AGREEMENT REGARDING INITIAL EXERCISE PRICE Reference is hereby made to that certain Common Stock Purchase Warrant dated June 8, 1999 (the "Warrant"), relating to the right to purchase shares of the common stock, $0.01 par value, of Hallwood Energy...

                   AGREEMENT REGARDING INITIAL EXERCISE PRICE


         Reference is hereby made to that certain Common Stock Purchase  Warrant
dated June 8, 1999 (the "Warrant"),  relating to the right to purchase shares of
the common stock,  $0.01 par value, of Hallwood Energy  Corporation,  a Delaware
corporation (the "Company"),  and issued to The Prudential  Insurance Company of
America ("Prudential"). Pursuant to the provisions of section 1A of the Warrant,
the Company and Prudential  agree that the Initial Exercise Price (as defined in
the  Warrant)  has  been  determined  as  provided  in  such  section  1A and is
$__________.


June   , 1999


                                            HALLWOOD ENERGY CORPORATION



                                            By:   /s/ Xxxxxxxx X. Xxxxxx
                                            Name:   Xxxxxxxx X. Xxxxxx
                                            Title:     Vice President


                                            THE PRUDENTIAL INSURANCE COMPANY OF
                                              AMERICA

                                            By:   /s/ Xxx Xxxx
                                            Name:   Xxx Xxxx
                                            Title:  Vice President

DAL02:230291