to  payments  of  principal,  interest
thereon shall be payable at the then applicable  rate during such extension.  If
any payment on a Euro-Dollar  Loan becomes due and payable on a day other than a
Euro-Dollar  Business  Day, the maturity  thereof  shall be extended to the next
succeeding  Euro-Dollar  Business Day unless such Euro-Dollar Business Day falls
on another  calendar  month, in which case the date for payment thereof shall be
the next  preceding  Euro-Dollar  Business  Day, and  interest on the  principal
outstanding  thereon  shall be payable at the then  applicable  rate during such
extension.
           Unless the Agent shall have received  notice from the Borrowers prior
to the  date on  which  any  payment  is due to the  Banks  hereunder  that  the
Borrowers  will not make such  payment in full,  the Agent may  assume  that the
Borrowers have made such payment in full to the Agent on such date and the Agent
may, in reliance upon such  assumption,  cause to be distributed to each Bank on
such due date an amount  equal to the amount  then due such Bank.  If and to the
extent that the Borrowers  shall not have so made such payment,  each Bank shall
repay to the Agent  forthwith  on demand  such amount  distributed  to such Bank
together  with  interest  thereon,  for each day from the date  such  amount  is
distributed  to such Bank  until the date such Bank  repays  such  amount to the
Agent, at the Federal Funds Rate.
         SECTION . Interest. It is the intention of the parties hereto that each
Bank shall conform strictly to usury laws applicable to it. Accordingly,  if the
transactions  contemplated  hereby  would be  usurious  as to a Bank  under laws
applicable  to it  (including  the laws of the  United  States of America or any
other jurisdiction whose laws may be mandatorily applicable  notwithstanding the
other  provisions  of this  Agreement),  then,  in that  event,  notwithstanding
anything to the

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        26

<PAGE>



contrary in a Note or any other Financing  Document or other  agreement  entered
into in connection with or as security for a Note, it is agreed as follows:  (i)
the  aggregate  of  all  consideration  which  constitutes  interest  under  law
applicable  to a Bank  that is  contracted  for,  taken,  reserved,  charged  or
received  by such Bank  under a Note or any other  Financing  Document  or other
agreements or otherwise in connection  with a Note shall under no  circumstances
exceed the maximum amount allowed by such  applicable  law, and any excess shall
be credited by such Bank on the principal amount of its Indebtedness as selected
by such Bank (or, if the principal  amount of the  Indebtedness  shall have been
paid in full,  refunded  by such Bank to the  Borrowers);  and (ii) in the event
that the  maturity  of a Note is  accelerated  by reason of an  election  of the
holder or  holders  thereof  resulting  from any  Event of  Default  under  this
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration  that constitutes  interest under law applicable to such
Bank may never include more than the maximum amount  allowed by such  applicable
law, and excess  interest,  if any,  provided for in this Agreement or otherwise
shall be canceled automatically by such Bank as of the date of such acceleration
or prepayment  and if  theretofore  paid,  shall be credited by such Bank on the
principal  amount of its  Indebtedness  as  selected  by such  Bank (or,  if the
principal amount of the Indebtedness  shall have been paid in full,  refunded by
such  Bank  to the  Borrowers).  To the  extent  that  any  court  of  competent
jurisdiction  determines,  notwithstanding  the provisions hereof, that any Bank
located  in Texas may be subject to Texas law  limiting  the amount of  interest
payable for its account,  such Bank shall  utilize the  indicated  (weekly) rate
ceiling  from time to time in effect as provided  in Chapter 1D of Article  5069
(Tex.Rev.Civ.Stat.Ann.  art 5069-1D.001, et seq.), as amended. In no event shall
the  provisions  of Article 5069,  Chapter 15 of the Revised  Civil  Statutes of
Texas (which  regulates  certain  revolving  credit loan  accounts and revolving
tri-party accounts) apply to any Loan made hereunder.
         SECTION . Reimbursement of Certain Funding Losses. Without prejudice to
any other provision of this Agreement,  in the event that a Bank shall incur any
loss or expense  after  making  reasonable  efforts to minimize any such loss or
expense (including,  without limitation,  any loss or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by a Bank
to fund or maintain all or any portion of the  outstanding  principal  amount of
any Fixed Rate Loan, but excluding loss of margin) as a result of
                  payment, prepayment or conversion of such principal amount of
such Fixed Rate Loan on a date  other than the last day of any  Interest  Period
applicable thereto, whether pursuant to Section , or or otherwise, or

               any failure by the Borrowers to borrow, continue or convert into,
such Fixed Rate Loan on the date or in the amount specified in an Advance Notice
given pursuant to this Agreement,

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        27

<PAGE>




then the  Borrowers  shall pay to the  Agent,  on  demand,  such  amount as will
reimburse  such Bank for such loss or expense.  A  certificate  setting forth in
reasonable  detail any  additional  amounts  payable  pursuant to the  foregoing
submitted  by such Bank shall be prima facie  evidence of such  amounts,  absent
manifest error.
         SECTION .  Increased Costs.    If, as the result of any Regulatory
Change:
                    a Bank (or its Applicable Lending Office) shall be subjected
to any tax of any kind whatsoever  with respect to the Agreement,  a Note or any
Fixed Rate Loan made by it, or the basis of  taxation of payments to the Bank of
principal,  interest, fees or any other amount payable under this Agreement or a
Note shall be changed  (except for changes in the rate of tax on the overall net
income  of  such  Bank  or  such  Applicable   Lending  Office  imposed  by  the
jurisdiction in which such Bank's  principal  office or such Applicable  Lending
Office is located); or

                        any reserve, special deposit, compulsory loan, insurance
assessment  or similar  requirement  is imposed,  modified or deemed  applicable
against  assets held by, or deposits or other  liabilities in or for the account
of, advances or loans by, or other credit extended by, or any other  acquisition
of funds by, any office of a Bank (in excess, and without duplication,  of those
taken into account in computing  the Domestic  Reserve  Percentage,  Euro-Dollar
Reserve Percentage and Assessment Rate); or

                     any other condition affecting this Agreement, a Note or any
of its Fixed Rate Loans is imposed on a Bank;

and the result of any of the  foregoing  is to increase the cost to such Bank of
making,  maintaining  or  funding  any of its Fixed  Rate Loans or to reduce any
amount  receivable  in respect of such Fixed Rate Loans (such  increases in cost
and  reductions  in  amounts  receivable  being  hereinafter  called  "Increased
Costs"),  then, in any such case, the Borrowers shall promptly pay to such Bank,
within ten Domestic  Business Days of its demand,  such additional  amount which
will  compensate  such Bank for such  Increased Cost as determined by such Bank.
Upon receiving demand from a Bank pursuant to subsection (a) of this Section and
at any time thereafter (unless and until such Bank has rescinded such demand) at
the option of the Borrowers  and upon giving  Advance  Notice to the Agent,  the
Borrowers  may (A) in any case  where such  Increased  Costs are  applicable  to
Euro-Dollar  Loans,  convert  to Base  Rate  Loans or CD Loans  all  outstanding
Euro-Dollar Loans made by such Bank or (B) in any case where such Increased

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        28

<PAGE>



Costs are  applicable  to CD Loans,  convert to Base Rate  Loans or  Euro-Dollar
Loans all  outstanding CD Rate Loans made by such Bank. Upon any such conversion
of the Fixed Rate Loans of any Bank,  the  Borrowers  shall pay to such Bank, in
accordance  with Section , such amounts as may be necessary to  compensate  such
Bank for any loss or expense  sustained  or  incurred by such Bank in respect of
such Fixed Rate Loans as a result of such conversion.
         It is understood  that in compensating a Bank for taxes pursuant to the
preceding  paragraph,  the amount of compensation  shall include such additional
amounts as may be  necessary so that every net payment of  principal,  interest,
fees or other amount payable under this Agreement,  after taxes (including taxes
levied on any additional interest paid pursuant to this subsection), will not be
less than the corresponding amount provided for in this Agreement.
                If any Bank shall have determined that any Regulatory Change has
or would have the effect of reducing  the rate of return on capital of such Bank
(or its Parent) as a consequence of such Bank's obligations hereunder to a level
below that which it or its Parent could have  achieved  but for such  Regulatory
Change (taking into consideration its policies with respect to capital adequacy)
by an amount deemed by such Bank to be material,  then from time to time, within
15 days after  demand by such Bank  (with a copy to the  Agent),  the  Borrowers
shall pay to such Bank such additional amount or amounts as will compensate such
Bank (or its Parent) for such reduction.

               Each Bank will promptly notify the Borrowers and the Agent of any
event of which it has  knowledge,  occurring  after the date hereof,  which will
entitle such Bank to compensation  pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Bank be  otherwise  disadvantageous  to such  Bank.  A  certificate  of any Bank
claiming  compensation under this Section and setting forth in reasonable detail
the  calculation of the additional  amount or amounts to be paid to it hereunder
shall be  conclusive  in the  absence of manifest  error.  In  determining  such
amount, such Bank may use any reasonable averaging and attribution methods.

              If a Bank receives a refund or credit in respect of such Increased
Costs from a Person  other than the  Borrowers,  such Bank shall  reimburse  the
Borrowers  for the  amount of such  refund or credit  not to exceed  the  amount
actually paid by the Borrowers to such Bank in respect of such Increased Costs.

         SECTION .  Basis for Determining Fixed Rates Inadequate.  In the
event that:

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        29

<PAGE>



                the Agent shall have determined in good faith that by reason of
circumstances   affecting  the  domestic  market  for  certificates  of  deposit
generally,  adequate  and  reasonable  means do not exist for  ascertaining  the
Adjusted CD Rate  applicable  pursuant to  subsection  2.04(a) for any  Interest
Period  elected by the Borrowers  with respect to (1) a proposed  Borrowing that
the Borrowers have requested be made as a CD Borrowing,  (2) a CD Borrowing that
will  result  from  the  requested  conversion  of a Base  Rate  or  Euro-Dollar
Borrowing  into a CD Borrowing,  or (3) the  continuation  of an  outstanding CD
Borrowing beyond the expiration of the then current  Interest Period  applicable
thereto,  or the Agent shall have  determined in good faith that the Adjusted CD
Rate will not  adequately  and fairly  reflect  the cost to the Banks of making,
maintaining or funding a proposed Borrowing that the Borrowers have requested be
made or  continued  as or converted  into a CD  Borrowing,  then the Agent shall
promptly  give notice of such  determination  to the  Borrowers on the borrowing
date for such CD Borrowing,  the conversion  date of such Base Rate Borrowing or
Euro-Dollar Borrowing or the last day of such Interest Period. If such notice is
given,  and subject to the Borrowers'  right (if the required Advance Notice can
then be given)  pursuant to Section , or to request a  Euro-Dollar  Borrowing in
lieu of a requested CD  Borrowing or to convert to or to continue a  Euro-Dollar
Borrowing in lieu of converting to a CD Borrowing (for which limited purpose the
Advance  Notice  pertaining to such CD Borrowing  shall be  revocable),  (i) any
requested CD  Borrowing  shall be made as a Base Rate  Borrowing;  (ii) any Base
Rate  Borrowing  that was to have  been  converted  to a CD  Borrowing  shall be
continued as a Base Rate Borrowing;  (iii) any Euro-Dollar Borrowing that was to
have  been  converted  to a CD  Borrowing  shall  be  converted  to a Base  Rate
Borrowing and (iv) any outstanding CD Borrowing shall be converted,  on the last
day of the then  current  Interest  Period  applicable  thereto,  to a Base Rate
Borrowing.  Until such  notice has been  withdrawn  by the Agent,  no further CD
Loans shall be made nor shall the Borrowers  have the right to convert Base Rate
Loans or Euro-Dollar Loans to CD Loans;

                 the Agent shall have determined in good faith that by reason of
circumstances  affecting the interbank Euro-Dollar market generally adequate and
reasonable  means do not exist for  ascertaining  the Adjusted  Euro-Dollar Rate
applicable pursuant to subsection 2.04(b) for any Interest Period elected by the
Borrowers  with  respect to (1) a proposed  Borrowing  that the  Borrowers  have
requested be made as a Euro-Dollar  Borrowing,  (2) a Euro-Dollar Borrowing that
will result  from the  requested  conversion  of a Base Rate  Borrowing  or a CD
Borrowing into a Euro-Dollar Borrowing or (3) the continuation of an outstanding
Euro-Dollar  Borrowing beyond the expiration of the then current Interest Period
applicable  thereto,  or the Agent shall have  determined in good faith that the
Adjusted Euro-Dollar Rate will not adequately and fairly reflect the cost to the
Banks of making,  maintaining or funding a proposed Borrowing that the Borrowers
have requested be made or continued as or converted into a

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        30

<PAGE>



Euro-Dollar  Borrowing,  then the  Agent  shall  promptly  give  notice  of such
determination  to the Borrowers at least one Euro-Dollar  Business Day prior to,
as the case may be,  the  borrowing  date for such  Euro-Dollar  Borrowing,  the
conversion  date of such Base Rate  Borrowing or CD Borrowing or the last day of
such Interest  Period.  If such notice is given,  and subject to the  Borrowers'
right (if the required  Advance Notice can then be given)  pursuant to Section ,
or to request a CD Borrowing in lieu of a requested  Euro-Dollar Borrowing or to
convert to or to continue a CD Borrowing in lieu of  converting to a Euro-Dollar
Borrowing  (for which  limited  purpose the Advance  Notice  pertaining  to such
Euro-Dollar  Borrowing  shall  be  revocable),  (i)  any  requested  Euro-Dollar
Borrowing shall be made as a Base Rate  Borrowing,  (ii) any Base Rate Borrowing
that was to have been converted to a Euro-Dollar Borrowing shall be continued as
a Base Rate Borrowing, (iii) any CD Borrowing that was to have been converted to
a Euro-Dollar Borrowing shall be converted to a Base Rate Borrowing and (iv) any
outstanding Euro-Dollar Borrowing shall be converted on the last day of the then
current Interest Period applicable thereto to a Base Rate Borrowing.  Until such
notice has been withdrawn by the Agent,  no further  Euro-Dollar  Loans shall be
made nor shall the  Borrowers  have the right to  convert  Base Rate Loans or CD
Rate Loans to Euro-Dollar Loans.

         SECTION  .  Illegality.  Notwithstanding  any other  provision  in this
Agreement,  if, as a result of any  Regulatory  Change,  it shall be unlawful or
impossible for a Bank (or its Applicable  Lending  Office) to make,  maintain or
fund any  Fixed  Rate  Loans as  contemplated  by this  Agreement,  such  Bank's
obligation  hereunder to make the affected  Fixed Rate Loans shall  forthwith be
canceled provided that such Bank shall designate a different  Applicable Lending
Office if such  designation  will avoid the need for such  cancellation and will
not be  otherwise  disadvantageous  to such  Bank.  Immediately  upon  any  such
cancellation,  if it shall be unlawful or  impossible to maintain any Fixed Rate
Loans then outstanding,  all such Fixed Rate Loans of such Bank then outstanding
shall be converted  automatically  to Base Rate Loans.  Such Bank shall promptly
give written  notice to the Borrowers and the Agent of any such  conversion.  If
any such  conversion  of a Fixed  Rate Loan is made prior to the last day of the
then current Interest Period  therefor,  the Borrowers shall pay to such Bank in
accordance  with  Section  , such  amount  or  amounts  as may be  necessary  to
compensate such Bank for any loss or expense  sustained or incurred by such Bank
in respect of such Fixed Rate Loan as a result of such conversion. A certificate
setting forth in reasonable  detail any additional  amounts payable  pursuant to
the foregoing  sentence  submitted by such Bank to the Borrowers  shall be prima
facie evidence of such amounts, absent manifest error.
         SECTION .  Foreign Taxes.    All payments made by the Borrowers
for the account of any Bank under its Note or this Agreement or any other
Financing Document shall be made free and clear of, and without reduction for or

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        31

<PAGE>



on account  of, any  present or future  income,  stamp or other  taxes,  levies,
imposts,  duties,  charges,  fees,  deductions,  withholdings,  restrictions  or
conditions of any nature whatsoever now or hereafter imposed, levied, collected,
withheld or assessed by any country  including  the United States of America (or
by any political subdivision or taxing authority thereof or therein),  excluding
net income and franchise taxes now or hereafter  imposed by the United States of
America,  by any state of the  United  States  of  America  or by any  political
subdivision or taxing authority  thereof or therein,  or by the country in which
such Bank's Applicable Lending Office is located or any political subdivision or
taxing authority thereof or therein (such  non-excluded  taxes being hereinafter
called "Foreign  Taxes").  If any Foreign Taxes are required to be withheld from
any amounts payable to such Bank under its Note or this  Agreement,  the amounts
so payable to such Bank shall be increased  to the extent  necessary to yield to
such Bank  (after  payment  of all  Foreign  Taxes)  interest  or any such other
amounts payable thereunder or hereunder at the rates or in the amounts specified
in its Note or this  Agreement.  Whenever  any  Foreign  Tax is  payable  by the
Borrowers,  as promptly as possible  thereafter,  the  Borrowers  shall send the
Agent an original official receipt showing payment thereof. If a Bank receives a
refund or credit in respect of such  Foreign  Taxes from a Person other than the
Borrowers, such Bank shall reimburse the Borrowers for the amount of such refund
or credit not to exceed the amount  actually paid by the Borrowers to or for the
account of such Bank in respect of such Foreign Taxes.
           At least five Domestic Business Days prior to the first date on which
interest or fees are payable  hereunder  for the account of any Bank,  each Bank
that is not  incorporated  under the laws of the  United  States of America or a
state  thereof  agrees that it will deliver to the  Borrowers  and the Agent two
duly completed  copies of United States  Internal  Revenue  Service Form 1001 or
4224,  certifying in either case that such Bank is entitled to receive  payments
under this  Agreement  and the Notes  without  deduction or  withholding  of any
United States federal  income taxes.  Each Bank which so delivers a Form 1001 or
4224 further undertakes to deliver to the Borrowers and the Agent two additional
copies of such form (or a  successor  form) on or before the date that such form
expires or becomes  obsolete or after the  occurrence  of any event  requiring a
change in the most recent form so delivered by it, and such  amendments  thereto
or  extensions  or  renewals  thereof  as may  be  reasonably  requested  by the
Borrowers or the Agent,  in each case  certifying  that such Bank is entitled to
receive  payments  under  this  Agreement  and the Notes  without  deduction  or
withholding  of  any  United  States  federal  income  taxes,  unless  an  event
(including  without  limitation  any change in treaty,  law or  regulation)  has
occurred  prior to the  date on  which  any such  delivery  would  otherwise  be
required which renders all such forms  inapplicable  or which would prevent such
Bank from duly  completing  and  delivering any such form with respect to it and
such Bank advises the Borrowers and the Agent that it

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        32

<PAGE>



is not capable of receiving  payments  without any deduction or  withholding  of
United States federal income tax.

         SECTION .  Substitution  of Banks. If (i) the obligation of any Bank to
make  Euro-Dollar  Loans has been canceled  pursuant to Section or (ii) any Bank
has demanded compensation under Section or , the Borrowers shall have the right,
with the  assistance of the Agent,  to seek a mutually  satisfactory  substitute
bank or banks  (which may be one or more of the Banks) to purchase  the Note and
assume the Commitment of such Bank.
         SECTION .  Participants'  Expenses.  All costs,  losses,  expenses,  or
liabilities  of a Bank  reimbursable  pursuant to this Article by the  Borrowers
shall also include all costs,  losses,  expenses,  or liabilities of any lenders
participating  through such Bank in this  Agreement,  a Note,  or any Fixed Rate
Loan. A certificate  setting forth in reasonable  detail any additional  amounts
payable  pursuant  to the  foregoing  sentence  submitted  by  such  Bank to the
Borrowers shall be prima facie evidence of such amounts, absent manifest error.
         SECTION . 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 . Engineering  Fee. The Borrowers agree to pay to the Agent and
each of the Banks a non-refundable fee of $10,000 and $7,500,  respectively,  on
March 31, 2000 and on each  anniversary  thereof to  reimburse  them for certain
engineering and other costs.  If the Petroleum  Property  changes  substantially
after the date  hereof,  the  Agent  shall  have the  right,  in its  reasonable
discretion, to modify such fee to reflect increased engineering and other costs.
         SECTION . Agents' Fees. The Borrowers agree to pay to each of the Agent
and the  Collateral  Agent  $15,000  on March 31,  2000 and on each  anniversary
thereof  to  reimburse   the  Agent  and  the   Collateral   Agent  for  certain
administrative costs in connection with the Financing Documents.
         SECTION .  Participation Fee.  The Borrowers shall pay on the
Effective Date to the Agent for the account of the Banks ratably in accordance
with their respective Commitments as in effect of the Effective Date immediately

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        33

<PAGE>



after giving effect to this Amended Agreement a participation fee equal to 0.45%
of the Debt Limit then in effect.

ARTICLE
REPRESENTATIONS AND WARRANTIES
         In order to induce the Banks to enter into this Amended Agreement,  the
Borrowers  represent  and  warrant  to  the  Banks  (which  representations  and
warranties  will  survive the delivery of the Notes and the making of the Loans)
that:
         SECTION . Existence.  HEC is a corporation duly  incorporated,  validly
existing and in good standing  under the laws of the State of Delaware,  and has
all corporate  powers and all material  governmental  licenses,  authorizations,
consents and approvals required to carry on its business as now conducted.
                HCRC is a corporation duly incorporated, validly existing and in
good  standing  under the laws of the State of Delaware,  and has all  corporate
powers and all  material  governmental  licenses,  authorizations,  consents and
approvals required to carry on its business as now conducted.

                HEP is a limited partnership duly formed pursuant to the Uniform
Limited  Partnership Act of the State of Delaware and has all partnership powers
and all material governmental licenses,  authorizations,  consents and approvals
required to carry on its business as now conducted.

         (d) HEP General  Partner is a corporation  duly  incorporated,  validly
existing  and in good  standing  under the laws of the State of Delaware and has
all corporate  powers and all material  governmental  licenses,  authorizations,
consents and approvals required to carry on its business as now conducted.
         (e) HLP and LPA are  each a  limited  liability  company  duly  formed,
validly  existing and in good standing  under the laws of the state of Colorado.
MEPO is a limited  partnership  duly  formed  pursuant  to the  Uniform  Limited
Partnership  Act of the State of Texas.  Nominee  and Concise are each a general
partnership duly formed pursuant to the Uniform  Partnership Act of the State of
Colorado.  HCP is a limited  partnership  duly  formed  pursuant  to the Uniform
Limited  Partnership  Act of the  State of  Colorado.  Each of HLP,  LPA,  MEPO,
Nominee, Concise and HCP has all partnership or limited liability company powers
and all material governmental licenses,  authorizations,  consents and approvals
required to carry on its business as now conducted.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        34

<PAGE>



         SECTION .  Authorization.  The execution,  delivery and  performance by
each Borrower of the Financing Documents to which it is a party and the creation
and issuance of the Notes are within such  Borrower's  corporate or  partnership
powers,  as the case may be,  and have been  duly  authorized  by all  necessary
corporate or partnership  action, as the case may be (including,  in the case of
HEP, all corporate action on the part of the HEP General Partner). All necessary
action on the part of each Borrower (and on the part of the HEP General  Partner
in its capacity as general  partner of HEP)  requisite  for the due creation and
issuance of the Notes and for the due  execution,  delivery and  performance  by
such  Borrower of the  Financing  Documents to which it is a party has been duly
and effectively  taken. No action or consent is required of the limited partners
of HEP in connection  with the due creation and issuance of the Notes by HEP and
for  the  due  execution,  delivery  and  performance  by HEP  of the  Financing
Documents to which it is a party, including this Agreement.
         SECTION .  Binding  Obligations.  This  Agreement  and other  Financing
Documents  do,  and the Notes,  upon their  creation,  issuance,  execution  and
delivery in accordance  with this Agreement will,  constitute  valid and binding
obligations  of the  Borrowers  party  thereto  or which have  created,  issued,
executed and delivered such Notes, as the case may be, enforceable in accordance
with their  terms  except as (i) the  enforceability  thereof  may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration  and the  availability of equitable  remedies may be
limited by equitable principles of general applicability.
         SECTION  . No Legal  Bar or  Resultant  Lien.  The  Notes and the other
Financing Documents to which each Borrower is a party, including this Agreement,
and the compliance with and performance by such Borrower of the terms thereof do
not and will not violate any  provisions  of  certificate  of  incorporation  or
by-laws or partnership  agreement of such  Borrower,  as the case may be, or any
material contract,  agreement,  instrument or Governmental Requirement presently
in effect to which  such  Borrower  is  subject,  or result in the  creation  or
imposition  of any  Lien  upon  Property  of such  Borrower,  other  than  those
permitted by the Financing Documents.
         SECTION  .  No  Consent.  Each  Borrower's   execution,   delivery  and
performance of the Notes and the Financing Documents to which such Borrower is a
party,  including this Agreement,  do not require the consent or approval of any
Person  which  has  not  been  obtained,   including,  without  limitation,  any
regulatory authority or governmental body of the United States of America or any
state  thereof or any political  subdivision  of the United States of America or
any state thereof, except for approvals or consents required for the transfer of
interests in oil and gas leases by certain  governmental  bodies under the terms
of the oil and gas leases issued by such governmental bodies.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        35

<PAGE>



         SECTION . Financial  Condition.  The Financial  Statements,  which have
been  delivered to the Banks,  have been prepared in accordance  with  generally
accepted accounting principles,  consistently applied, and present fairly (i) in
the  case  of the  Financial  Statements  of  HEC,  the  consolidated  financial
condition,  results  of  operations  of HEC as at the date or dates  and for the
period  or  periods  stated  giving  effect  to  the  Reorganization  as if  the
Reorganization has been consummated (x) on December 31, 1998, in the case of the
consolidated  balance  sheet of HEC and (y) January 1, 1998,  in the case of the
consolidated  statement of  operations of HEC, (ii) in the case of the Financial
Statements of HEP, the consolidated  financial condition,  results of operations
and cash  flows of HEP as at the date or dates  and for the  period  or  periods
stated  and  (iii)  in the  case  of  the  Financial  Statements  of  HCRC,  the
consolidated  financial condition,  results of operations and cash flows of HCRC
as at the date or dates and for the period or periods stated. No change,  either
individually  or in the  aggregate,  has occurred since December 31, 1998 in the
condition,  financial or otherwise,  of HEC which would have a Material  Adverse
Effect.
         SECTION  .  Investments  and  Guaranties.  At the date of this  Amended
Agreement,  neither HEC nor any of its  Subsidiaries  has made  investments  in,
advances to or guaranties of the obligations of any Person,  except as reflected
in the Financial Statements or disclosed to the Banks in Schedule B hereto.
         SECTION . Liabilities;  Litigation.  Except for liabilities incurred in
the normal course of business,  neither HEC nor any of its  Subsidiaries  has at
the  date  of  this  Amended  Agreement  any  material  (individually  or in the
aggregate) liabilities, direct or contingent, except as disclosed or referred to
in the  Financial  Statements  or  disclosed  to the Banks in Schedule B hereto.
Except as disclosed  in the  Financial  Statements  or disclosed to the Banks in
Schedule B hereto, at the date of this Amended Agreement there is no litigation,
legal,  administrative or arbitral proceeding,  investigation or other action of
any nature pending or, to the knowledge of the Borrowers,  threatened against or
affecting  HEC  or  any  of  its  Subsidiaries  which  involves  the  reasonable
possibility  of any judgment or liability not fully  covered by  insurance,  and
which  would have a Material  Adverse  Effect.  No unusual or unduly  burdensome
restriction,  restraint,  or hazard  exists  by  contract,  law or  governmental
regulation  or  otherwise  relative  to the  business or Property of HEC and its
Subsidiaries,  except as disclosed to the Banks in the  Financial  Statements or
disclosed in Schedule B hereto.
         SECTION . Taxes;  Governmental  Charges.  HEC and its Subsidiaries have
filed all Federal and, to the best of their  knowledge,  all material  state and
local tax  returns  and  reports  required  to be filed and have paid all taxes,
assessments,  fees and other  governmental  charges  levied upon each of them or
upon their  respective  Property or income which are due and payable,  including
interest and penalties, except for any taxes, assessments, fees and other

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        36

<PAGE>



governmental  charges  with respect to which HEC and its  Subsidiaries  have set
aside on their  books any  reserve  required by  generally  accepted  accounting
principles.
         SECTION . Titles,  etc.  Except as disclosed on Schedule B hereto,  HEC
and its Subsidiaries,  individually and  collectively,  have good title to their
material  (individually  or  in  the  aggregate)  Property  (including,  without
limitation,  all  Petroleum  Property)  and the  Borrowers and the Property Base
Subsidiaries  have record title to and  beneficial  ownership  of all  Petroleum
Property which the Borrowers have identified to the Banks for use in determining
the Debt  Limit,  in each  case free and  clear of all  Liens  except  (i) Liens
referred to in the Financial  Statements,  (ii) Liens  disclosed to the Banks in
Schedule B hereto,  (iii) Excepted Liens,  or (iv) Liens otherwise  permitted by
this Agreement or the other  Financing  Documents.  The Borrowers have delivered
(or have caused the Property  Base  Subsidiaries  to deliver) to the  Collateral
Agent copies of the most recent  title  opinions  with respect to the  Petroleum
Property included in the Hydrocarbon Property Base having a fair market value in
excess of $100,000;  provided that the Collateral  Agent shall not have any duty
to review such title  opinions or determine the ownership of any such  Petroleum
Property.
         SECTION  .  Defaults.  Neither  HEC nor any of its  Subsidiaries  is in
default nor has any event or circumstance occurred which, but for the passage of
time or the  giving of  notice,  or both,  would  constitute  a default  (in any
respect  which would have a Material  Adverse  Effect)  under any loan or credit
agreement,  indenture,  mortgage,  deed of trust,  security  agreement  or other
agreement or  instrument  evidencing  or  pertaining  to any Debt,  or under any
material  agreement or instrument to which HEC or such  Subsidiary is a party or
by which it is bound,  except as  disclosed to the Banks in Schedule B-2 hereto.
No Default has occurred and is continuing.
         SECTION  .  Casualties;  Taking  of  Property.  Since  the  date of the
Financial  Statements,  neither  the  business  nor the  Property of HEC and its
Subsidiaries has been affected as a result of any fire,  explosion,  earthquake,
flood, drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of Property of HEC and its Subsidiaries or cancellation of
contracts,  permits or concessions by any domestic or foreign  government or any
agency thereof, riot, activities of armed forces or acts of God or of any public
enemy, the occurrence of which would have a Material Adverse Effect.
         SECTION . Use of  Proceeds;  Margin  Stock.  The  proceeds of the Loans
shall be used for working capital purposes and acquisitions.  No proceeds of any
Loan will be used, directly or indirectly,  for the purpose,  whether immediate,
incidental  or  ultimate,  of buying or carrying any "margin  stock"  within the
meaning of Regulation U. None of the Borrowers is engaged principally, or as

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        37

<PAGE>



one of such Borrower's important activities, in the business of extending credit
for the purpose of purchasing or carrying  margin stocks.  None of the Borrowers
nor any  Person  acting on behalf  of the  Borrowers  has taken or will take any
action which might cause any of the Financing  Documents to violate Regulation U
or any other  regulation of the Board of Governors of the Federal Reserve System
or to violate  Section  of the  Securities  Exchange  Act of 1934 or any rule or
regulation  thereunder,  in  each  case  as now in  effect  or as the  same  may
hereinafter be in effect.
         SECTION .  Compliance with the Law.  Neither HEC nor any of its
Subsidiaries:
                         is in violation of any Governmental Requirement; or

                    has failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of any of its Property or
the conduct of its business;

which  violation or failure  would have (in the event such  violation or failure
were  asserted  by any Person  through  appropriate  action) a Material  Adverse
Effect.
         SECTION . Compliance  with Erisa.  Each member of the Controlled  Group
has fulfilled its obligations  under the minimum funding  standards of ERISA and
the Code with respect to each Plan and is in compliance in all material respects
with the presently  applicable  provisions of ERISA and the Code with respect to
each  Plan.  No member of the  Controlled  Group has (i)  sought a waiver of the
minimum  funding  standard under Section 412 of the Code in respect of any Plan,
(ii)  failed to make any  contribution  or payment to any Plan or  Multiemployer
Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan
or Benefit Arrangement, which in either case has resulted or could result in the
imposition  of a Lien under  ERISA or the Code or the posting of a bond or other
security under ERISA or the Code or (iii) incurred any liability  under Title IV
of ERISA other than a liability to the PBGC for premiums  under  Section 4007 of
ERISA.
         SECTION . No Material Misstatements. No information,  exhibit or report
furnished to the Banks by the Borrowers in connection  with the  negotiation  of
this Amended Agreement contained any material misstatement of fact or omitted to
state a material  fact or any fact  necessary to make the  statements  contained
therein not misleading.
         SECTION .  Investment Company Act.  None of the Borrowers is an
"investment company" or a company "controlled" by an "investment

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        38

<PAGE>



company," within the meaning of the Investment Company Act of 1940, as
amended.
         SECTION . Public Utility  Holding Company Act. None of the Borrowers is
a "holding  company," or a  "subsidiary  company" of a "holding  company," or an
"affiliate"  of a "holding  company" or of a "subsidiary  company" of a "holding
company," or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
         SECTION . Corporate  Documents and HEP Partnership  Agreement.  Each of
HEC and  HCRC  has  delivered  to the  Banks  true  and  correct  copies  of its
certificate  of  incorporation  and  by-laws,   and  each  such  certificate  of
incorporation and by-laws is in full force and effect as of the date hereof. HEP
has  delivered  to the  Banks a true  and  correct  copy of the HEP  Partnership
Agreement and its  certificate of limited  partnership  and such HEP Partnership
Agreement  and  certificate  of limited  partnership  have not been  modified or
terminated  except for  non-material  changes to the names and  addresses of the
limited  partners,   if  any;  and  such  HEP  Partnership  Agreement  and  such
certificate of limited  partnership  are in full force and effect as of the date
hereof.  Neither HEP nor HEP General  Partner nor, to the best  knowledge of the
Borrowers, any other Person is in default under the HEP Partnership Agreement or
the certificate of limited  partnership of HEP, except as disclosed to the Banks
in Schedule B hereto.
         SECTION . Location of the Borrowers. Each Borrower's principal place of
business is Denver,  Colorado  and each  Borrower's  chief  executive  office is
located at 4610 South Ulster Street, Suite 200, Denver, Colorado 80237.
         SECTION  .  Gas  Imbalances.  Except  as set  forth  on  Schedule  B or
specifically  disclosed in the consolidated  financial statements of HEC and its
consolidated Subsidiaries or a Reserve Report, there are no gas imbalances, take
or pay or other  prepayments with respect to the Borrowers' or the Property Base
Subsidiaries'  oil and gas  Property  which would  require the  Borrowers or the
Property  Base  Subsidiaries  to deliver  hydrocarbons  produced from any of the
Borrowers'  or the  Property  Base  Subsidiaries'  oil and gas  Property at some
future time without then or thereafter  receiving  full payment  therefor  which
would exceed $200,000 in the aggregate.
         SECTION  .  Foreign  Corporation.   Each  of  the  Borrowers  and  each
Subsidiary  of HEC pledging  Mortgaged  Property is duly  qualified as a foreign
corporation or partnership,  as the case may be, in all jurisdictions  where any
Mortgaged Property pledged by it is located.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        39

<PAGE>



         SECTION .  Other Financing Documents.  The representations and
warranties contained in the other Financing Documents are true and correct as of
the date of this Amended Agreement.
         SECTION  .  Environmental  Matters.  In  the  ordinary  course  of  its
business,  HEC conduct an ongoing review of the effect of Environmental  Laws on
the  business,  operations  and  properties of HEC and its  Subsidiaries  in the
course of which HEC identifies and evaluates  associated  liabilities  and costs
(including,  without limitation,  any capital or operating expenditures required
for clean-up or closure of properties presently or previously owned, any capital
or  operating  expenditures  required  to achieve or  maintain  compliance  with
environmental  protection  standards  imposed  by law or as a  condition  of any
license,  permit or contract,  any related constraints on operating  activities,
including any periodic or permanent shutdown of any facility or reduction in the
level of or change in the nature of operations  conducted thereat and any actual
or potential liabilities to third parties,  including employees, and any related
costs and expenses).  On the basis of this review, HEC has reasonably  concluded
that such associated  liabilities  and costs,  including the costs of compliance
with  Environmental  Laws are unlikely to have a material  adverse effect on the
business  (as it is being  conducted  on the date this  representation  is being
made),  financial  condition,  results of operations or prospects of HEC and its
Subsidiaries, taken as a whole.
         SECTION .  Subsidiaries.      The Subsidiaries party to the Guaranty
Agreement constitute all of the Material Subsidiaries of HEC.
             Each Borrower (other than HEC) is a wholly-owned Subsidiary of HEC.
             Each  Material  Subsidiary  of HEC (other than any  Borrower)  is a
corporation or partnership duly incorporated or formed,  validly existing and in
good standing under the laws of its  jurisdiction of incorporation or formation,
and has all  corporate  or  partnership  powers  and all  material  governmental
licenses,  authorizations,  consents  and  approvals  required  to  carry on its
business as now conducted.
         SECTION .  Solvency, etc.  [Intentionally deleted]
         SECTION .  Year 2000 Compliance.  HEC has (i) initiated a review and
assessment  of all areas within the business and  operations  of HEC and each of
its Subsidiaries  (including those areas affected by suppliers and vendors) that
could suffer a Material  Adverse Effect by the "Year 2000 Problem" (that is, the
risk that computer  applications used by it or any of its Subsidiaries (or their
respective  suppliers  and  vendors)  may be unable  to  recognize  and  perform
properly date- sensitive functions involving certain dates prior to and any date
after December

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        40

<PAGE>



31,  1999),  (ii)  developed a plan and  timeline for  addressing  the Year 2000
Problem on a timely basis and (iii) to date, implemented or is implementing such
plan in  accordance  with  such  timetable.  HEC  reasonably  believes  that all
computer  applications  (including  those of  suppliers  and  vendors)  that are
material to the business or operations of HEC or any of its Subsidiaries will on
a timely  basis be able to perform  properly  date-sensitive  functions  for all
dates  before  and from and  after  January  1, 2000  (that  is,  be "Year  2000
compliant"),  except to the extent that a failure to do so could not  reasonably
be expected to have a Material Adverse Effect.
         SECTION .  Reorganization.  Each of HEC, HEC  Acquisition  Partnership,
L.P., HEC Acquisition  Corp.,  HCRC, HCRC Acquisition  Corp., HEP and HEPGP Ltd.
(collectively,  the "Reorganization  Parties") has all requisite  partnership or
corporate  power and  authority,  as the case may be, to  execute,  deliver  and
perform  the  Merger  and  Asset   Contribution   Agreement  as  amended,   (the
"Reorganization  Agreement")  entered  into by them on December  15, 1998 and to
consummate the Reorganization and the other transactions contemplated thereby.
          The execution,  delivery and performance by each of the Reorganization
Parties of the  Reorganization  Agreement and the other  documents  delivered by
such  Reorganization  Party pursuant  thereto or in connection  therewith  (with
respect to each Reorganization Party, the "Reorganization  Documents") have been
duly authorized by all necessary  corporate or partnership  action,  as the case
may be.
              There is no action, suit or proceeding pending or threatened which
questions the validity or legality of, or seeks  damages in connection  with the
Reorganization   Documents,  the  Reorganization  or  any  actions  contemplated
thereby.

                         The execution, delivery and performance by each of the
Reorganization  Parties of the  Reorganization  Documents to which it is a party
and the consummation of the  Reorganization do not and will not conflict with or
violate  the  constituent  documents  of such  Reorganization  Party or any law,
statute, or published rule or regulation,  or any writ, order or decision of any
court or governmental  instrumentality binding on HEC or any of its Subsidiaries
or any indenture,  mortgage,  contract,  instrument or agreement to which HEC or
any of its Subsidiaries is a party or by which it or its assets is bound.

                   Neither the execution, delivery or performance by each of the
Reorganization  Parties of the  Reorganization  Documents to which it is a party
nor the  consummation of the  Reorganization  require the consent or approval or
other action of, or the making of any filing with, any  governmental  authority,
other than

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        41

<PAGE>



such consents and  approvals  that have been  obtained,  such other actions that
have been taken and such  other  filings  that have been made and that,  in each
case, are in full force and effect on the date hereof.

                       All conditions precedent set forth in Article VIII of the
Reorganization Agreement have been satisfied.


ARTICLE
COVENANTS
         SECTION . Financial Statements and Reports. The Borrowers will promptly
furnish to each of the Banks  from time to time upon  request  such  information
regarding the business and affairs and  financial  condition of the Borrowers as
any Bank may reasonably request, and will furnish to each Bank:
             Annual Financial Statements - as soon as available and in any event
within one hundred  (100) days after the close of each  fiscal year of HEC,  two
(2) copies of the audited consolidated balance sheet of HEC and its consolidated
Subsidiaries as of the end of such fiscal year and two (2) copies of the audited
consolidated   statements   of   operations,   of  cash  flows  and  changes  in
shareholders'  equity of HEC and its  consolidated  Subsidiaries for such fiscal
year,  which  fairly  present the  information  included  therein  (showing  any
material change in the  consistency of the application of accounting  principles
from the prior period) accompanied by an opinion without material  qualification
of independent certified public accountants of national repute;

             Quarterly Statements - as soon as available and in any event within
sixty (60) days after the close of each of the first  three  fiscal  quarters of
each fiscal year of HEC, two (2) copies of the consolidated balance sheet of HEC
and its  consolidated  Subsidiaries as at the close of such fiscal quarter,  and
two (2) copies of the consolidated statements of operations and of cash flows of
HEC and its  consolidated  Subsidiaries  for  such  fiscal  quarter  and for the
portion of HEC's  fiscal  year ended at the end of such fiscal  quarter,  all in
such detail as the Required  Banks may  reasonably  request and  certified by an
Authorized  Person  of HEC as  complete  and  correct  and  that  the  quarterly
financial  statements were prepared on the same  accounting  basis as the annual
financial statements;

                 Audit Reports - promptly upon receipt thereof, one copy of each
other report submitted to HEC by independent  accountants in connection with any
annual,  interim or special  audit made by them of the books of HEC,  including,
without  limitation,  any  comment  letter  submitted  by  such  accountants  to
management in connection with such audit;

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        42

<PAGE>




                       Subordinated Notes Agreement - contemporaneously with the
delivery   of  any   information   (including   without   limitation   financial
information),  reports or notices to  Prudential  pursuant  to Section 5A of the
Subordinated  Notes  Agreement,  a copy thereof to each Bank (unless  previously
delivered to such Bank under this Agreement);

                 SEC and Other Reports - promptly upon their becoming available,
one copy of each financial  statement and proxy statement sent or made available
by HEC to its  security  holders,  of each  regular or  periodic  report and any
registration   statement,   prospectus  or  written  communication  (other  than
transmittal  letters)  in  respect  thereof  filed by HEC  with  any  securities
exchange or the Securities and Exchange  Commission or any successor agency, and
of all press releases and other  statements made available  generally by HEC and
its Subsidiaries to the public concerning material  developments in the business
of HEC and its Subsidiaries; and

             Hedging Transactions - concurrently with the furnishing of each set
of financial  statements pursuant to Section 4.01(a) or 4.01(b) hereof, a report
setting forth in reasonable detail the terms of each Hedging Transaction between
HEC or any of its  Subsidiaries  and any Bank or affiliate of any Bank as of the
last day of the fiscal quarter or fiscal year to which such financial statements
relate,  together with a calculation of the payment obligations of HEC or any of
its Subsidiaries  thereunder (calculated on a marked-to market basis) as of such
day.

         SECTION . Annual  Certificates  of  Compliance.  Concurrently  with the
furnishing of the annual financial  statements  pursuant to Section hereof,  HEC
will  furnish  or cause to be  furnished  to each of the Banks  certificates  of
compliance, as follows:
                 a certificate signed by an Authorized Person (i) in the form of
Schedule A hereto; and (ii) containing or accompanied by such financial or other
details,  information,  calculations  and  material  as the  Required  Banks may
reasonably request to evidence such compliance; and

              a certificate from the independent public accountants stating that
their audit has not disclosed the existence of any condition which constitutes a
Default,  or if their audit has disclosed  the existence of any such  condition,
specifying the nature, period of existence and status thereof.

         SECTION .  Quarterly Certificates of Compliance.Concurrently with the
furnishing of the quarterly financial statements pursuant to subsection 4.01(b)
hereof, HEC will furnish or cause to be furnished to each of the Banks a

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        43

<PAGE>



certificate  signed by an Authorized  Person in the same form as the certificate
required by Section hereof.
         SECTION . Taxes and Other Liens.  HEC will,  and will cause each of its
Subsidiaries  to,  pay  and  discharge  promptly  all  taxes,   assessments  and
governmental charges or levies imposed upon it or upon its income or upon any of
its  Property  as well as all  claims of any kind  (including  claims for labor,
materials,  supplies and rent) which,  if unpaid,  might become a material  Lien
upon any or all of its Property; provided, however, HEC shall not be required to
pay,  or to cause any of its  Subsidiaries  to pay,  any such  tax,  assessment,
charge,  levy or claim if the amount,  applicability  or validity  thereof shall
currently  be  contested  in good faith by  appropriate  proceedings  diligently
conducted by or on behalf of HEC or such Subsidiary and if HEC shall have set up
reserves therefor adequate under generally accepted accounting principles.
         SECTION .  Maintenance;  Abandonment.  HEC will, and will cause each of
its Subsidiaries to, (i) maintain its partnership,  limited liability company or
corporate, as applicable,  existence,  rights and franchises; (ii) qualify to do
business as a partnership or a foreign corporation,  as the case may be, in each
jurisdiction  where the failure to do so would have a Material  Adverse  Effect;
(iii) observe and comply (to the extent  necessary so that any failure would not
have a Material Adverse Effect) with all Governmental Requirements,  and (iv) to
the extent it is within HEC's or such Subsidiary's direct control,  maintain its
Property  (and any  Property  leased by or  consigned  to it or held by it under
title retention or conditional  sales contracts) in good and workable  condition
at all times and make all  repairs,  replacements,  additions,  betterments  and
improvements to its Property as are necessary so that the business carried on in
connection  therewith may be conducted at all times in accordance  with industry
standards.  None of HEC or any of its  Subsidiaries  shall abandon or permit any
Petroleum  Property  to become  abandoned,  unless  such  Petroleum  Property is
incapable of producing  hydrocarbons  such that the marginal revenue  associated
with the production of each additional unit of such  hydrocarbon is greater than
the marginal direct costs of such production,  including royalties and taxes and
excluding non-cash charges.
         SECTION .  Further  Assurances.  HEC will,  and will  cause  each other
Obligor to,  promptly  cure,  any defects in the  execution  and delivery of the
Financing Documents.  HEC at its expense will, and will cause each other Obligor
to,  promptly  execute  and  deliver  to each of the Banks  upon  request of the
Required Banks all such other and further documents,  agreements and instruments
in compliance  with or  accomplishment  of the covenants and  agreements of each
Obligor  in the  Financing  Documents,  or to  further  evidence  and more fully
describe the collateral intended as security for the Indebtedness, or to correct
any omissions in the Collateral  Documents,  or more fully to state the security
obligations set out herein or in any of the Collateral Documents, or to perfect,

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        44

<PAGE>



protect  or  preserve  any  Liens  created  pursuant  to any  of the  Collateral
Documents,  or to make  any  recordings,  to file any  notices,  or  obtain  any
consents, all as may be necessary or appropriate in connection therewith.
         SECTION .  Performance of  Obligations.  HEC will, and will cause other
Obligor  to, do and  perform  every  act and  discharge  all of the  obligations
provided to be performed  and  discharged by HEC or such other Obligor under the
Financing Documents at the time or times and in the manner specified.
         SECTION . Reimbursement of Expenses.  The Borrowers will, upon request,
promptly  reimburse  each of the  Banks  for all  reasonable  amounts  expended,
advanced  or incurred by any Bank to satisfy  any  obligation  of the  Borrowers
under the  Financing  Documents,  or to enforce the rights of any Bank under the
Financing  Documents,  which  amounts will  include all court costs,  reasonable
attorneys'  fees  (including,  without  limitation,  for trial,  appeal or other
proceedings),  fees of auditors  and  accountants,  and  investigation  expenses
reasonably  incurred  by any  Bank in  connection  with any  such  matters.  The
Borrowers  agree  to pay,  indemnify  and  hold  each  of the  Banks  and  their
respective  affiliates and the  respective  directors,  officers,  employees and
agents of the  foregoing  ("Indemnitees")  harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever  (collectively
a "Claim")  caused by any act or omission  of the  Borrowers  or any  Indemnitee
relating  to the  Financing  Documents,  except for a Claim  caused by the gross
negligence or willful misconduct of the Indemnitee,  but expressly including any
Claim based on ordinary negligence.
         SECTION . Insurance.  HEC and each of its Subsidiaries  maintains,  and
HEC will maintain,  and will cause each of its  Subsidiaries  to maintain,  with
financially sound and reputable insurers, insurance with respect to the Property
and business of HEC and its Subsidiaries  against such liabilities,  casualties,
risks and  contingencies  and in such types and amounts as is  customary  in the
case  of  Persons  engaged  in the  same or  similar  businesses  and  similarly
situated. Upon request of any Bank, HEC will furnish or cause to be furnished to
such Bank from time to time a summary of such  insurance  in form and  substance
satisfactory to the Required  Banks. In the case of any fire,  accident or other
casualty  causing  loss  or  damage  to  any  Property  of  HEC  or  any  of its
Subsidiaries,  the  proceeds  of such  policies  shall be used (i) to  repair or
replace  the  damaged  Property,  or  (ii) to  prepay  the  Indebtedness,  which
prepayment  shall be made ratably  among all of the Banks in proportion to their
Commitments.
         SECTION .  Right of Inspection.  HEC will permit, and will cause each
of its Subsidiaries to permit, any officer, employee or agent of any Bank to
visit and inspect any of its Property, examine its books of record and accounts,
take

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        45

<PAGE>



copies and extracts  therefrom,  and discuss its affairs,  finances and accounts
with  HEC's or such  Subsidiary's  officers,  as the case may be, and with HEC's
independent  public  accountants  and  auditors in the presence of HEC's or such
Subsidiary's  officers,  all at such reasonable  times and as often as such Bank
may reasonably desire.
         SECTION . Notice of Certain  Events.  HEC shall promptly notify each of
the Banks in writing if HEC or any of its Subsidiaries  learns of the occurrence
of (i) any event which constitutes a Default, together with a detailed statement
by an  Authorized  Person of HEC of the steps  being taken to cure the effect of
such Default;  or (ii) the receipt of any notice from or the taking of any other
action by, the holder of any  promissory  note,  debenture or other  evidence of
Debt of any Obligor,  including the Notes and the Subordinated  Notes, or of any
security (as defined in the  Securities  Act of 1933, as amended) of any Obligor
with  respect to a claimed  default,  together  with a detailed  statement by an
Authorized  Person of HEC  specifying  the notice given or other action taken by
such  holder and the nature of the  claimed  default and what action HEC and its
Subsidiaries  are taking or propose to take with respect  thereto;  or (iii) any
legal,  judicial  or  regulatory   proceedings  affecting  HEC  or  any  of  its
Subsidiaries  or any of their  respective  Property in which the amount involved
exceeds  $500,000  (individually  or in the  aggregate)  or which,  if adversely
determined,  would have a Material  Adverse Effect;  or (iv) any dispute between
HEC or any of its  Subsidiaries  and any  governmental or regulatory body or any
other Person  which,  if  adversely  determined,  would have a Material  Adverse
Effect; or (v) any dispute between HEC and any of its stockholders;  or (vi) any
material default or noncompliance of any party to the HEP Partnership  Agreement
with any of the terms and  conditions  thereof,  or any notice of termination or
other material  proceedings or actions which might  materially  adversely affect
the HEP  Partnership  Agreement;  (vii)  any  amendment  of the HEP  Partnership
Agreement or the Certificate of Incorporation or Bylaws of HCRC or HEC, together
with a copy of  such  amendment  except,  in the  case  of the  HEP  Partnership
Agreement,  for  amendments  which only  change the names and  addresses  of the
limited  partners  of HEP;  or (viii) any event or  condition  having a Material
Adverse Effect.
         SECTION . ERISA  Information and Compliance.  HEC will promptly furnish
to each of the Banks,  if and when any member of the Controlled  Group (i) gives
or is required to give notice to the PBGC of any "reportable  event" (as defined
in  Section  4043 of ERISA)  with  respect to any Plan  which  might  constitute
grounds for a  termination  of such Plan under Title IV of ERISA,  or knows that
the plan  administrator  of any Plan has given or is  required to give notice of
any such reportable  event, a copy of the notice of such reportable  event; (ii)
receives  notice of complete or partial  withdrawal  liability under Title IV of
ERISA or notice that any Multiemployer Plan is in  reorganization,  is insolvent
or has been  terminated;  (iii) receives  notice from the PBGC under Title IV of
ERISA

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        46

<PAGE>



of an intent to  terminate,  impose  liability  (other than for  premiums  under
Section  4007 of ERISA) in respect  of, or appoint a trustee to  administer  any
Plan;  (iv) applies for a waiver of the minimum  funding  standard under Section
412 of the Code;  (v) gives notice of intent to terminate any Plan under Section
4041(c) of ERISA;  (vi) gives  notice of  withdrawal  from any Plan  pursuant to
Section 4063 of ERISA; or (vii) fails to make any payment or contribution to any
Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit  Arrangement  which in either case has resulted
or could  result  in the  imposition  of a Lien  under  ERISA or the Code or the
posting of a bond or other  security  under ERISA or the Code, a certificate  or
notice as  described in the last  sentence of this Section . Promptly  after the
occurrence of any event set forth in clauses (i) - (vii) above, HEC will furnish
to each of the Banks a  certificate  or written  notice  signed by an Authorized
Person of HEC setting forth details as to each such  occurrence  and action,  if
any, which HEC or the applicable  member of the Controlled  Group is required or
proposes to take.
         SECTION . Collateral  Security.  The Borrowers  will at all times cause
(i) Petroleum Property  representing in value, as determined by reference to the
most recent Reserve Report,  not less than 60% of the Hydrocarbon  Property Base
and (ii) all outstanding  capital stock,  limited liability company interests or
partnership  interests  directly or indirectly owned by HEC of each wholly-owned
and (to the extent not  restricted  by  customary  provisions  in joint  venture
agreements or similar  agreements)  non-wholly owned Material  Subsidiary of HEC
(including  without  limitation  any Person  (including  without  limitation any
Subsidiary)  which becomes a Material  Subsidiary after the date hereof),  to be
subject to valid  first-priority  Liens in favor of the Collateral Agent for the
benefit of the Banks pursuant to the Collateral Documents. In the event that the
daily average aggregate unpaid principal amount of Debt of the Borrowers exceeds
50% of the Debt Limit for a period of ninety (90) days,  the Required  Banks may
deliver to the Borrowers a written  demand for  additional  collateral  security
pursuant to this Section.  Upon receipt of such demand,  the Borrowers  will, or
will cause its Subsidiaries to, grant to the Collateral Agent for the benefit of
the Banks, within sixty (60) days of receipt of such demand, as security for the
Indebtedness,  a first-priority Lien on additional  Petroleum Property such that
Petroleum Property representing in value, as determined by reference to the most
recent Reserve Report, not less than 80% of the Hydrocarbon  Property Base shall
thereafter be subject to such  first-priority  Liens.  The Liens will be created
and perfected by and in accordance  with the  provisions of security  agreements
and financing statements,  deeds of trust or other Collateral Documents,  all in
form and substance  satisfactory  to the Required  Banks in sufficient  executed
(and  acknowledged  where necessary or appropriate)  counterparts  for recording
purposes.  The  Borrowers  will  furnish or cause to be furnished to each of the
Banks in connection therewith opinions satisfactory in form and substance to the
Required Banks from counsel satisfactory to the Required Banks as to such

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        47

<PAGE>



Collateral  Documents  and the  validity  and  perfection  of the Liens  created
thereby.  The Borrowers  shall also furnish to each of the Banks a  certificate,
within 30 days of any Reserve Report prepared pursuant to Section , signed by an
Authorized Person of each of the Borrowers, confirming compliance with the above
collateral  security  requirement and stating the percent of Petroleum  Property
subject to valid  first-priority  Liens in favor of the Collateral Agent for the
benefit of the Banks pursuant to the Collateral Documents.
          The  Borrowers   shall  deliver  to  the  Collateral   Agent  executed
counterparts  of each  Collateral  Document  set forth in  Schedule C within two
Domestic  Business Days of receipt by the Borrowers of such Collateral  Document
in final form.
         SECTION . Performance of  Partnership  Agreement.  HEP will perform and
observe in all material respects the provisions of its Partnership  Agreement on
its part to be performed or observed prior to the  termination  thereof,  unless
and to the  extent  only  that the  same  shall be  contested  in good  faith by
appropriate action by or on behalf of HEP.
         SECTION . Notice to Purchasers of Oil and Gas. Each Borrower  will, and
will cause each Property Base Subsidiary to, upon request of the Required Banks,
join with the Banks in notifying  the  purchaser or purchasers of oil and gas of
the existence of the Collateral  Documents,  such  notification to be in writing
and accompanied (if necessary) by certified copies of the Collateral Documents.
         SECTION .   Engineering Reports.
            By April 1 and August 1 of each year, the Borrowers shall furnish to
each of the Banks a report in form and substance reasonably  satisfactory to the
Required Banks which may be prepared by or under the  supervision of a petroleum
engineer  who may be an employee of any  Borrower or an  Affiliate,  which shall
evaluate each  Petroleum  Property as of the  preceding  December 31 or June 30,
respectively,  and which shall,  together with any other information  reasonably
requested by any Bank,  set forth the  information  necessary  to determine  the
Hydrocarbon  Property Base as of such date; provided that, if the Required Banks
so request by no later than  November 1 of any year,  such report as of December
31 of such year shall be  prepared  by Approved  Petroleum  Engineers  and shall
evaluate a portion of Petroleum Property having a value at least equal to 80% of
the aggregate value of all Petroleum Property.

                 If the Required Banks have not requested a Reserve Report to be
prepared by Approved Petroleum  Engineers as of December 31 of any year pursuant
to the proviso in  subsection  (a), the  Borrowers  shall furnish to each of the
Banks, together with the Reserve Report furnished pursuant to subsection (a)

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        48

<PAGE>



as of December 31 of such year,  an audit report by April 1 of such year thereon
in form and substance reasonably  satisfactory to the Required Banks by Approved
Petroleum  Engineers.  Such  audit  report  shall  state  that such  independent
petroleum  engineers  have  reviewed  at least  70% in  value  of the  Petroleum
Property each year in detail to confirm the Borrowers'  reserve figures and have
conducted a general review of the remaining properties. The reviews contained in
each audit report shall separately cover Proved  Developed  Producing  Reserves,
Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves.

               At any time and upon request by the Required Banks, the Borrowers
shall furnish to each of the Banks,  within 30 days of such written  request,  a
report which shall evaluate each  Petroleum  Property as of the date of the most
recent Reserve Report or as of such other date as the Required Banks specify, in
form and substance  reasonably  satisfactory  to the Required  Banks (a "Special
Engineering Report"),  together with any other information  reasonably requested
by any Bank.  The  Special  Engineering  Report  shall use  production  and cost
profiles from the most recent Reserve Report,  unless otherwise requested by the
Required Banks,  with such other  information as supplied by the Required Banks.
No more  than  two (2)  Special  Engineering  Reports  may be  requested  by the
Required Banks during the term of the Financing Documents.

                  The reports contemplated by this Section  shall be prepared on
the basis of price and other  economic  assumptions  specified  by the  Required
Banks to the  Borrowers in accordance  with their  customary oil and gas lending
practices not less than thirty (30) days prior to the date the related report is
due.

         SECTION .  Debt.     HEC will not, and will not permit any of its
Subsidiaries to, incur, create, assume or suffer to exist any Debt, except:
                         the Indebtedness;

                         Debt existing on the Effective Date and listed on
Schedule B, but not any renewals, extensions or increases thereof;

                         Debt of any Obligor owed to any other Obligor;

                         Debt in an aggregate principal amount at any time
outstanding not to exceed $1,000,000 secured by a Lien permitted under
clause (d) or (e) of Section ;

                         Reimbursement Obligations constituting Debt;

                         the Subordinated Notes and the Subordinated Guaranty;

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                    49

<PAGE>



                and additional Debt in an aggregate principal amount at any time
outstanding not to exceed $100,000;

provided that, the aggregate outstanding principal or face amount of Debt of HEC
and its Subsidiaries (other than Debt permitted by clauses (iii) and (vi)) shall
at no time exceed the Debt Limit (as defined below) in effect at such time.
                   "Debt Limit" means an amount which shall be determined by the
Required Banks as set forth on subsection (c) in accordance with their customary
oil and gas lending practices,  provided that in making such determination,  the
Required Banks shall  consider only the Petroleum  Property which is included in
the Hydrocarbon Property Base.

                  The Debt Limit will be determined and adjusted periodically as
follows:

                   Prior to a determination pursuant to subparagraph (iii) below
on the basis of the initial Reserve Report delivered subsequent to the Effective
Date, and subject to adjustment in accordance with  subparagraphs  (ii) and (iv)
below, the Debt Limit shall be $84,500,000.

                         Upon any sale by the Borrowers or the Property Base
Subsidiaries of Petroleum Property under circumstances when subparagraph (iv) is
not applicable, or, if subparagraph (iv) is applicable,  until the Debt Limit is
redetermined  pursuant to  subparagraph  (iv),  the Debt Limit shall be reduced,
effective on the date of consummation of such sale, by an amount equal to 50% of
the net proceeds to the  Borrowers and the Property  Base  Subsidiaries  of such
sale.

                      Within 60 days of delivery of each Reserve Report pursuant
to Section , and within 60 days after the Borrowers have notified the Agent that
the Borrowers or the Property Base  Subsidiaries  have sold  Petroleum  Property
having an aggregate fair market value of greater than $5,000,000  since the date
of the most recent  Reserve  Report,  the Agent shall  determine a proposed Debt
Limit on the basis of such  Reserve  Report or such  information,  and  promptly
notify the Borrowers  and the Banks of such  proposed Debt Limit.  Such proposed
Debt  Limit  shall  become  the Debt Limit  within 30 days of such  notice,  and
binding on all  parties,  unless  Banks  having  more than 30% of the  aggregate
amount of the  Commitments  reject  such  proposed  Debt  Limit by notice to the
Agent.  In the event of such a  rejection,  the  Banks  shall  consult  with one
another  with a view to agreement  on the Debt Limit to be  determined,  and the
Debt Limit shall be  determined  by Banks  having at least 70% of the  aggregate
amount of the Commitments. Any Debt Limit so determined by the Banks

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                    50

<PAGE>



shall be  promptly  communicated  in  writing  to the  Borrowers,  and upon such
notification  shall be binding on all parties.  In no event shall the Debt Limit
increase pursuant to this subparagraph (iii), unless all the Banks agree.

                        The Borrowers may request that the Banks redetermine the
Debt  Limit,  provided  that no more  than one such  request  may be made by the
Borrowers  in any  one-year  period.  In the  event  of  such a  request  by the
Borrowers,  the Banks will consult with one another to determine  the Debt Limit
in accordance with their customary oil and gas lending practices. Any Debt Limit
so  determined  by the Banks  shall be promptly  communicated  in writing to the
Borrowers, and upon such notification shall be binding on all parties.

                         The Borrowers shall notify each Bank at the earliest
practicable  time in  advance  of any  transactions  which  entail a  reasonable
likelihood  of an adjustment to the Debt Limit  pursuant to  subparagraph  (ii),
(iii) or (iv) above,  and shall  furnish  each Bank with such  information  with
respect thereto as any Bank may reasonably request.

         SECTION .  Liens.  HEC will not, and will not permit any of its
Subsidiaries to,incur, assume or suffer to exist any Lien on any of its Property
(now owned or hereafter acquired), except:
                         Liens created by the Collateral Documents;

                         Excepted Liens;

                         Liens existing on Property and disclosed to the Banks
in Schedule B hereto, but not any renewals and extensions thereof;

                         subject to Section 4.17(a)(iv), a Lien existing on any
asset prior to the acquisition thereof, but not created in contemplation of such
acquisition; and

              subject to Section 4.17(a)(iv),  a Lien on any asset securing Debt
incurred  or assumed  for the  purpose of  financing  of any part of the cost of
acquiring   such  asset,   provided  that  such  Lien  attaches  to  such  asset
concurrently with or within 90 days after the acquisition thereof.

         SECTION . Investments,  Loans and Advances. HEC will not make or permit
to remain  outstanding,  or permit  any  Subsidiary  to make or permit to remain
outstanding,  any loans or  advances  to, or acquire  (other  than  pursuant  to
Section 4.21) or hold any capital stock,  partnership interest or other security
of or in, any Person, except that the foregoing restriction shall not apply to:

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        51

<PAGE>



            investments,  loans or advances the  material  details of which have
been set forth in the  Financial  Statements  or are  disclosed  to the Banks in
Schedule B hereto;
            investments in direct obligations of the United States of America or
any agency thereof;

        investments in certificates of deposit of maturities less than one year,
issued by commercial  banks in the United States of America  having  capital and
surplus (net of loan loss reserves) in excess of $250,000,000;

              investments in Euro-Dollar obligations of maturities less than one
year,  issued by (and supported by the full faith and credit,  and  representing
direct  obligations of) commercial  banks in the United States of America having
capital and surplus (net of loan loss reserves) in excess of $250,000,000;

            investments in commercial paper of maturities of ninety days or less
if at the time of  purchase  such  paper is rated in either  of the two  highest
rating  categories of S&P,  Moody's,  or any other rating agency selected by the
Borrowers and  satisfactory  to the Required Banks, or investments in commercial
paper of any Bank or of a holding company controlling any Bank;

                 notes received from purchasers of Property sold in the ordinary
course of business and not  considered  to  represent a material  portion of the
Borrowers'  or  Subsidiaries'  Property;  provided  that in no event  shall  the
principal amount of such notes at any time outstanding  exceed $2,000,000 in the
aggregate;

                investments (other than investments pursuant to subparagraph (a)
above or  subparagraph  (h) or (j)  below) in common  stock of  publicly  traded
companies or in partnership  interests and which companies or  partnerships  are
primarily  engaged in the oil and gas  business;  provided  that the  historical
costs of such  investments  at any one time held shall not exceed  $2,000,000 in
the aggregate, unless the Required Banks otherwise agree in writing in advance;

             investments (other than investments pursuant to subparagraph (a) or
(g) above or  subparagraph  (j) below) in common  stock,  interests in a limited
liability   company,   joint  venture  interests,   co-ownership   interests  or
partnership  interests  which  provide  the  Borrowers  the right to receive the
income from, control the operations of and direct the disposition of the oil and
gas assets of such company or partnership; provided that the historical costs of
such  investments  at any one time  held  shall  not  exceed  $2,000,000  in the
aggregate, unless the Required Banks otherwise agree in writing in advance;

                  direct ownership in oil and gas properties and related assets;

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        52

<PAGE>




              investments by any Obligor in any other Person that was an Obligor
immediately prior to the making of such investment, and loans and advances by
any Obligor to any other Obligor;

             investments (other than investments permitted by clause (j)) by any
Obligor in any Subsidiary; provided that immediately after giving effect to such
investment,  (i)  no  Default  exists  and  (ii)  the  aggregate  amount  of all
investments in Subsidiaries  made in reliance on this clause (k) does not exceed
$500,000 in fair market value.

                 other investments, loans or advances approved of, in writing in
advance, by the Required Banks.

         SECTION .  Subsidiaries. [Intentionally Deleted].
         SECTION .  Distributions, Etc. HEC will not 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 now or  hereafter  outstanding  ("Distributions")  (a) if an
Event of Default has occurred  and is  continuing  and the  Required  Banks have
notified  HEC in writing not to make such  Distributions;  (b) if the  aggregate
Debt of HEC and its  Subsidiaries  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,  subject to the last sentence of this Section
4.21, the sum of cash provided by operations before working capital changes plus
distributions  received  from  Affiliates,   as  reported  in  the  consolidated
statements  of cash  flows  of HEC 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 Banks the  financial  statements
required to delivered by them pursuant to Section 4.01; provided,  however, that
the  provisions  of  subparagraphs  (b) and (c) of this  Section  4.21 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. In addition, for purposes of this Section 4.21:
         "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%.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        53

<PAGE>



         "Monthly  Exposure"  means, on any date, the daily average  outstanding
principal  amount  of  Debt  of HEC  and  its  Subsidiaries  (including  without
limitation the loans under the Credit Agreement) during the 30-day period ending
on the date immediately preceding such date.
         The  amount  described  in  clause  (c)  above  for any  period of four
consecutive fiscal quarters ended after the Effective Date and prior to June 30,
2000 shall be equal to the sum of cash  provided by  operations  before  working
capital changes plus distributions received from Affiliates,  as reported in the
consolidated  statements  of cash flows of HEC for the period from and including
the date of consummation of the  Reorganization to and including the last day of
such period, annualized on a simple arithmetic basis.
         SECTION . Mergers,  Etc.  HEC will not,  and will not permit any of its
Subsidiaries to, merge or consolidate with, or sell, assign,  lease or otherwise
dispose of (whether in one  transaction or in a series of  transactions)  all or
substantially  all of its Property  (whether  now owned or hereafter  acquired),
other than  inventory  in the  ordinary  course of  business,  to,  any  Person;
provided that (i) any Borrower may merge with another  Person if (1) such Person
was an  Obligor  immediately  prior to  giving  effect  to such  merger  and (2)
immediately  after giving effect to such merger,  no Default shall have occurred
and be  continuing  and (ii) any  Subsidiary  of HEC (other than a Borrower) may
merge with another Person if after giving effect to such merger,  (1) no Default
exists and (2) the  surviving  entity is or becomes an Obligor and satisfies the
requirements  set forth in  clauses  (i) and (ii) of Section  4.38  hereof on or
prior to the consummation of such merger.
         SECTION . Nature of  Business.  HEC will,  and will  cause  each of its
Subsidiaries to, continue to engage in business of the same general character as
now conducted, as disclosed to the Banks in Schedule B hereto.
         SECTION .  ERISA Compliance.  HEC will not, and will not permit any
of its Subsidiaries to:
                Engage in, or permit any other member of the Controlled Group to
engage in, any transaction in connection with which any member of the Controlled
Group  could  be  subjected  to  either a civil  penalty  assessed  pursuant  to
subsections  (c), (i) or (l) of section 502 of ERISA or a tax imposed by section
4975 of the Code;

                Terminate, or permit any other member of the Controlled Group to
terminate,  any Plan in a manner,  or take any other  action with respect to any
Plan,  which could result in any  liability of a Borrower or any other member of
the Controlled Group to the PBGC;


(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        54

<PAGE>



             Fail to make, or permit any other member of the Controlled Group to
fail to make,  full payment when due of all amounts which,  under the provisions
of any Plan,  agreement  relating  thereto or applicable  law, any member of the
Controlled Group is required to pay as contributions thereto;

              Permit to exist, or allow any other member of the Controlled Group
to permit to exist,  any accumulated  funding  deficiency  within the meaning of
section  302 of ERISA or section 412 of the Code,  whether or not  waived,  with
respect to any Plan;

              Fail to pay or cause to be paid, or permit any other member of the
Controlled  Group to fail to pay or  cause  to be paid,  to the PBGC in a timely
manner,  without  incurring any late payment or underpayment  charge or penalty,
all premiums required pursuant to sections 4006 and 4007 of ERISA;

                  Acquire, or permit any other member of the Controlled Group to
acquire, an interest in any Person that causes such Person to become a member of
the Controlled Group if such Person sponsors, maintains or contributes to, or at
any time in the  six-year  period  preceding  such  acquisition  has  sponsored,
maintained or contributed to, (1) any  Multiemployer  Plan, or (2) any Plan that
is subject to Title IV of ERISA under which the  actuarial  present value of the
benefit  liabilities  under such Plan  exceeds the  current  value of the assets
(computed on a plan  termination  basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities;

           Contribute to or assume an obligation to contribute to, or permit any
other member of the Controlled Group to contribute to or assume an obligation to
contribute to, any employee  welfare benefit plan, as defined in Section 3(1) of
ERISA  including,  without  limitation,  any such  plan  maintained  to  provide
benefits to former  employees of such  entities,  that may not be  terminated by
such  entities  in their  sole  discretion  at any  time  without  any  material
liability; or

             Permit, or allow any other member of the Controlled Group to permit
the aggregate potential  withdrawal  liability with respect to all Multiemployer
Plans to exceed  $1,000,000 in the event that all the members of the  Controlled
Group, as the case may be, were to completely  withdraw from such  Multiemployer
Plans.

         SECTION . Sale or  Discount  of  Receivables.  HEC will  not,  and will
permit any of its Subsidiaries  to, discount or sell with recourse,  or sell for
less than the  greater  of the face or market  value  thereof,  any of its notes
receivable  or  accounts  receivable,  except,  in any  particular  case,  for a
discount  or sale  which HEC or such  Subsidiary  determines  in good faith will
maximize the amount  realized by HEC or such  Subsidiary on such note receivable
or account receivable.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        55

<PAGE>



         SECTION .  Transactions  with  Affiliates.  HEC will not,  and will not
permit any of its Subsidiaries  to, directly or indirectly,  pay any funds to or
for the account  of, make any  investment  (whether by  acquisition  of stock or
indebtedness,  by  loan,  advance,  transfer  of  property,  guarantee  or other
agreement to pay,  purchase or service,  directly or  indirectly,  any Debt,  or
otherwise)  in,  lease,  sell,  transfer  or  otherwise  dispose of any  assets,
tangible or  intangible,  to, or  participate  in, or effect any  transaction in
connection  with any joint  enterprise  or other  joint  arrangement  with,  any
Affiliate;  provided,  however,  that the  foregoing  provisions of this Section
shall not  prohibit (a) HEC or any such  Subsidiary  from  participating  in, or
effecting any  transaction  in connection  with,  any joint  enterprise or other
joint  arrangement with any Affiliate if HEC or such Subsidiary  participates or
effects any such  transaction  in the  ordinary  course of its business and on a
basis no less  advantageous than the basis on which HEC or such Subsidiary would
participate in a similar  transaction with a Person not an Affiliate and (b) HEC
from making, paying or declaring any Distribution otherwise permitted under this
Agreement.
         SECTION . Sale of Assets.  HEC will not, and will not permit any of its
Subsidiaries  to, sell,  transfer or otherwise  dispose of any of its  Property;
provided,  that  (a)  HEC  and any  Subsidiary  may  sell  oil,  gas  and  other
hydrocarbons after severance in the ordinary course of business; and (b) HEC and
any  Subsidiary  may sell  Property  not  constituting,  individually  or in the
aggregate,  all or substantially  all of its Property for consideration not less
than the  fair  market  value  of such  Property  so long as the  aggregate  net
proceeds of all such sales by HEC and its Subsidiaries do not exceed  $5,000,000
during any period of six  consecutive  calendar  months.  The provisions of this
Section  apply to all sales of  Petroleum  Property  and are not affected by any
reduction in the Debt Limit pursuant to Section . HEC shall promptly  notify the
Agent of any sale of Property pursuant to clause (b) above.
         SECTION . Annual  Coverage  Ratio.  The  annual  projected  CFADS  from
Petroleum  Property,  determined on the basis of each Reserve  Report  delivered
pursuant  to  Section  , will not be less than 120% of  scheduled  interest  and
principal  payments on all Debt of HEC and its  Subsidiaries  during each of (i)
the calendar year during which the related  Reserve Report is delivered and (ii)
the two succeeding calendar years. HEC shall provide a certificate, signed by an
Authorized  Person of HEC,  45 days  after  each  Reserve  Report is  delivered,
certifying the coverage  ratio and the method used to calculate  such ratio.  If
HEC or any of its  Subsidiaries  discover that they will fail to meet the annual
coverage ratio as described  above,  HEC shall, or shall cause its  Subsidiaries
to, within 45 days of learning of such fact, reduce their Debt maturities in the
affected  years or add  Petroleum  Property  acceptable to the Banks so that the
above ratio will be met.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        56

<PAGE>



         SECTION  .  Additional  Information.  HEC will  furnish  to each of the
Banks, with reasonable promptness,  such other information and data with respect
to HEC and its Subsidiaries as from time to time may be reasonably  requested by
any Bank.
         SECTION .  Information Meetings. [Intentionally deleted]
         SECTION .  Compliance with Laws, etc.  HEC will, and will cause each
of its  Subsidiaries  to,  exercise all due diligence in order to assure that it
complies with the  requirements of all applicable laws,  rules,  regulations and
orders of any governmental authority, noncompliance with which would result in a
Material Adverse Effect.
         SECTION  .  Covenant  to  Secure  Indebtedness  Equally.  If HEC or any
Subsidiary shall create or assume any Lien upon any of its Property, whether now
owned or hereafter  acquired,  other than Liens  permitted by the  provisions of
Section , HEC shall make,  or shall  cause such  Subsidiary  to make,  effective
provision  whereby the  Indebtedness  will be concurrently  secured by such Lien
equally and ratably with any and all other Debt  thereby  secured as long as any
such other Debt shall be so secured;  provided that compliance with this Section
shall  not  prevent  an  Event  of  Default  from   occurring  as  a  result  of
noncompliance  by HEC with Section  hereof.  The remedy provided in this Section
shall not be exclusive and shall have no effect on the  availability or exercise
of any other  remedy  that may be  available  to any Bank  under  the  Financing
Documents.
         SECTION . Inconsistent  Provisions.  In the event of any  inconsistency
between the  representations,  warranties,  covenants  and  undertakings  of the
Borrowers  in the  Collateral  Documents,  on the one  hand,  and  those in this
Agreement on the other hand,  the relevant  provisions of this  Agreement  shall
control.
         SECTION . Interest Coverage Ratio. At the end of each fiscal quarter of
HEC,  the  Historical  CFADS from  Petroleum  Properties  for the period of four
consecutive  quarters then ending  (subject to the last sentence of this Section
4.34), determined on the basis of the financial statements and reports furnished
pursuant to Section , will not be less than 200% of the interest  expense of HEC
and  its  consolidated  Subsidiaries  for  such  period.  HEC  shall  provide  a
certificate, signed by an Authorized Person of HEC, within 60 days after the end
of each such quarter,  certifying  the ratio of Historical  CFADS from Petroleum
Properties to HEC's and its consolidated Subsidiaries' interest expense for such
period as set forth  above and the method  used to  calculate  such  ratio.  For
purposes of this Section 4.34,  "Historical CFADS" means, for any period,  gross
cash operating revenues properly allocable to Petroleum Property for such period
less the following cash items: royalties,  operating costs, severance,  windfall
profits and

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        57

<PAGE>



other wellhead taxes, general and administrative expenses and current income and
other taxes properly allocable to such period and cash capital expenditures made
during such period and properly  allocable to a Petroleum  Property  owned as of
the date of the most recent Reserve Report. "Historical CFADS" for any period of
four  consecutive  quarters  ending  prior  to June 30,  2000  shall be equal to
"Historical CFADS" for the period from and including the date of consummation of
the Reorganization to and including the last day of such period, annualized on a
simple arithmetic basis.
         SECTION . Hedging  Transactions.  HEC will not, and will not permit any
of its Subsidiaries to, at any time become a party to a Hedging  Transaction for
any  purpose  except  for bona  fide  hedging  purposes.  Without  limiting  the
generality of the  foregoing,  at any time during any calendar year, no Borrower
will enter into any Hedging Transaction with respect to natural gas or crude oil
if, immediately after giving effect to such Transaction, the aggregate reference
quantity of hydrocarbons  with respect to all Hedging  Transactions with respect
to natural gas or crude oil which such  Borrower  shall have entered into during
such year exceeds 65% of the aggregate  natural gas and crude oil  production of
such Borrower for such year  (calculated  on the basis of actual natural gas and
crude oil  production  for such year to date and a good  faith  estimate  of the
aggregate amount of such production for the remainder of such year).
         SECTION  .  Incorporation  By  Reference  of  Certain  Covenants.   The
provisions  of  Paragraph 6A of the  Subordinated  Notes  Agreement  and related
definitions are hereby incorporated by reference with the same effect as if such
provisions  were fully set forth  herein;  provided  that,  for purposes of this
Agreement (i) the ratio set forth in Paragraph 6A(1) of the  Subordinated  Notes
Agreement  shall be 3.75,  (ii) the  Dollar  amount  set forth in clause  (i) of
Paragraph  6A(2) of the  Subordinated  Notes  Agreement shall be $55,000,000 and
(iii) any  amendments or waivers of any such  provisions or related  definitions
shall be effective  hereunder  solely if consented to in writing by the Required
Banks.
         SECTION . Restrictions with Respect to Subordinated  Debt. (a) HEC will
not, and shall not permit any of its Subsidiaries  (including without limitation
HCRC) to, make any payments with respect to the  Subordinated  Notes  (including
without limitation any payments under the Subordinated Guaranty), other than (i)
scheduled payments of interest, (ii) scheduled repayments of principal,  each in
the  amount of  $5,000,000  on or about  December  23 in each of the years  2003
through 2006, inclusive, and (iii) scheduled payments of principal in the amount
of  $5,000,000  on or about  December  23,  2007,  in each case  subject  to the
subordination provisions set forth in the Subordinated Note Agreement.
         (b) HEC will not, and will not permit any of its Subsidiaries to, enter
into any amendment or waiver of any term of the  Subordinated  Notes  Agreement,
the

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        58

<PAGE>



Subordinated  Guaranty  or any  Subordinated  Notes  without  the prior  written
consent of the Required Banks.
         SECTION  .  Additional  Guarantors.  HEC  shall  cause  (x) any  Person
(including   without   limitation  any  Subsidiary)  which  becomes  a  Material
Subsidiary  after the date  hereof  and (y) any  Person  other  than a  Material
Subsidiary  that has entered into, or is proposing to enter into, a guarantee of
the Subordinated Notes (including without limitation the Subordinated  Guaranty)
to  (i)  become  bound  by  the  Guaranty   Agreement   and  (ii)  deliver  such
certificates,  evidences of corporate or other organizational actions,  opinions
of counsel  and other  documents  relating  thereto as the Agent may  reasonably
request, all in form and substance  reasonably  satisfactory to the Agent, on or
prior to the tenth day after the date on which the relevant  event  described in
clause (x) or (y) occurs (or, if earlier,  the date on which the relevant Person
enters into a guarantee of the Subordinated  Notes (including without limitation
the Subordinated Guaranty)).
ARTICLE
DEFAULTS
         SECTION .  Events of Defaults.  Events of Default.  If one or more of
the following events ("Event of Default") not specifically waived in writing by
the Required Banks shall have occurred:
                    the Borrowers shall fail to pay when due any principal of or
premium on any Loan or shall  fail to pay  within  five (5) days of the due date
thereof  any  interest,  fees  or  other  amount  payable  under  the  Financing
Documents;

                      any Borrower shall fail to observe or perform any covenant
contained in Sections , 4.17(a),  to , inclusive, or , 4.36 or 4.38;

            any Obligor shall fail to observe or perform any of its covenants or
agreements contained in any of the Financing Documents (other than those covered
by clause (a) or (b) above) for 30 days after it shall have become aware of such
failure;

            any representation, warranty, certification or statement made by any
Obligor  in any of the  Financing  Documents  or in any  certificate,  financial
statement or other document delivered pursuant to any of the Financing Documents
shall prove to have been incorrect in any material  respect when made (or deemed
made);

                HEC or any of its Subsidiaries shall fail to make any payment or
payments in an aggregate amount exceeding $100,000 in respect of any Debt

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        59

<PAGE>



(other than Loans) or Derivative Obligations when due or within any applicable
grace period;

         any event or condition shall occur which results in the acceleration of
the maturity of any Debt in an aggregate  principal  amount  exceeding  $100,000
(other than Loans) of HEC or any of its  Subsidiaries  or enables (or,  with the
giving of notice or lapse of time or both, would enable) the holder of such Debt
or any Person acting on such holder's behalf to accelerate the maturity thereof;

            HEC or any of its  Subsidiaries  shall  commence a voluntary case or
other  proceeding  seeking  liquidation,  reorganization  or other  relief  with
respect to itself or its debts 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  of  it  or  any
substantial part of its property,  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  to pay its debts as they
become  due,  or  shall  take  any  corporate  action  to  authorize  any of the
foregoing;
              an involuntary case or other proceeding shall be commenced against
HEC or any of its  Subsidiaries  seeking  liquidation,  reorganization  or other
relief with respect to it or its debts 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  of  it  or  any
substantial part of its property,  and such involuntary case or other proceeding
shall remain  undismissed  and unstayed for a period of 60 days; or an order for
relief shall be entered against HEC or any of its Subsidiaries under the federal
bankruptcy laws as now or hereafter in effect;

               the PBGC shall institute proceedings under Title IV of ERISA to
terminate,  to impose  liability  (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be  appointed to  administer  any
Material  Plan; or a condition  shall exist by reason of which the PBGC would be
entitled  to  obtain  a  decree  adjudicating  that any  Material  Plan  must be
terminated;

              a judgment or order for the payment of money in excess of $400,000
shall be rendered  against HEC or any of its  Subsidiaries  and such judgment or
order shall continue unsatisfied and unstayed for a period of 30 days;

            any of the Collateral Documents after delivery thereof shall for any
reason cease to be in full force and effect and valid,  binding and  enforceable
(except  as  enforceability  may  be  subject  to  any  applicable   bankruptcy,
insolvency  or similar  laws or equitable  principles  generally  affecting  the
enforcement of

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        60

<PAGE>



creditors'  rights) in accordance with its terms, or cease to create a valid and
perfected  first-priority Lien on any of the Collateral  purported to be covered
thereby,  or any Borrower (or any other Person who may have granted or purported
to grant such Lien) shall so state in writing;

           at any time (i) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities  Exchange Act of 1934, as amended) other than
The Hallwood Group  Incorporated,  or any of its successors  ("Hallwood Group"),
shall have  acquired  beneficial  ownership  (within  the  meaning of Rule 13d-3
promulgated by the Securities and Exchange  Commission under said Act) of 20% or
more of the  outstanding  shares of common stock of HEC or (ii)  Hallwood  Group
shall have acquired beneficial ownership (within the meaning of said Rule 13d-3)
of 30% or more of the outstanding  shares of common stock of HEC; or at any time
a majority of the board of directors of HEC is composed of individuals  who were
not elected or appointed as directors by members of such board;

                  any Borrower (other than HEC) shall cease to be a wholly-owned
Subsidiary of HEC; or

           the Guaranty Agreement shall for any reason cease to be in full force
and effect and valid,  binding and enforceable  (except as enforceability may be
subject to any  applicable  bankruptcy,  insolvency or similar laws or equitable
principles   generally  affecting  the  enforcement  of  creditors'  rights)  in
accordance with its terms, or any Obligor shall so state in writing;

then, and in every such event,  the Agent shall (i) if requested by the Required
Banks,  by notice to the  Borrowers  terminate  the  Commitments  and they shall
thereupon  terminate,  and (ii) if requested by the Required Banks, by notice to
the Borrowers  declare the Notes (together with accrued interest thereon) to be,
and the Notes  shall  thereupon  become,  immediately  due and  payable  without
presentment,  demand, protest, notice of intent to accelerate or other notice of
any kind, all of which are hereby waived by the Borrowers;  provided that in the
case of any of the Events of Default  specified  in clause (g) or (h) above with
respect to any Borrower,  without any notice to any Borrower or any other act by
the Agent or the Banks, the Commitments shall thereupon  terminate and the Notes
(together  with  accrued  interest  thereon)  shall become  immediately  due and
payable without presentment,  demand,  protest,  notice of intent to accelerate,
notice of  acceleration  or other  notice of any kind,  all of which are  hereby
waived by the Borrowers.
         SECTION  . Notice  of  Default.  The  Agent  shall  give  notice to the
Borrowers of a Default under Section 5.01(c) promptly upon being requested to do
so by any Bank and shall thereupon notify all the Banks thereof.


(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        61

<PAGE>



ARTICLE
CONDITIONS
         SECTION . Effectiveness.  This Amended Agreement shall become effective
on the date that each of the following  conditions shall have been satisfied (or
waived in accordance with Section ):
                Amended Agreement -- the Agent shall have received counterparts
of this Amended  Agreement signed by each of the parties hereto (or, in the case
of any party as to which an executed  counterpart  shall not have been received,
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party);

                Guaranty Agreement -- the Agent shall have received counterparts
of the Guaranty Agreement signed by each of the parties thereto (or, in the case
of any party as to which an executed  counterpart  shall not have been received,
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party);

             Note --  the Agent shall have received for the account of each Bank
an executed Note,duly and validly issued, dated on or before the Effective Date;

                Certificates -- the Agent shall have received a signed copy of a
certificate  of the  Secretary  or an Assistant  Secretary or other  appropriate
officer of each  Obligor and of the general  partner of each  Obligor  than is a
partnership  (including  without  limitation the HEP General  Partner)  (each, a
"Transaction  Party"),  certifying  (i) the  names  and true  signatures  of the
Authorized  Persons  authorized  to  sign  any  Financing  Document  which  such
Transaction  Party is a party  and the other  documents  or  certificates  to be
delivered by such Transaction  Party pursuant  thereto,  (ii) the resolutions of
the Board of Directors of such Transaction  Party,  authorizing the transactions
contemplated  hereby,  together with all documents  evidencing  other  necessary
corporate or  partnership  action with respect to any thereof,  and (iii) a true
copy of the certificate of incorporation and by-laws or partnership agreement of
such Transaction Party, as the case may be;

              Opinion of Borrowers' Counsel -- the Agent shall have received (i)
from Cathleen  Osborn,  General Counsel of HEC and King & Spalding,  special New
York counsel for the Obligors, an opinion substantially to the effect of Exhibit
B  hereto,  respectively,  and each  covering  such  additional  matters  as the
Required Banks may reasonably  request and (ii) from counsel to the Borrowers in
each  jurisdiction  in which any Collateral  pledged under any of the Collateral
Documents  set forth in Schedule C is located,  an opinion in form and substance
reasonably satisfactory to the Collateral Agent;


(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        62

<PAGE>



                Opinion of Agent's Counsel -- the Agent shall have received from
Davis  Polk  &  Wardwell,   special   counsel  for  the  Agent,  an  opinion  in
substantially the form of Exhibit C hereto;

               Participation Fees -- receipt by the Agent for the account of the
Banks of the full amount of the participation fee described in Section 2.23;

                    Subordinated Note Agreement -- the Agent shall have received
executed  counterparts of the  Subordinated  Note Agreement and the Subordinated
Guaranty,  each as in  effect on the  Effective  Date,  and all other  documents
delivered pursuant thereto or in connection therewith, all in form and substance
satisfactory to the Banks;

                        Reorganization -- the Banks shall have received evidence
satisfactory  to them in their good  faith  discretion  that the  Reorganization
shall have been  consummated  substantially  on the terms described in the Proxy
Statement; and

               Other -- the Agent shall have received such other documents as it
may reasonably have requested;

provided that this Amended Agreement shall not become effective or be binding on
any party hereto nor shall any  representation or warranty  contained in Article
hereof be deemed to be made unless and until all of the foregoing conditions are
satisfied  not later  than June 8, 1999.  The Agent  shall  promptly  notify the
Borrowers  and the  Banks  of the  Effective  Date,  and  such  notice  shall be
conclusive and binding on all parties hereto.
         On  the   Effective   Date  each  Original   Agreement   will  each  be
automatically  amended and restated in its entirety to read as set forth herein.
On and after the Effective Date the rights and obligations of the parties hereto
shall  be  governed  by  this  Amended  Agreement;   provided  that  rights  and
obligations  of the parties hereto (and of any HEP Borrower or any HCRC Borrower
that is not a party to this Amended  Agreement) with respect to the period prior
to the  Effective  Date shall  continue to be governed by the  provisions of the
relevant Original Agreement.
         SECTION . Transitional Provisions. On the Effective Date but subject to
satisfaction of the conditions set forth in Section hereof, (i) the Euro- Dollar
Loans  and  Domestic  Loans,  as such  terms are  defined  under  each  Original
Agreement,   of  the  HEP  Borrowers  or  the  HCRC  Borrowers,  as  applicable,
outstanding to each Bank thereunder  shall be deemed to be Euro-Dollar  Loans or
Domestic  Loans,  as the case may be, made by such Bank to the  Borrowers  under
this Amended  Agreement,  it being the intention of the parties  hereto that (i)
all

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        63

<PAGE>



indebtedness  evidenced by the Original Notes shall,  on and after the Effective
Date, be solely evidenced by the Notes,  (ii) the loans  outstanding  under each
Original  Agreement on the Effective  Date shall  continue to be  outstanding on
such date as Domestic Loans or Euro-Dollar  Loans under this Amended  Agreement,
as appropriate,  having Interest Periods identical to the corresponding interest
periods under the relevant  Original  Agreement and bearing  interest (x) in the
case of Domestic Loans that are Base Rate Loans, for each day from and including
the Effective  Date, at the interest rate applicable to Base Rate Loans pursuant
to Section 2.04 of this  Amended  Agreement,  (y) in the case of Domestic  Loans
that are CD Loans, at the "Adjusted CD Rate"  applicable to such Loans under the
Original  Credit  Agreement  pursuant to which such Loans were  originally  made
plus,  for each day from and including  the Effective  Date to but excluding the
last day of the Interest  Period  applicable to such Loans,  the CD Margin under
this  Amended  Agreement  and  (z) in the  case  of  Euro-Dollar  Loans,  at the
"Adjusted  Euro-Dollar  Rate" applicable to such Loans under the Original Credit
Agreement  pursuant to which such Loans were  originally made plus, for each day
from and  including  the  Effective  Date to but  excluding  the last day of the
Interest  Period  applicable to such Loans,  the  Euro-Dollar  Margin under this
Amended 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 Notes "Replaced" and in due course return
its Original Notes to HEC.
         SECTION .  All Loans.  The obligation of each Bank to make its Loan
on the occasion of each Borrowing pursuant to this Agreement is subject to the
following conditions precedent:
               Advance Notice -- the Agent shall have received Advance Notice in
accordance with Section  which shall be true and correct and shall be duly
and properly executed and completed by the Borrowers;

                No Default -- immediately before and after such Loan, no Default
shall have occurred and be continuing;

                       Representations and Warranties -- the representations and
warranties of the Obligors  contained in the Financing  Documents  shall be true
and correct in all  material  respects on and as of the date of such Loan (other
than,  solely with respect to any Borrowing to be made after the Effective Date,
the representations and warranties contained in Sections and );

                No Material Adverse Change -- there shall have occurred no event
or condition having, in the sole opinion of the Required Banks, a Material
Adverse Effect; and

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        64

<PAGE>




                  the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the AvailabilityLimit.

         Each Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrowers on the date of such Borrowing as to the facts
specified in subsections (b) and (c) of this Section.
ARTICLE
THE AGENT AND THE COLLATERAL AGENT
         SECTION . Appointment and Authorization. Each Bank irrevocably appoints
and authorizes each of the Agent and the Collateral Agent to take such action as
agent on its behalf and to exercise such powers under the Financing Documents as
are delegated to the Agent or the Collateral Agent,  respectively,  by the terms
thereof, together with all such powers as are reasonably incidental thereto. The
Collateral  Agent is  authorized  to hold,  on  behalf of the  Banks,  all Liens
created by any of the Collateral  Documents and to exercise,  if directed by the
Required Banks,  any and all rights and remedies  available under the Collateral
Documents.
         SECTION . Agent and  Collateral  Agent and  Affiliates.  Each of Morgan
Guaranty  Trust Company of New York and First Union National Bank shall have the
same rights and powers under the  Financing  Documents as any other Bank and may
exercise or refrain from  exercising the same as though it were not the Agent or
the Collateral  Agent, as the case may be. Each of Morgan Guaranty Trust Company
of New York and First Union  National Bank and their  respective  affiliates may
accept  deposits  from,  lend  money  to,  and  generally  engage in any kind of
business  with any Obligor or any affiliate of any Obligor as if it were not the
Agent  or the  Collateral  Agent,  as the  case  may  be,  under  the  Financing
Documents.
         SECTION . Action by Agent or Collateral  Agent.  The obligations of the
Agent and the  Collateral  Agent under the  Financing  Documents  are only those
expressly set forth therein.  Without  limiting the generality of the foregoing,
the Agent and the Collateral Agent shall not be required to take any action with
respect to any Default,  except as expressly  provided therein or as directed by
the Required Banks.
         SECTION  .  Consultation  with  Experts.  Each  of the  Agent  and  the
Collateral  Agent may  consult  with legal  counsel  (who may be counsel for any
Obligor), independent public accountants and other experts selected by the Agent
or the Collateral Agent, respectively, and neither the Agent nor the Collateral

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        65

<PAGE>



Agent shall be liable for any action  taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
         SECTION . Liability of Agent and  Collateral  Agent.  Neither the Agent
nor the Collateral  Agent nor any of their  affiliates nor any of the directors,
officers,  agents or employees of any of the  foregoing  shall be liable for any
action taken or not taken by the Agent or the Collateral  Agent, as the case may
be, in connection  with the  Financing  Documents (i) with the consent or at the
request  of the  Required  Banks  or (ii) in the  absence  of the  Agent  or the
Collateral Agent's own gross negligence or willful misconduct. Neither the Agent
nor the Collateral  Agent nor any of their  affiliates nor any of the directors,
officers,  agents or employees of any of the foregoing  shall be responsible for
or have  any  duty to  ascertain,  inquire  into or  verify  (i) any  statement,
warranty or  representation  made in connection with the Financing  Documents or
any borrowing under this Agreement; (ii) the performance or observance of any of
the  covenants or  agreements  of any  Obligor;  (iii) the  satisfaction  of any
condition  specified  in  Article  of this  Agreement,  except  receipt of items
required to be  delivered  to the Agent;  (iv) the  validity,  effectiveness  or
genuineness of any of the Financing Documents or any other instrument or writing
furnished  in  connection  therewith;  or (v) the  existence,  title,  value  or
marketability  of any of the  Collateral.  Neither the Agent nor the  Collateral
Agent shall incur any liability by acting in reliance upon any notice,  consent,
certificate,  statement,  or other  writing  (which may be a bank  wire,  telex,
facsimile  or similar  writing)  believed by it to be genuine or to be signed by
the proper party or parties.
         SECTION . Indemnification.  Each Bank shall, ratably in accordance with
its  Commitment  (or,  if the  Commitments  shall  have  terminated,  ratably in
accordance  with  its  Commitment  as  in  effect   immediately  prior  to  such
termination), indemnify the Agent and the Collateral Agent, their affiliates and
the  directors,  officers,  employees and agents of any of the foregoing (to the
extent not  reimbursed by the  Obligors)  against any cost,  expense  (including
counsel  fees and  disbursements),  claim,  demand,  action,  loss or  liability
(except  such as result  from such  indemnitees'  gross  negligence  or  willful
misconduct)  that the  indemnitees may suffer or incur in connection with any of
the  Financing  Documents  or any action  taken or  omitted by such  indemnitees
thereunder, including such indemnitees' ordinary negligence.
         SECTION  .  Credit  Decision.  Each  Bank  acknowledges  that  it  has,
independently  and without  reliance upon the Agent, the Collateral Agent or any
other  Bank,  and  based on such  documents  and  information  as it has  deemed
appropriate,  made its own  credit  analysis  and  decision  to  enter  into the
Financing Documents. Each Bank also acknowledges that it will, independently and
without  reliance upon the Agent,  the  Collateral  Agent or any other Bank, and
based on such  documents and  information  as it shall deem  appropriate  at the
time, continue

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        66

<PAGE>



to make its own credit  decisions  in taking or not taking any action  under the
Financing  Documents.  Each Bank further  acknowledges that it has not relied on
the Collateral Agent to review the title of any Petroleum  Property and that the
Collateral Agent does not have any duty to perform such a review.
         SECTION  .  Successor  Agent  or  Collateral  Agent.  The  Agent or the
Collateral  Agent may resign at any time by giving written notice thereof to the
Banks and the  Borrowers.  Upon any such  resignation,  the Required Banks shall
have the right to appoint a successor Agent or Collateral Agent, as the case may
be, with the consent of the Borrowers,  which consent shall not be  unreasonably
withheld.  If no  successor  Agent  or  Collateral  Agent  shall  have  been  so
appointed,  and shall have accepted such  appointment,  within 30 days after the
retiring  Agent or  Collateral  Agent  gives  notice  of  resignation,  then the
retiring  Agent or  Collateral  Agent  may,  on behalf of the  Banks,  appoint a
successor Agent or Collateral Agent,  which shall be a commercial bank organized
or  licensed  under the laws of the  United  States of  America  or of any State
thereof and having a combined capital and surplus of at least $250,000,000. Upon
the  acceptance  of its  appointment  as Agent or  Collateral  Agent  under  the
Financing  Documents by a successor  Agent or Collateral  Agent,  such successor
Agent or Collateral Agent shall thereupon  succeed to and become vested with all
the  rights  and  duties of the  retiring  Agent or  Collateral  Agent,  and the
retiring  Agent or  Collateral  Agent  shall be  discharged  from its duties and
obligations  under  the  Financing  Documents.   After  any  retiring  Agent  or
Collateral  Agent's  resignation  under  the  Financing  Documents  as  Agent or
Collateral Agent, as the case may be, the provisions of this Article shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Agent or Collateral Agent.

ARTICLE
MISCELLANEOUS
         SECTION . Notices.  All notices,  requests and other  communications to
any party hereunder shall be in writing  (including bank wire, telex,  facsimile
transmission  or similar  writing) and shall be given to such party:  (x) in the
case of the Borrowers or the Agent, at the address or telex or facsimile  number
set forth on the  signature  pages  hereof,  (y) in the case of any Bank, at its
address  or  telex  or  facsimile   number  set  forth  in  its   Administrative
Questionnaire  or (z) in the case of any party,  such other  address or telex or
facsimile  number as such party may hereafter  specify for the purpose by notice
to the Agent and the Borrowers. Each such notice, request or other communication
shall be effective (i) if given by telex,  when such telex is transmitted to the
telex  number  specified  in this  Section  and the  appropriate  answerback  is
received,  (ii) if given by mail, 72 hours after such communication is deposited
in the mails with first class postage prepaid,

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        67

<PAGE>



addressed as aforesaid or (iii) if given by any other means,  when  delivered at
the address specified in this Section;  provided that notices to the Agent under
Article
 shall not be effective until received.
         SECTION . No  Waivers.  No failure or delay by the Agent or any Bank in
exercising  any right,  power or privilege  under any Financing  Document  shall
operate as a waiver  thereof  nor shall any single or partial  exercise  thereof
preclude  any other or further  exercise  thereof or the  exercise  of any other
right,  power or privilege.  The rights and remedies  therein  provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
         SECTION . Expenses;  Documentary Taxes. The Borrowers shall pay (i) all
out-of-pocket expenses of the Agent and the Collateral Agent, including fees and
disbursements  of special  counsel  for the Agent and  special  counsel  for the
Collateral  Agent, in connection with the preparation and  administration of the
Financing  Documents,  any waiver or consent thereunder or any amendment thereof
or any  Default or alleged  Default  thereunder  and (ii) if an Event of Default
occurs,  all out-of-pocket  expenses incurred by the Agent, the Collateral Agent
or any Bank,  including fees and  disbursements  of counsel,  in connection with
such  Event  of  Default  and  collection,   bankruptcy,  insolvency  and  other
enforcement proceedings resulting therefrom.  The Borrowers shall indemnify each
Bank against any transfer taxes,  documentary taxes, assessments or charges made
by any  governmental  authority by reason of the  execution  and delivery of any
Financing Document.
         SECTION . Sharing of  Set-offs.  Each Bank agrees that if it shall,  by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate  amount of principal and interest due with respect
to any Note held by it which is  greater  than the  proportion  received  by any
other Bank in respect of the aggregate amount of principal and interest due with
respect  to  any  Note  held  by  such  other  Bank,  the  Bank  receiving  such
proportionately  greater payment shall purchase such participations in the Notes
held by the other Banks,  and such other  adjustments  shall be made,  as may be
required so that all such payments of principal and interest with respect to the
Notes  held by the Banks  shall be shared by the Banks pro rata;  provided  that
nothing in this Section shall impair the right of any Bank to exercise any right
of set-off or  counterclaim  it may have and to apply the amount subject to such
exercise to the payment of obligations of the Borrowers  other than  obligations
under the Notes. The Borrowers agree, to the fullest extent they may effectively
do so under  applicable  law,  that any  holder  of a  participation  in a Note,
whether or not acquired  pursuant to the  foregoing  arrangements,  may exercise
rights  of  set-off  or  counterclaim  and other  rights  with  respect  to such
participation  as  fully  as if such  holder  of a  participation  were a direct
creditor of the Borrowers in the amount of such participation.

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        68

<PAGE>



         SECTION . Amendments  and Waivers.  Any provision of this  Agreement or
the Notes may be amended or waived if, but only if, such  amendment or waiver is
in writing and is signed by the  Borrowers  and the Required  Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent); provided that
no such amendment or waiver shall,  unless signed by all the Banks, (i) increase
or decrease  the  Commitment  of any Bank or subject any Bank to any  additional
obligation,  (ii) increase the Debt Limit, (iii) reduce the principal of or rate
of interest on any Loan or any fees hereunder,  (iv) postpone the date fixed for
any payment of principal of or interest on any Loan or any fees  hereunder,  (v)
change the percentage of the  Commitments or of the aggregate  unpaid  principal
amount of the Notes,  or the number of Banks,  which shall be  required  for the
Banks  or any of them  to take  any  action  under  this  Section  or any  other
provision  of this  Agreement  or (vi)  increase  the  amount  set  forth in the
definition of  Availability  Limit or change the provisions of Section  6.03(e).
Any  provision of the Guaranty  Agreement  may be amended or waived if, but only
if, such  amendment or waiver is in writing and is signed by each Obligor  party
thereto and the Agent with the consent of the Required  Banks;  provided that no
such amendment or waiver shall,  unless signed by each Obligor party thereto and
the Agent with the consent of all the Banks, release all or substantially all of
the  Obligors  from their  obligations  under the  Guaranty  Agreement or permit
termination  of the  Guaranty  Agreement,  except  in  each  case  as  expressly
permitted by the terms thereof.
         SECTION .  Successors and Assigns.
             The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their  respective  successors and assigns,
except that no Borrower may assign or otherwise transfer any of its rights under
this Agreement without the prior written consent of all Banks.

                    Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of  its  Loans.  In the  event  of  any  such  grant  by a Bank  of a
participating  interest  to a  Participant,  whether  or not upon  notice to the
Borrowers and the Agent, such Bank shall remain  responsible for the performance
of its obligations hereunder,  and the Borrowers and the Agent shall continue to
deal solely and directly  with such Bank in  connection  with such Bank's rights
and obligations under this Agreement.  Any agreement  pursuant to which any Bank
may grant  such a  participating  interest  shall  provide  that such Bank shall
retain  the sole right and  responsibility  to enforce  the  obligations  of the
Borrowers  hereunder  including,  without  limitation,  the right to approve any
amendment,  modification or waiver of any provision of this Agreement;  provided
that such  participation  agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause (i),
(ii), (iii), (iv) or

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        69

<PAGE>



(vi) of Section without the consent of the  Participant.  An assignment or other
transfer  which is not permitted by  subsection  (c) or (d) below shall be given
effect for  purposes  of this  Agreement  only to the extent of a  participating
interest granted in accordance with this subsection (b).

                   Any Bank may at any time assign to one or more banks or other
institutions  (each an "Assignee")  all, or a proportionate  part of all, of its
rights and  obligations  under this  Agreement and the Notes,  and such Assignee
shall  assume  such  rights  and  obligations,  pursuant  to an  Assignment  and
Assumption  Agreement in substantially  the form of Exhibit D hereto executed by
such Assignee and such  transferor  Bank,  with (and subject to) the  subscribed
consent of the Borrowers (which consent shall not be unreasonably  withheld) and
the Agent;  provided that if an Assignee is an affiliate of such transferor Bank
or if, at the time of such  assignment,  an Event of Default has occurred and is
continuing, no such consent shall be required; and provided further that if such
assignment is of a proportionate part of a Bank's rights and obligations,  after
giving effect to such  assignment the amount of the Commitment of the transferor
Bank (or, if the Commitments have terminated,  the aggregate principal amount of
the Loans held by the  transferor  Bank) and the amount of the Commitment of the
Assignee (or, if the Commitments have terminated, the aggregate principal amount
of the  Loans  held by the  Assignee)  in  each  case  shall  be not  less  than
$5,000,000.  Upon execution and delivery of such  instrument and payment by such
Assignee to such transferor Bank of an amount equal to the purchase price agreed
between such  transferor  Bank and such Assignee,  such Assignee shall be a Bank
party to this Agreement and shall have all the rights and  obligations of a Bank
as set forth in such instrument of assumption,  and the transferor Bank shall be
released  from its  obligations  hereunder  to a  corresponding  extent,  and no
further consent or action by any party shall be required.  Upon the consummation
of any assignment  pursuant to this  subsection  (c), the  transferor  Bank, the
Agent  and the  Borrowers  shall  make  appropriate  arrangements  so  that,  if
required,  a new Note is issued to the  Assignee.  In  connection  with any such
assignment, the transferor Bank shall pay to the Agent an administrative fee for
processing  such  assignment  in the amount of $2,500.  If the  Assignee  is not
incorporated  under the laws of the United States of America or a state thereof,
it  shall,  prior to the  first  date on  which  interest  or fees  are  payable
hereunder for its account,  deliver to the Borrowers and the Agent certification
as to exemption  from  deduction or  withholding  of any United  States  federal
income taxes in accordance with Section .

                Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal  Reserve Bank. No such assignment
shall release the transferor Bank from its obligation hereunder.

               No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section  than such

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        70

<PAGE>



Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the  Borrowers'  prior  written  consent or by
reason of the provisions of Section requiring such Bank to designate a different
Applicable  Lending  Office under  certain  circumstances  or at a time when the
circumstances giving rise to such greater payment did not exist.

         SECTION .  New York Law.  THIS AGREEMENT AND EACH NOTE
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.  The Borrowers hereby submit to
the  nonexclusive  jurisdiction  of the  United  States  District  Court for the
Southern  District  of New York and of any New York State  court  sitting in New
York City for  purposes of all legal  proceedings  arising out of or relating to
this  Agreement  or  the  transactions   contemplated   hereby.   The  Borrowers
irrevocably  waive, to the fullest extent  permitted by law, any objection which
the Borrowers  may now or hereafter  have to the laying of the venue of any such
proceeding  brought  in such a court  and any  claim  that any  such  proceeding
brought in such a court has been brought in an inconvenient forum.
         SECTION .  Counterparts;  Integration.  This Agreement 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.
This Agreement and the other Financing Documents constitute the entire agreement
and  understanding  among the  parties  hereto and  supersede  any and all prior
agreements and understandings,  oral or written,  relating to the subject matter
hereof.
         SECTION .  Collateral.  Each of the Banks represents to the Agent and
each of the other Banks that it in good faith is not relying upon any "margin
stock"(as defined in Regulation U) as collateral in the extension or maintenance
of the credit provided for in this Agreement.
         SECTION . WAIVER OF JURY TRIAL.  EACH OF THE  BORROWERS,  THE AGENT AND
THE BANKS  HEREBY  IRREVOCABLY  WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL  PROCEEDING   ARISING  OUT  OF  OR  RELATING  TO  THIS  AGREEMENT  OR  THE
TRANSACTIONS CONTEMPLATED HEREBY.
         SECTION  .  Joint  and  Several  Obligations.  The  obligations  of the
Borrowers  under  the  Financing  Documents  shall be  joint  and  several.  The
obligations   of  each  Borrower   under  the  Financing   Documents   shall  be
unconditional   and  absolute  and,  without  limiting  the  generality  of  the
foregoing, shall not be released, discharged or otherwise affected by:

(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        71

<PAGE>



                      any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of any other Obligor under any
Financing Document, by operation of law or otherwise;

                    any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of any other Obligor under
any Financing Document;

                      any change in the existence, structure or ownership of any
other Obligor;

                     any insolvency, bankruptcy, reorganization or other similar
proceeding affecting any other Obligor or its assets or any resulting release or
discharge of any obligation of any other Obligor under any Financing Document;

                   any invalidity or unenforceability relating to or against any
other  Obligor for any reason of any  Financing  Document,  or any  provision of
applicable  law or  regulation  purporting  to prohibit the payment by any other
Obligor of the principal of or interest on any Note or any other amount  payable
by any other Obligor under any Financing Document; or

                    any other act or omission to act or delay of any kind by any
other  Obligor  or any other  corporation  or  person or any other  circumstance
whatsoever which might,  but for the provisions of this paragraph,  constitute a
legal or equitable discharge of the Borrowers' obligations hereunder.










(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        72

<PAGE>



         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly  executed by their  respective  authorized  officers as of the day and year
first above written.


HALLWOOD ENERGY CORPORATION




By:     /s/ Cathleen  Osborn
Title: Vice President & Secretary



HALLWOOD CONSOLIDATED RESOURCES
CORPORATION




By:  /s/ Cathleen  Osborn
Title: Vice President & Secretary



HALLWOOD ENERGY PARTNERS, L.P.




By: HEC Acquisition Corp., its
       General Partner

By:
 /s/ Cathleen Osborn
        Title: Vice President


      Address:  4610 South Ulster Street
                      Suite 200
                      Denver, Colorado   80237











(NY) 27008/757/CA99/ca.99.conf.wpd



<PAGE>



Commitments



$ 35,000,000


                              MORGAN GUARANTY TRUST COMPANY
                              OF NEW YORK


By:
---------------------------------------------------
 /s/ John Kowalczuk
        Title: Vice President


$ 35,000,000

FIRST UNION NATIONAL BANK


By:
---------------------------------------------------
 /s/ Jay M. Chernosky
        Title: Senior Vice President


$ 35,000,000

                              NATIONSBANK, N.A.


By:
---------------------------------------------------
 /s/ James Allred
        Title: Managing Director


Total Commitments



                                  $105,000,000
                            ---------------------
                            ---------------------










                              FIRST UNION NATIONAL BANK, as
                              Collateral Agent


By:
---------------------------------------------------
 /s/ Jay M. Chernosky
        Title: Senior Vice President





MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent

By:
---------------------------------------------------
 /s/ John Kowalczuk
        Title: Vice President








(NY) 27008/757/CA99/ca.99.conf.wpd


                                                        74

<PAGE>





                           CROSS-REFERENCE TARGET LIST

NOTE:  Due to the  number of  targets  some  target  names may not appear in the
target pull-down list. (This list is for the use of the  wordprocessor  only, is
not a part of this document and may be discarded.)

ARTICLE/SECTION      TARGET NAME    ARTICLE/SECTION       TARGET NAME
ARTICLE/SECTION      TARGET NAME    ARTICLE/SECTION       TARGET NAME


 ....................................................amounts&terms
 ..............................................principal.repayment
 ....................................................interest.rate
 ..................................................interest.rate.a
 ..................................................interest.rate.b
 ..............................................borrowing.procedure
 .............................................continuation.options
 ...............................................conversion.options
 .............................................conversion.options.a
 .............................................conversion.options.b
 ..............................................optional.prepayment
 ............................................optional.prepayment.b
 .................................................mandatory.prepay
 .........................................................payments
 .........................................................interest
 ....................................................reimbursement
 ..................................................increased.costs
 ............................................basis.for.determining
 .......................................................illegality
 ....................................................foreign.taxes


 ..............................................financial.condition
 .................................................investments&guar
3.28(a)..........................................consummate.reorg
3.28(b).................................................reorg.agt
 ........................................................covenants
 .............................................financial.statements
 .................................................annual.financial
 ..............................................annual.certificates
 ............................................annual.certificates.a
 .................................................reimburse.of.exp
 ..................................................erisa.info.comp
 ...............................................engineering.report
 .............................................................debt
 ...........................................................debt.a
 .......................................................debt.a.iii
 ........................................................debt.a.iv
 ...........................................................debt.b
 .............................................................lien
 ................................................investments.loans
 ..............................................investments.loans.j
 ..............................................investments.loans.k
 ..............................................investments.loans.l
 ..............................................investments.loans.m
 ..............................................investments.loans.o
 ......................................................subsidaries
 .................................................distribution.etc
 ......................................................mergers.etc
 ............................................transactions.with.aff
 ...................................................sale.of.assets
 ..................................................annual.coverage
 .................................................information.meet
 ..............................................compliance.with.law
 ..............................................covenants.to.secure
 ..............................................inconsistent.provis
 ................................................interest.coverage
 ................................................opinions.of.local
4.38........................................additional.guarantors

 ...............................................events.of.defaults
 .............................................events.of.defaults.b


 .......................................................conditions
 ....................................................effectiveness
 ..................................................effectiveness.e
 .............................................events.of.defaults.l


(NY) 27008/757/CA99/ca.99.conf.wpd



<PAGE>


ARTICLE/SECTION       TARGET NAME    ARTICLE/SECTION       TARGET NAME
ARTICLE/SECTION       TARGET NAME    ARTICLE/SECTION       TARGET NAME


 .......................................................................the.agent


 .........................................................................notices
 ................................................................amendments&waive
 ...............................................................successors&assign
 .............................................................successors&assign.a
 .............................................................successors&assign.b
 ...............................................................successors&assign

4.13(a).......................................................coll.sec.borrowers



(NY) 27008/757/CA99/ca.99.conf.wpd


                                                                      2

<PAGE>


ARTICLE/SECTION       TARGET NAME    ARTICLE/SECTION       TARGET NAME
ARTICLE/SECTION       TARGET NAME    ARTICLE/SECTION       TARGET NAME






(NY) 27008/757/CA99/ca.99.conf.wpd


                                                                      3

<PAGE>