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<CONFORMED-NAME>ATMOS ENERGY CORP
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<STREET1>1800 THREE LINCOLN CTR
<STREET2>5430 LBJ FREEWAY
<CITY>DALLAS
<STATE>TX
<ZIP>75240
<PHONE>9729349227
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<STREET1>1800 THREE LINCOLN CTR
<STREET2>5430 LBJ FREEWAY
<CITY>DALLAS
<STATE>TX
<ZIP>75240
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<FORMER-CONFORMED-NAME>ENERGAS CO
<DATE-CHANGED>19881024
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<PAGE>

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

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

<Table>
<C>        <S>
(Mark One)
   [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

           FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002

                                  OR


   [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

           FOR THE TRANSITION PERIOD FROM           TO
</Table>

                         COMMISSION FILE NUMBER 1-10042

                            ATMOS ENERGY CORPORATION
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                            <C>
              TEXAS AND VIRGINIA                                 75-1743247
       (State or other jurisdiction of                         (IRS Employer
        incorporation or organization)                      Identification No.)

       THREE LINCOLN CENTRE, SUITE 1800                            75240
       5430 LBJ FREEWAY, DALLAS, TEXAS                           (Zip code)
   (Address of principal executive offices)
</Table>

              REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                                 (972) 934-9227

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<Table>
<Caption>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
             -------------------                 -----------------------------------------
<S>                                            <C>
          Common stock, No Par Value                      New York Stock Exchange
</Table>

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]     No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     The aggregate market value of the voting stock held by non-affiliates of
the registrant was $853,523,154 as of October 31, 2002. On October 31, 2002 the
registrant had 41,731,717 shares of common stock outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's Definitive Proxy Statement to be filed for the
Annual Meeting of Shareholders on February 12, 2003 are incorporated by
reference into Part III of this report.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                                     PART I

     The terms "we," "our," "us," "Atmos" and "Atmos Energy" refer to Atmos
Energy Corporation and its subsidiaries, unless the context suggests otherwise.
The abbreviations "Mcf," "MMcf" and "Bcf" mean thousand cubic feet, million
cubic feet and billion cubic feet.

ITEM 1.  BUSINESS

OPERATIONS

     Atmos Energy Corporation and its subsidiaries are engaged primarily in the
natural gas utility business as well as certain non-regulated businesses. We
distribute natural gas through sales and transportation arrangements to
approximately 1.4 million residential, commercial, public authority and
industrial customers through our five regulated utility divisions. Effective in
December 2002, our customer base will increase to approximately 1.7 million. See
"Recent Developments." Our five utility operating divisions cover service areas
located in Colorado, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana,
Missouri, Tennessee, Texas and Virginia. In addition, we transport natural gas
for others through our distribution system.

     Prior to October 1, 2002, our five operating divisions were named Greeley
Gas Company with operations in Colorado, Kansas and a portion of Missouri;
Western Kentucky Gas Company with operations in Kentucky; Atmos Energy Louisiana
Gas Company with operations in Louisiana; United Cities Gas Company with
operations in Georgia, Illinois, Iowa, our remaining Missouri operations,
Tennessee and Virginia; and Energas Company with operations in Texas. Effective
October 1, 2002, we united our utility operations under the Atmos Energy brand.
Our former Greeley Gas Company operations are now conducted under the name Atmos
Energy Colorado-Kansas Division; our former Western Kentucky Gas Company
operations are now conducted under the name Atmos Energy Kentucky Division; our
former Atmos Energy Louisiana Gas Company operations are now conducted under the
name Atmos Energy Louisiana Division; our former United Cities Gas Company
operations are now conducted under the name Atmos Energy Mid-States Division;
and our former Energas Company operations are now conducted under the name Atmos
Energy Texas Division.

     We provide natural gas storage services and own or hold an interest in
natural gas storage fields in Kansas, Kentucky and Louisiana to supplement
natural gas used by customers in Kansas, Kentucky, Tennessee, Louisiana and
other states. We also provide energy management and gas marketing services to
industrial customers, municipalities and other local distribution companies. We
also provide electrical power generation to meet peak load demands for
municipalities and industrial customers. In addition, we market natural gas to
industrial and agricultural customers primarily in west Texas and to industrial
customers in Louisiana.

FORMATION

     We were organized under the laws of Texas in 1983 as Energas Company, a
subsidiary of Pioneer Corporation, for the purposes of owning and operating
Pioneer's natural gas distribution business in Texas. Immediately following the
transfer by Pioneer to Energas of its gas distribution business, which Pioneer
and its predecessors had operated since 1906, Pioneer distributed our
outstanding stock to its shareholders. In September 1988, we changed our name
from Energas Company to Atmos Energy Corporation. As a result of the merger with
United Cities Gas Company in July 1997, we also became incorporated in Virginia.

RECENT DEVELOPMENTS

     Pending acquisition of Mississippi Valley Gas Company.  In September 2001,
we entered into a definitive agreement to acquire Mississippi Valley Gas
Company, a privately held natural gas utility, for $75.0 million cash and $75.0
million of Atmos common stock. In addition, we will repay outstanding long-term
debt of Mississippi Valley Gas of approximately $45.0 million. Mississippi
Valley Gas provides natural gas distribution service to approximately 261,500
residential, commercial, industrial and other customers located primarily in the
northern and central regions of Mississippi. Mississippi Valley Gas has a 5,500
mile distribution system and 335 miles of intrastate pipeline. It also has two
underground storage facilities with 2.05 Bcf of working gas capacity. On October
31, 2002, we announced that we had received approval from the

                                        1
<PAGE>

Mississippi Public Service Commission to acquire Mississippi Valley Gas. The
transaction had previously received federal regulatory approval and approvals
from the six other state utility commissions that required approval. We expect
to close the acquisition in December 2002.

     Louisiana Regulatory Actions.  In January and February 2002, our Louisiana
division submitted its 2001 Rate Stabilization filings to the Louisiana Public
Service Commission for the two gas systems we operate in Louisiana. Recently
completed audits by the Louisiana Public Service Commission of these filings
found our earnings to be deficient and that rate adjustments were appropriate.
Approved tariff revisions, which became effective November 1, 2002, will result
in $15.8 million in additional revenue per year during the first 24-month
period. Subsequent to the first 24-month period, adjusted rates will provide
$12.2 million in total annual revenue increases. As a result of the actions
taken by the Louisiana Public Service Commission, Atmos Energy has decreased its
overall weather sensitivity in Louisiana.

     Atmos Power Systems, Inc. constructs power plant.  In September 2002, Atmos
Power Systems, Inc., a subsidiary of Atmos Energy Holdings, Inc. completed
construction of a 20-megawatt natural gas fueled power plant in Tennessee which
was placed in operation in October 2002. The plant provides an interruptible
electric rate while reducing annual energy costs. Power is directly connected to
the customer's substation. The customer has leased the facility for a 10-year
period with an option to purchase the plant after the fifth year of the lease.
Capital expenditures for construction and related costs totaled $8.5 million.
Woodward Marketing, L.L.C., a subsidiary of Atmos Energy Marketing, LLC, has
entered into a contract to supply natural gas to the facility.

STRATEGY

     Our overall strategy is to:

     - deliver superior shareholder value,

     - continue to manage our utility operations efficiently,

     - profitably grow our non-utility operations to complement our utility
       operations, and

     - profitably grow our business through acquisitions.

     We are running our operations efficiently by:

     - managing our operating and maintenance expenses,

     - leveraging our technology, such as our 24-hour call center, to achieve
       more efficient operations,

     - focusing on regulatory rate proceedings to increase revenue,

     - mitigating weather-related risks through weather normalized rates in some
       jurisdictions and purchasing weather insurance in others, and

     - disposing of non-growth assets.

     We are growing our non-utility operations by:

     - increasing our non-regulated gas sales, and

     - growing such non-utility businesses as distributed electrical power
       generation.

     We are growing our utility business by acquiring natural gas operations,
such as the pending acquisition of Mississippi Valley Gas Company.

     Our operations are divided into three segments, the utility segment, which
includes our regulated natural gas distribution and sales operations; the
natural gas marketing segment, which includes Atmos Energy Marketing, Woodward
Marketing and Trans Louisiana Industrial Gas Company, Inc.; and our other non-
utility segment, which includes all of our other non-utility operations.

                                        2
<PAGE>

UTILITY OPERATIONS SEGMENT OVERVIEW

     Our utility operations segment is operated through our five regulated
natural gas divisions:

     - Atmos Energy Colorado-Kansas Division (formerly Greeley Gas Company),

     - Atmos Energy Kentucky Division (formerly Western Kentucky Gas Company),

     - Atmos Energy Louisiana Division (formerly Atmos Energy Louisiana Gas
       Company),

     - Atmos Energy Mid-States Division (formerly United Cities Gas Company),
       and

     - Atmos Energy Texas Division (formerly Energas Company).

     Atmos Energy Colorado-Kansas Division:  Our Colorado-Kansas Division
operates in Colorado, Kansas and a portion of Missouri and is regulated by each
respective state's public service commission with respect to accounting, rates
and charges, operating matters and the issuance of securities. We operate under
terms of non-exclusive franchises granted by the various cities. At September
30, 2002 and 2001, our Colorado-Kansas Division had 216,980 and 212,484 utility
meters in service. For the years ended September 30, 2002 and 2001, this
division had total throughput of 33,554 and 37,797 MMcf.

     Atmos Energy Kentucky Division:  Our Kentucky Division operates in Kentucky
and is regulated by the Kentucky Public Service Commission, which regulates
utility services, rates, issuance of securities and other matters. We operate in
the various incorporated cities pursuant to non-exclusive franchises granted to
us by these cities. Sales of natural gas for use as vehicle fuel in Kentucky are
unregulated. We have been operating under a performance-based rate program since
July 1998. We also have weather normalization adjustments to our rates in
Kentucky. At September 30, 2002 and 2001, our Kentucky Division had 178,379 and
182,275 utility meters in service. For the years ended September 30, 2002 and
2001, this division had total throughput of 43,721 and 46,530 MMcf.

     Atmos Energy Louisiana Division:  Our Louisiana Division includes the
operations of the assets of Louisiana Gas Service Company acquired in July 2001
and our previously existing Trans La Division. Our Louisiana Division operates
in Louisiana and is regulated by the Louisiana Public Service Commission, which
regulates utility services, rates and other matters. In most of the areas in
which we operate in Louisiana, we do so pursuant to a non-exclusive franchise
granted by the governing authority of each area. Direct sales of natural gas to
industrial customers in Louisiana, who use gas for fuel or in manufacturing
processes, and sales of natural gas for vehicle fuel are exempt from regulation.

     In connection with its review of our acquisition of Louisiana Gas Service,
the Louisiana Public Service Commission has approved a rate structure that
requires us to share cost savings that resulted from the acquisition with the
customers of Louisiana Gas Service. The shared cost savings will be the
difference between operation and maintenance expense in any future year and the
1998 normalized expense for Louisiana Gas Service, indexed for inflation, annual
changes in labor costs and customer growth. Beginning January 1, 2002, the
customers are assured annual savings, which will be indexed for inflation,
annual changes in labor costs and customer growth. The sharing mechanism will
remain in place for 20 years subject to established modification procedures.

     The rates of Louisiana Gas Service are subject to a purchased gas
adjustment clause that allows it to pass changes in gas costs on to its
customers. In addition, on January 29, 2001, the Louisiana Public Service
Commission approved a rate stabilization clause for Louisiana Gas Service for a
three-year period beginning January 1, 2001. Under the rate stabilization
clause, Louisiana Gas Service will be allowed to earn a return on equity within
certain ranges that will be monitored on an annual basis. After the completion
of the acquisition of Louisiana Gas Service, our Atmos Energy Louisiana Division
also became subject to those clauses.

     Prior to our acquisition of the assets of Louisiana Gas Service Company, a
division of Citizens Communications Company, in July 2001, Louisiana Gas Service
Company was involved in a proceeding with the Louisiana Public Service
Commission relating to past costs associated with the purchase of gas that it
charged to its customers. Subsequent to our acquisition of the Louisiana Gas
assets, we agreed to take responsibility for assuring the payment of refunds
and/or credits to ratepayers that may arise from Citizens

                                        3
<PAGE>

Communications' past activities with respect to purchased gas costs. On April
10, 2002, the Louisiana Public Service Commission issued a Report of Proceedings
in which it approved a Stipulation and Agreement between Citizens
Communications, Atmos and the Commission Staff. This Stipulation and Agreement
resulted in no refunds being due to customers.

     In October 2002, Atmos received written notification from the Executive
Secretary of the Louisiana Public Service Commission that he was asserting that
a monthly facilities fee of approximately $0.6 million charged since July 2001
to Atmos by Trans Louisiana Gas Pipeline, Inc., a wholly-owned subsidiary of
Atmos, pursuant to a contract between the parties, was excessive. The Executive
Secretary asserted that all monthly facilities fees in excess of approximately
$0.1 million from July 2001 should be refunded to ratepayers with interest.

     Atmos has responded to the Secretary and noted that it has previously made
all required filings with the Commission fully disclosing the amount of the
facilities fee. Atmos intends to file another petition seeking Commission
approval of the facilities fee by the end of calendar year 2003 similar to that
filed in 2001 but containing updated data. In the interim, Atmos is continuing
to charge a facilities fee of approximately $0.6 million per month, as the
Executive Secretary's correspondence does not constitute action of the
Commission.

     The Louisiana Public Service Commission approved a rate stabilization
clause for a three year period for our former Trans La Division beginning
October 1, 1999. Under the rate stabilization clause, our former Trans La
Division will be allowed to earn a return on equity within certain ranges that
will be monitored on an annual basis.

     At September 30, 2002 and 2001, our Louisiana Division had 370,012 and
368,436 utility meters in service. For the years ended September 30, 2002 and
2001, this division had total throughput of 30,435 and 12,578 MMcf. The increase
in throughput from 2001 to 2002 resulted from throughput from the Louisiana Gas
Service assets which we purchased in July 2001.

     In January and February 2002, our Louisiana division submitted its 2001
Rate Stabilization filings to the Louisiana Public Service Commission for the
two gas systems we operate in Louisiana. Recently completed audits by the
Louisiana Public Service Commission of these filings found our earnings to be
deficient and that rate adjustments were appropriate. Approved tariff revisions,
which became effective November 1, 2002, will result in $15.8 million in
additional revenue per year during the first 24-month period. Subsequent to the
first 24-month period, adjusted rates will provide $12.2 million in total annual
revenue increases. As a result of the actions taken by the Louisiana Public
Service Commission, Atmos Energy has decreased its overall weather sensitivity
in Louisiana.

     Atmos Energy Mid-States Division:  Our Mid-States Division operates in
Georgia, Illinois, Iowa, Missouri, Tennessee and Virginia. In each of these
states, our rates, services and operations as a natural gas distribution company
are subject to general regulation by each state's public service commission. We
operate in each community, where necessary, under a franchise granted by the
municipality for a fixed term of years. In Tennessee and Georgia, we have
performance-based rates, which provide incentives for us to find ways to lower
costs. Any cost savings are then shared with our customers. We also have weather
normalization adjustments to our rates in Tennessee and Georgia. At September
30, 2002 and 2001, our Mid-States Division had 310,630 and 308,394 utility
meters in service. For the years ended September 30, 2002 and 2001, this
division had total throughput of 57,144 and 64,924 MMcf.

     Atmos Energy Texas Division:  Our Texas Division operates in Texas. The
governing body of each municipality we serve has original jurisdiction over all
utility rates, operations and services within its city limits, except with
respect to sales of natural gas for vehicle fuel and agricultural use. We
operate pursuant to non-exclusive franchises granted by the municipalities we
serve, which are subject to renewal from time to time. The Railroad Commission
of Texas has exclusive appellate jurisdiction over all rate and regulatory
orders and ordinances of the municipalities and exclusive original jurisdiction
over rates and services to customers not located within the limits of a
municipality. At September 30, 2002 and 2001, our Texas Division

                                        4
<PAGE>

had 313,340 and 314,734 utility meters in service. For the years ended September
30, 2002 and 2001, this division had total throughput of 49,279 and 53,586 MMcf.

NATURAL GAS MARKETING SEGMENT OVERVIEW

     Our natural gas marketing and other non-utility segments have operations in
18 states and are organized under Atmos Energy Holdings, Inc.

     Atmos Energy Marketing, L.L.C. comprises our natural gas marketing segment.
Woodward Marketing, L.L.C. and Trans Louisiana Industrial Gas Company, Inc. are
wholly-owned subsidiaries of Atmos Energy Marketing. Atmos Energy Marketing
provides a variety of natural gas management services to natural gas utility
systems, municipalities and industrial natural gas consumers in several states
and to our Colorado-Kansas, Kentucky, Louisiana and Mid-States divisions. These
services consist primarily of the furnishing of natural gas supplies at fixed
and market-based prices, load forecasting and management, gas storage and
transportation services, peaking sales and balancing services and gas price
hedging through the use of derivative products. In addition, Trans Louisiana
Industrial Gas Company markets natural gas primarily to commercial customers in
Louisiana. For the year ended September 30, 2002, Atmos Energy Marketing
realized $49.0 million in gas trading margin from the sale of 273.8 Bcf of
natural gas to its customers.

  ATMOS ENERGY MARKETING ACTIVITIES

     We acquired a 45 percent interest in Woodward Marketing in July 1997 as a
result of the merger of Atmos and United Cities Gas Company, which had acquired
that interest in May 1995. In April 2001, we acquired the 55 percent interest
that we did not own from JD Woodward and others for 1,423,193 restricted shares
of our common stock. Immediately following the acquisition, Mr. Woodward was
elected as a Senior Vice President of Atmos in charge of all non-utility
business activities, a position he has held since April 2001. Prior to that
time, Mr. Woodward had not been an officer or employee of Atmos.

     The principal business of Atmos Energy Marketing, including the activities
of Woodward Marketing and Trans Louisiana Industrial Gas, is the overall
management of natural gas requirements for municipalities, local gas utility
companies and industrial customers located primarily in the southeastern and
midwestern United States. This business involves the sale of natural gas by
Atmos Energy Marketing to its customers and the management of storage and
transportation contracts for its customers under contracts generally having one
to two-year terms. At September 30, 2002, Atmos Energy Marketing had a total of
101 municipal customers and 641 industrial customers. Atmos Energy Marketing
also sells natural gas to certain of its industrial customers on a delivered
burner tip basis under contract terms from 30 days to two years. In addition,
Atmos Energy Marketing supplies our regulated operations with a portion of our
natural gas requirements on a competitive bid basis. Any mark-to-market gains or
losses on these affiliate contracts are eliminated.

     In the management of natural gas requirements for municipal and other local
utilities, Atmos Energy Marketing sells physical natural gas to those customers
for future delivery and manages the associated price risk through the use of gas
futures, forwards, over-the-counter and exchange-traded options, and swap
contracts with counterparties. These financial contracts are marked-to-market at
the daily close of business. Atmos Energy Marketing links gas derivatives to
physical delivery of natural gas and typically balances its derivatives
positions at the end of each trading day. Over-the-counter swap agreements
require Atmos Energy Marketing to receive or make payments based on the
difference between a fixed price and the market price of natural gas on the
settlement date. Atmos Energy Marketing uses these futures and swaps to manage
margins on offsetting fixed-price purchase or sale commitments for physical
quantities of natural gas, which are also carried on a mark-to-market basis.
Mark-to-market accounting refers to the measurement of contracts at fair value
determined at the balance sheet date with any gains and losses included in
earnings. Options held to manage price risk provide the right, but not the
requirement, to buy or sell energy commodities at a fixed price. Atmos Energy
Marketing uses options to manage margins and to limit overall price risk
exposure. At any point in time, Atmos Energy Marketing may not have completely
hedged its price risk on these activities.

     Energy related services provided by Atmos Energy Marketing include the sale
of natural gas to its various customer classes and management of transportation
and storage assets and inventories. More specifically,
                                        5
<PAGE>

energy services include contract negotiation and administration, load
forecasting, storage acquisition, natural gas purchase and delivery and capacity
utilization strategies. In providing these services, Atmos Energy Marketing
generates income from its utility, municipal and industrial customers through
negotiated prices based on the volume of gas supplied to the customer. Atmos
Energy Marketing also generates income by taking advantage of the difference
between near-term gas prices and prices for future delivery as well as the daily
movement of gas prices by utilizing storage and transportation capacity that it
controls.

     Prior to May 2002, Atmos Energy Marketing engaged in limited financial
trading for speculative purposes. Financial trading involves utilizing financial
instruments (futures, options, swaps, etc.) to hedge natural gas prices or to
take a position in the market based on anticipated price movement. In some prior
years, Atmos Energy Marketing experienced losses in its financial speculative
trading business. Effective in May 2002, Atmos Energy Marketing's financial
trading for speculative purposes was discontinued. Atmos Energy Marketing will
continue its financial trading for hedging (risk management purposes) related to
its physical trading positions. With regard to its physical trading business,
Atmos Energy Marketing does engage in limited speculative natural gas trading
for its own account primarily related to its storage activity, subject to a risk
management policy established by Atmos' management which limits the level of
trading loss to a maximum of 25 percent of the budgeted annual operating income
of Atmos Energy Holdings. Physical trading involves utilizing physical assets
(storage and transportation) to sell and deliver gas to customers or to take a
position in the market based on anticipated price movement. Compliance with such
risk management policy is monitored on a daily basis. In addition, Woodward
Marketing's bank credit facility limits trading positions that are not closed at
the end of the day (open positions) to 5.0 Bcf of natural gas. At September 30,
2002, Atmos Energy Marketing's net open positions in its trading operations
totaled 1.9 Bcf. Atmos Energy Marketing's open trading positions are monitored
on a daily basis but are not required to be closed if they remain within the
limits set by the bank loan agreement. In addition to the price risk of any net
open position at the end of each trading day, the financial exposure that
results from intra-day fluctuations of gas prices constitutes a risk of loss
since the price of natural gas purchased or sold for future delivery at the
beginning of the day may not be hedged until later in the day.

     Financial instruments, which subject Atmos Energy Marketing to counterparty
risk, consist primarily of financial instruments arising from trading and risk
management activities and overnight repurchase agreements that are not insured.
Counterparty risk is the risk of loss from nonperformance by financial
counterparties to a contract. Exchange-traded future and option contracts are
generally guaranteed by the exchanges.

     Atmos Energy Marketing's operations are concentrated in the natural gas
industry, and its customers and suppliers may be subject to economic risks
affecting that industry.

     From time to time, Woodward Marketing borrows money to fund its natural gas
purchases and to fulfill its obligations to maintain deposit accounts with its
counterparties. See Note 3 of notes to consolidated financial statements.

OTHER NON-UTILITY SEGMENT OVERVIEW

     - Atmos Pipeline and Storage, L.L.C.  Atmos Pipeline and Storage owns or
       has an interest in underground storage fields in Kansas, Kentucky and
       Louisiana and provides storage services to our Colorado-Kansas,
       Mid-States and Louisiana divisions and to other non-utility customers.
       Our total storage capacity is approximately 26.1 Bcf. Atmos Pipeline and
       Storage also provides transportation services to our utility operations
       in Louisiana.

     - Atmos Power Systems, Inc.  Atmos Power Systems constructs and operates
       electrical power generating plants and associated facilities. Atmos Power
       Systems may also enter into agreements to either lease or sell such
       plants.

                                        6
<PAGE>

OPERATING STATISTICS

     The following table shows our consolidated operating statistics for each of
the five fiscal years from 1998 through 2002. It is followed by three additional
tables that show utility sales and statistical data by division for 2002 and
2001 and our non-utility sales and statistical data for the same periods.
Certain prior year amounts have been reclassified to conform with the current
year presentation.

                                        7
<PAGE>

                            ATMOS ENERGY CORPORATION

                       CONSOLIDATED OPERATING STATISTICS

<Table>
<Caption>
                                                        YEAR ENDED SEPTEMBER 30
                                     --------------------------------------------------------------
                                        2002         2001         2000         1999         1998
                                     ----------   ----------   ----------   ----------   ----------
<S>                                  <C>          <C>          <C>          <C>          <C>
METERS IN SERVICE, end of year
  Residential......................   1,247,247    1,243,625      970,873      919,012      889,074
  Commercial.......................     122,156      122,274      104,019       98,268       94,302
  Industrial (including
    agricultural)..................      12,694       13,020       14,259       14,329       16,322
  Public authority and other.......       7,244        7,404        7,448        6,386        4,834
                                     ----------   ----------   ----------   ----------   ----------
         Total meters..............   1,389,341    1,386,323    1,096,599    1,037,995    1,004,532
  Propane customers(1).............          --           --           --       39,539       37,400
                                     ----------   ----------   ----------   ----------   ----------
         Total.....................   1,389,341    1,386,323    1,096,599    1,077,534    1,041,932
                                     ==========   ==========   ==========   ==========   ==========
HEATING DEGREE DAYS(2)
  Actual (weighted average)........       3,368        4,124        2,096        3,374        3,799
  Percent of normal................          94%         115%          82%          85%          95%
SALES VOLUMES -- MMcf
  Residential......................      77,386       79,000       63,285       67,128       73,472
  Commercial.......................      35,796       36,922       30,707       31,457       36,083
  Industrial (including
    agricultural)..................      26,431       33,730       38,687       35,741       44,881
  Public authority and other.......       5,875        6,892        5,520        5,793        4,937
                                     ----------   ----------   ----------   ----------   ----------
         Total sales volumes.......     145,488      156,544      138,199      140,119      159,373
Transportation volumes -- MMcf.....      63,053       61,230       59,365       55,468       56,224
                                     ----------   ----------   ----------   ----------   ----------
TOTAL THROUGHPUT -- MMcf...........     208,541      217,774      197,564      195,587      215,597
                                     ==========   ==========   ==========   ==========   ==========
PROPANE -- Gallons (000's)(1)......          --           --       19,329       22,291       23,412
                                     ==========   ==========   ==========   ==========   ==========
OPERATING REVENUES (000's)
Gas sales revenues
  Residential......................  $  535,981   $  788,902   $  405,552   $  349,691   $  410,538
  Commercial.......................     221,728      342,945      176,712      144,836      184,046
  Industrial (including
    agricultural)..................     112,172      208,168      171,447      117,382      161,382
  Public authority and other.......      31,731       58,539       27,198       22,330       20,504
                                     ----------   ----------   ----------   ----------   ----------
         Total gas sales
            revenues...............     901,612    1,398,554      780,909      634,239      776,470
Transportation revenues............      36,591       28,668       23,610       23,101       23,971
Other gas revenues.................      11,258       10,925        4,674        4,500        8,121
                                     ----------   ----------   ----------   ----------   ----------
         Total gas revenues........     949,461    1,438,147      809,193      661,840      808,562
Propane revenues(1)................          --           --       22,550       22,944       29,091
Other revenues.....................       1,388        4,128       18,409        5,412       10,555
                                     ----------   ----------   ----------   ----------   ----------
         Total operating
            revenues...............  $  950,849   $1,442,275   $  850,152   $  690,196   $  848,208
                                     ==========   ==========   ==========   ==========   ==========
AVERAGE SALES PRICE/Mcf............  $     6.20   $     8.93   $     5.65   $     4.53   $     4.87
AVERAGE COST OF GAS/Mcf SOLD.......        3.81         6.83         3.79         2.79         3.24
AVERAGE TRANSPORTATION
  REVENUES/Mcf.....................         .58          .47          .40          .42          .43
</Table>

                     See footnotes following these tables.

                                        8
<PAGE>

                            ATMOS ENERGY CORPORATION

               UTILITY SALES AND STATISTICAL DATA BY DIVISION(3)

<Table>
<Caption>
                                                   YEAR ENDED SEPTEMBER 30, 2002
                              ------------------------------------------------------------------------
                              COLORADO-
                               KANSAS     KENTUCKY   LOUISIANA   MID-STATES    TEXAS     TOTAL UTILITY
                              ---------   --------   ---------   ----------   --------   -------------
<S>                           <C>         <C>        <C>         <C>          <C>        <C>
METERS IN SERVICE, at end of
  year
  Residential...............   196,320     158,296    346,369      273,166     273,096     1,247,247
  Commercial................    18,602      18,017     22,709       35,925      26,903       122,156
  Industrial................       464         409         --          729      11,092        12,694
  Public authority and
     other..................     1,594       1,657        934          810       2,249         7,244
                              --------    --------   --------     --------    --------    ----------
          Total.............   216,980     178,379    370,012      310,630     313,340     1,389,341
                              ========    ========   ========     ========    ========    ==========
HEATING DEGREE DAYS(2)
  Actual....................     5,373       4,346      1,543        3,644       3,259         3,368
  Percent of normal.........        95%        100%        90%          94%         92%           94%
SALES VOLUMES -- MMcf(4)
  Residential...............    15,660      10,802     15,117       16,245      19,562        77,386
  Commercial................     5,948       4,611      6,442       11,599       7,196        35,796
  Industrial................     1,839       1,931         --        8,658      13,059        25,487
  Public authority and
     other..................     1,190       1,314        847          287       2,237         5,875
                              --------    --------   --------     --------    --------    ----------
          Total.............    24,637      18,658     22,406       36,789      42,054       144,544
TRANSPORTATION
  VOLUMES -- MMcf(4)........     8,917      25,063      8,029       20,355       7,225        69,589
                              --------    --------   --------     --------    --------    ----------
TOTAL THROUGHPUT
  -- MMcf(4)................    33,554      43,721     30,435       57,144      49,279       214,133
                              ========    ========   ========     ========    ========    ==========
OTHER STATISTICS
  Operating revenues
     (000's)................  $154,718    $138,772   $188,092     $257,305    $198,639    $  937,526
  Miles of pipe.............     6,454       3,794      7,951        7,637      13,321        39,157
  Employees(5)..............       271         245        457          461         332         1,766
</Table>

                     See footnotes following these tables.
                                        9
<PAGE>

                            ATMOS ENERGY CORPORATION

               UTILITY SALES AND STATISTICAL DATA BY DIVISION(3)

<Table>
<Caption>
                                                   YEAR ENDED SEPTEMBER 30, 2001
                              ------------------------------------------------------------------------
                              COLORADO-
                               KANSAS     KENTUCKY   LOUISIANA   MID-STATES    TEXAS     TOTAL UTILITY
                              ---------   --------   ---------   ----------   --------   -------------
<S>                           <C>         <C>        <C>         <C>          <C>        <C>
METERS IN SERVICE, at end of
  year
  Residential...............   192,056     161,616    344,870      271,233     273,850     1,243,625
  Commercial................    18,376      18,602     22,650       35,518      27,128       122,274
  Industrial................       414         397         --          711      11,498        13,020
  Public authority and
     other..................     1,638       1,660        916          932       2,258         7,404
                              --------    --------   --------     --------    --------    ----------
          Total.............   212,484     182,275    368,436      308,394     314,734     1,386,323
                              ========    ========   ========     ========    ========    ==========
HEATING DEGREE DAYS(2)
  Actual....................     6,041       4,233      2,076        3,755       3,782         4,124
  Percent of normal.........       106%         98%       117%          97%        107%          115%
SALES VOLUMES -- MMcf(4)
  Residential...............    18,027      12,833      5,257       19,978      22,905        79,000
  Commercial................     6,845       5,669      2,448       13,968       7,992        36,922
  Industrial................     1,224       3,018         --       10,473       8,395        23,110
  Public authority and
     other..................     1,497       1,519        919          339       2,618         6,892
                              --------    --------   --------     --------    --------    ----------
          Total.............    27,593      23,039      8,624       44,758      41,910       145,924
TRANSPORTATION
  VOLUMES -- MMcf(4)........    10,204      23,491      3,954       20,166      11,676        69,491
                              --------    --------   --------     --------    --------    ----------
TOTAL THROUGHPUT --
  MMcf(4)...................    37,797      46,530     12,578       64,924      53,586       215,415
                              ========    ========   ========     ========    ========    ==========
OTHER STATISTICS
  Operating revenues
     (000's)................  $270,678    $237,047   $ 96,511     $464,498    $311,414    $1,380,148
  Miles of pipe.............     6,344       3,779      7,934        7,536      13,345        38,938
  Employees(5)..............       272         247        488          470         342         1,819
</Table>

                  NATURAL GAS MARKETING AND OTHER NON-UTILITY
                        OPERATIONS AND STATISTICAL DATA

<Table>
<Caption>
                                                              YEAR ENDED SEPTEMBER 30
                                                              -----------------------
                                                                 2002         2001
                                                              ----------   ----------
<S>                                                           <C>          <C>
OPERATIONS DATA (000's)
  Operating revenues........................................   $ 14,795     $ 64,116
  Gas trading margin........................................   $ 38,538     $    488
  Equity in earnings of Woodward Marketing, L.L.C.(6).......   $     --     $  8,062
  Net income................................................   $ 16,662     $  6,209
  Total assets..............................................   $313,376     $303,884
OTHER STATISTICS
  Customers:
     Industrial.............................................        641          531
     Municipal..............................................        101           68
  Employees.................................................         83           62
</Table>

                     See footnotes following these tables.

                                        10
<PAGE>

     Notes to preceding tables:
---------------

(1) Prior to August 2000, propane revenues and expenses were fully consolidated.
    Subsequent to August 2000, the results of our propane operations are shown
    on the equity basis.

(2) A heating degree day is equivalent to each degree that the average of the
    high and the low temperatures for a day is below 65 degrees. The colder the
    climate, the greater the number of heating degree days. Heating degree days
    are used in the natural gas industry to measure the relative coldness of
    weather and to compare relative temperatures between one geographic area and
    another. Normal degree days are based on 30-year average National Weather
    Service data for selected locations. Degree day information for 2002 and
    2001 is adjusted for service areas included in the Mid-States Division and
    the Kentucky Division which have weather normalized operations. Degree day
    information for 2000, 1999 and 1998 has not been adjusted for service areas
    with weather normalized operations as that information was not available.

(3) These tables present data for our five utility divisions. Their operations
    include the regulated local distribution companies located in their
    respective service areas. The operations of Louisiana Gas are included in
    our Louisiana Division since July 1, 2001, the date of acquisition.

(4) Utility sales volumes and revenues reflect utility segment operations,
    including intercompany sales and transportation amounts.

(5) The number of employees excludes 489 and 480 Atmos shared services and
    customer support center employees and 83 and 62 non-utility employees in
    2002 and 2001.

(6) In April 2001, we completed our acquisition of the remaining 55 percent
    interest in Woodward Marketing that we did not already own. Subsequent to
    April 2001, the revenues and expenses of Woodward Marketing are now shown on
    a consolidated basis.

                                        11
<PAGE>

     We consider each division within our utility segment to be a reporting unit
of the utility segment and not a separate reportable segment.

     The following table summarizes certain information regarding the operations
of the utility, natural gas marketing and other non-utility segments of Atmos as
of and for each of the three years ended September 30, 2002. The information is
net of intersegment eliminations.

<Table>
<Caption>
                                                     NATURAL GAS   OTHER NON-
                                         UTILITY      MARKETING     UTILITY       TOTAL
                                        ----------   -----------   ----------   ----------
                                                          (IN THOUSANDS)
<S>                                     <C>          <C>           <C>          <C>
2002
  Operating revenues..................  $  936,054    $    404      $ 14,391    $  950,849
  Gas trading margin..................          --      38,538            --        38,538
  Operating income....................     125,506      20,610         9,215       155,331
  Net income..........................      42,994      12,614         4,048        59,656
  Identifiable assets.................   1,666,845     242,340        71,036     1,980,221
2001
  Operating revenues..................  $1,378,159    $  7,946      $ 56,170    $1,442,275
  Gas trading margin..................          --         488            --           488
  Operating income (loss).............     127,980      (3,122)        5,423       130,281
  Net income..........................      49,881       2,551         3,658        56,090
  Identifiable assets.................   1,732,296     251,238        52,646     2,036,180
2000
  Operating revenues..................  $  734,835    $    929      $114,388    $  850,152
  Gas trading margin..................          --          --            --            --
  Operating income....................      77,207         155         7,954        85,316
  Net income..........................      22,459       5,344         8,115        35,918
  Identifiable assets.................   1,246,782      37,621        64,355     1,348,758
</Table>

GAS SALES

     Our natural gas utility distribution business is seasonal and highly
dependent on weather conditions in our service areas. Gas sales to residential
and commercial customers are greater during the winter months than during the
remainder of the year. The volumes of gas sales during the winter months will
vary with the temperatures during these months. The seasonal nature of our sales
to residential and commercial customers is partially offset by our sales in the
spring and summer months to our agricultural customers in Texas, Colorado and
Kansas who use natural gas to operate irrigation equipment.

     In addition to weather, our revenues are affected by the cost of natural
gas and economic conditions in the areas that we serve. Higher gas costs, which
we are generally able to pass through to our customers under purchased gas
adjustment clauses, may cause customers to conserve, or, in the case of
industrial customers, to use alternative energy sources.

     To protect against volatility in gas prices, we are hedging gas costs for
the 2002-2003 heating season by using a combination of storage, financial hedges
and fixed forward contracts to stabilize gas prices. For the 2002-2003 heating
season, we have covered between 45 and 50 percent of our anticipated flowing gas
requirements through storage and financial instruments. The gas hedges should
help to moderate the effects of higher customer accounts receivable caused by
potentially higher gas prices.

     We also have weather normalization adjustments in our rate jurisdictions in
Tennessee, Georgia and Kentucky which protect against earnings volatility. We
purchased a three-year weather insurance policy for our Texas and Louisiana
operations commencing with the 2001-2002 heating season, with an option to
cancel in the third year if we obtain weather protection in our rate structures.
The policy covers the entire heating

                                        12
<PAGE>

season of October through March. See "Weather and Seasonality" in Management's
Discussion and Analysis of Operations.

     Our distribution systems have experienced aggregate peak day deliveries of
approximately 2.0 Bcf per day. We have the ability to curtail deliveries to
certain customers under the terms of interruptible contracts and applicable
state statutes or regulations which enable us to maintain our deliveries to high
priority customers. We have not imposed curtailment in our Texas Division since
we began independent operations in 1983 or in our Louisiana Division since we
acquired Trans Louisiana Gas Company in 1986 and Louisiana Gas Service in 2001.
The Kentucky Division curtailed deliveries to certain interruptible customers
during exceptionally cold periods in December 1989, January 1994 and during the
winter of 1996. Neither the Colorado-Kansas Division nor its predecessor,
Greeley Gas Company, has curtailed deliveries to its sales customers since prior
to 1980. The Mid-States Division curtails interruptible service customers from
time to time each year in accordance with the interruptible contracts and
tariffs.

GAS SUPPLY

     We receive gas deliveries in our utility operations through 35 pipeline
transportation companies, both interstate and intrastate, to satisfy our sales
market requirements. The pipeline transportation agreements are firm and many of
them have pipeline no-notice storage service which provides for daily balancing
between system requirements and nominated flowing supplies. These agreements
have been negotiated with the shortest term necessary while still maintaining
our right of first refusal.

     The Kentucky Division's gas supply is delivered primarily by the following
pipelines: Williams Pipeline-Texas Gas, Tennessee Gas, Trunkline, Midwestern
Pipeline and ANR. During 2002, the Kentucky Division sought and was granted
approval by the Kentucky Public Service Commission for a four year extension of
its performance-based rate program which commenced in July 1998. Under the
performance-based program, we and our customers jointly share in any actual gas
cost savings achieved when compared to pre-determined benchmarks. We also have
similar gas cost performance-based rate mechanisms in Georgia and Tennessee.

     Our Mid-States Division is served by 13 interstate pipelines. The majority
of the volumes are transported through East Tennessee Pipeline, Southern Natural
Gas, Tennessee Gas Pipeline and Columbia Gulf.

     Colorado Interstate Gas Company, Williams Pipeline-Central, Public Service
Company of Colorado and Northwest Pipeline are the principal transporters of the
Colorado-Kansas Division's requirements. Additionally, the Colorado-Kansas
Division purchases substantial volumes from producers that are connected
directly to its distribution system.

     Our Texas Division receives transportation service from ONEOK Pipeline. In
addition, the Texas Division purchases a significant portion of its supply from
Pioneer Natural Resources which is connected directly to our Amarillo, Texas
distribution system.

     Louisiana Intrastate Gas Company, Acadian Pipeline, Gulf South and Williams
Pipeline-Texas Gas pipelines deliver most of the Louisiana Division's
requirements.

     We also own or hold an interest in and operate numerous natural gas storage
facilities in Kentucky, Kansas and Louisiana which are used to help meet
customer requirements during peak demand periods and to reduce the need to
contract for additional pipeline capacity to meet such peak demand periods.
Additionally, we operate one propane plant and a liquefied natural gas plant for
peak shaving purposes. We also contract for storage service in underground
storage facilities on many of the interstate pipelines serving us. See "Item 2.
Properties" below for further information regarding the peak shaving facilities.

     We normally inject gas into pipeline storage systems and company owned
storage facilities during the summer months and withdraw it in the winter
months. Our underground storage facilities in Kansas, Kentucky and Louisiana
have a combined maximum daily output capability of approximately 266,000 Mcf.

     We purchase our gas supply from various producers and marketers. Supply
arrangements are contracted on a firm basis with various terms at market prices.
The firm supply consists of both base load and swing supply quantities. Base
load quantities are those that flow at a constant level throughout the month and
swing

                                        13
<PAGE>

supply quantities provide the flexibility to change daily quantities to match
increases or decreases in requirements related to weather conditions. Except for
local production purchases, we select suppliers through a competitive bidding
process by requesting proposals from suppliers that have demonstrated that they
can provide reliable service. We select these suppliers based on their ability
to deliver gas supply to our designated firm pipeline receipt points at the best
cost. Major suppliers during fiscal 2002 were Reliant Energy, Pioneer Natural
Resources, Duke Energy, our non-utility subsidiary Woodward Marketing, ONEOK Gas
Marketing, BP Energy, Anadarko and Tenaska Marketing. We do not anticipate
problems with obtaining additional gas supply as needed for our customers.

REGULATION

     Each of our utility divisions is regulated by various state or local public
utility authorities. We are also subject to regulation by the United States
Department of Transportation with respect to safety requirements in the
operation and maintenance of our gas distribution facilities. Our distribution
operations are also subject to various state and federal laws regulating
environmental matters. From time to time we receive inquiries regarding various
environmental matters. We believe that our properties and operations
substantially comply with and are operated in substantial conformity with
applicable safety and environmental statutes and regulations. There are no
administrative or judicial proceedings arising under environmental quality
statutes pending or known to be contemplated by governmental agencies which
would have a material adverse effect on us or our operations. Our environmental
claims have arisen out of manufactured gas plant sites in Tennessee and Missouri
and mercury contamination sites in Kansas. See Note 5 of notes to consolidated
financial statements.

RATES

     The method of determining regulated rates varies among the states in which
our utility divisions operate. The regulators have the responsibility of
ensuring that utilities under their jurisdiction operate in the best interests
of customers while providing the utilities the opportunity to earn a reasonable
return on investment. In a general rate case, the applicable regulatory
authority, which is typically the state public utility commission, establishes a
base margin, which is the amount of revenue authorized to be collected from
customers to recover authorized operating expense (other than the cost of gas),
depreciation, interest, taxes and return on rate base. The divisions in our
utility operations segment perform annual deficiency studies for each rate
jurisdiction to determine when to file rate cases.

     Substantially all of our sales to our customers fluctuate with the cost of
gas that we purchase. Rates established by regulatory authorities are adjusted
for increases and decreases in our purchased gas cost through purchased gas
adjustment mechanisms. Purchased gas adjustment mechanisms provide gas utilities
a method of recovering purchased gas costs on an ongoing basis without the
necessity of a rate case addressing all of the utilities' non-gas costs. These
mechanisms are commonly utilized when regulatory authorities recognize a
particular type of expense, such as purchased gas costs, that (i) is subject to
significant price fluctuations compared to the utility's other costs, (ii)
represents a large component of the utility's cost of service and (iii) is
generally outside the control of the gas utility. Such purchased gas adjustment
mechanisms are not designed to allow the utility to earn a profit but are
designed to allow a dollar-for-dollar recovery of fuel costs. Therefore, while
our operating revenues may fluctuate, gross profit (which is defined as
operating revenues less purchased gas cost) is generally not eroded or enhanced
because of gas cost increases or decreases.

     Approximately 98 percent of our revenues in the fiscal year ended September
30, 2002, and approximately 96 percent of our revenues in fiscal 2001 were
derived from sales at rates set by or subject to approval by local or state
authorities. Generally, the regulatory authority reviews our rate request and
establishes a rate structure intended to generate revenue sufficient to cover
our costs of doing business and provide a reasonable return on invested capital.

                                        14
<PAGE>

     The following table sets forth major rate requests that we or other parties
have made during the most recent five years and the action taken on such
requests.

<Table>
<Caption>
                                                                                AMOUNT
                                                       EFFECTIVE    AMOUNT     RECEIVED
JURISDICTION                                             DATE      REQUESTED   (REDUCED)
------------                                           ---------   ---------   ---------
                                                                (IN THOUSANDS)
<S>                                                    <C>         <C>         <C>
Texas
  West Texas System..................................  12/01/00     $ 9,827     $ 3,011
  Amarillo System....................................  01/01/00       4,354       2,200
Louisiana
  Trans La System....................................  11/01/02          --         364(a)
  LGS System.........................................  11/01/02          --      11,890(b)
Kentucky.............................................  12/21/99      14,127       9,900(c)
Colorado.............................................  01/21/98          --      (1,600)(d)
                                                       05/04/01       4,200       2,750
Iowa.................................................  03/05/01          --        (326)(e)
Illinois.............................................  10/23/00       2,100       1,367
Virginia.............................................  10/01/98          --        (248)(f)
                                                       04/01/01       2,100        (534)
</Table>

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

(a)  The Louisiana Public Service Commission approved, in October 1999, a rate
     stabilization clause for three years for our former Trans La Division. The
     rate stabilization clause will allow the Trans La system to earn a return
     on equity within certain ranges that will be monitored on an annual basis.
     In 2002, we submitted our 2001 rate stabilization filing and received
     tariff revisions which resulted in an increase in annual revenues of $0.5
     million during the first 24-month period. Subsequent to the first 24-month
     period, adjusted rates will provide an increase in annual revenues of $0.4
     million.
(b)  On January 29, 2001, the Louisiana Public Service Commission approved a
     rate stabilization clause for our LGS system for a three-year period
     beginning January 1, 2001. Under the rate stabilization clause, our LGS
     system will be allowed to earn a return on equity within certain ranges
     that will be monitored on an annual basis. In 2002, we submitted our 2001
     rate stabilization filing and received tariff revisions which resulted in
     an increase in annual revenues of $15.3 million during the first 24-month
     period. Subsequent to the first 24-month period, adjusted rates will
     provide an increase in annual revenues of $11.9 million.

(c)  The Kentucky rate order also included a provision for a five-year pilot
     program for weather normalization which began in November 2000.

(d)  Rate reduction as a result of settlement in a case initiated by the
     Colorado Consumer Council.

(e)  Rate reduction as a result of an agreement initiated by the Iowa Consumer
     Advocate Division of the Department of Justice.

(f)  Rate reduction as a result of a settlement with the Virginia State
     Corporation Commission staff.

COMPETITION

     Our utility operations are not currently in significant direct competition
with any other distributors of natural gas to residential and commercial
customers within our service areas. However, we do compete with other natural
gas suppliers and suppliers of alternative fuels for sales to industrial and
agricultural customers. We compete in all aspects of our business with
alternative energy sources, including, in particular, electricity. Competition
for residential and commercial customers is increasing. Promotional incentives,
improved equipment efficiencies and promotional rates all contribute to the
acceptability of electrical equipment. Electric utilities offer electricity as a
rival energy source and compete for the space heating, water heating and cooking
markets. The principal means to compete against alternative fuels is lower
prices, and natural gas historically has maintained its price advantage in the
residential, commercial and industrial markets. In
                                        15
<PAGE>

addition, our Natural Gas Marketing segment competes with other natural gas
brokers in obtaining natural gas supplies for customers.

EMPLOYEES

     At September 30, 2002, we had 2,338 employees, consisting of 2,255
employees in our utility segment and 83 employees in our other segments. See
"Utility Sales and Statistical Data by Division" for the number of employees by
division.

ITEM 2.  PROPERTIES

     We own an aggregate of 39,157 miles of underground distribution and
transmission mains throughout our gas distribution systems. These mains are
located on easements or rights-of-way which generally provide for perpetual use.
We maintain our mains through a program of continuous inspection and repair and
believe that our system of mains is in good condition. We also own and operate
one propane peak shaving plant with a total capacity of approximately 180,000
gallons that can produce an equivalent of approximately 3,300 Mcf daily. We own
a liquefied natural gas storage facility with a capacity of 500,000 Mcf which
can inject a daily volume of 30,000 Mcf into the system, as well as underground
storage fields, as discussed below, that are used to supplement the supply of
natural gas in periods of peak demand.

     We have seven underground gas storage facilities in Kentucky and four in
Kansas. We own a 25 percent interest in a gas storage facility in Napoleonville,
Louisiana. This gas storage facility is operated by Acadian Gas Pipeline System
who also owns the remaining 75 percent interest. Our 25 percent usable capacity
is 364,782 Mcf. In addition to the usable capacity, we maintain 332,917 Mcf of
cushion gas to maintain reservoir pressure. The Napoleonville facility has a
maximum daily delivery capability of approximately 56,000 Mcf. We also have a
contract through March 2003 with Bridgeline Gas Distribution L.L.C. for 250,000
Mcf of usable storage capacity in a storage facility in Sorrento, Louisiana. The
Sorrento facility has a maximum daily delivery capability of approximately
25,000 Mcf.

     Our total storage capacity is approximately 26.1 Bcf. However,
approximately 12.3 Bcf of gas in the storage facilities must be retained as
cushion gas to maintain reservoir pressure. The maximum daily delivery
capability of these storage facilities is approximately 266,000 Mcf.

     Substantially all of our properties in our Colorado-Kansas Division and
Mid-States Division with net book values of approximately $184.8 million and
$328.8 million are subject to liens under First Mortgage Bonds assumed in our
acquisitions of Greeley Gas Company and United Cities Gas Company. At September
30, 2002, the liens collateralized $17.0 million of outstanding 9.4 percent
Series J First Mortgage Bonds due May 1, 2021, and $86.6 million of outstanding
Series P, Q, R, T, U and V First Mortgage Bonds due at various dates from 2004
through 2022.

     Our administrative offices are consolidated in Dallas, Texas under one
lease. We also maintain field offices throughout our distribution system, the
majority of which are located in leased facilities. Our non-utility operations
are headquartered in Houston, Texas, with offices in Houston and other
locations, primarily in leased facilities.

     Net property, plant and equipment at September 30, 2002 included
approximately $1,223.9 million for utility, $9.9 million for natural gas
marketing and $66.5 million for other non-utility.

     We hold franchises granted by the incorporated cities and towns that we
serve. At September 30, 2002, we held 555 such franchises having terms generally
ranging from five to 25 years. We believe that each of our franchises will be
renewed.

                                        16
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

     See Note 5 of notes to consolidated financial statements.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 2002.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth certain information as of September 30,
2002, regarding the executive officers of the Company. It is followed by a brief
description of the business experience of each executive officer.

<Table>
<Caption>
                                     YEARS OF
NAME                           AGE   SERVICE                 OFFICE CURRENTLY HELD
----                           ---   --------                ---------------------
<S>                            <C>   <C>        <C>
Robert W. Best...............  55        5      Chairman, President and Chief Executive Officer
John P. Reddy................  49        4      Senior Vice President and Chief Financial
                                                Officer
R. Earl Fischer..............  63       40      Senior Vice President, Utility Operations
JD Woodward III..............  52        1      Senior Vice President, Non-Utility Operations
Louis P. Gregory.............  47        2      Senior Vice President and General Counsel
Wynn D. McGregor.............  49       14      Vice President, Human Resources
</Table>

     Robert W. Best was named Chairman of the Board, President and Chief
Executive Officer in March 1997. He previously served as Senior Vice
President -- Regulated Businesses of Consolidated Natural Gas Company
(1996-March 1997) and was responsible for its transmission and distribution
companies.

     John P. Reddy was named Senior Vice President and Chief Financial Officer
in September 2000. From April 2000 to September 2000, he was Senior Vice
President, Chief Financial Officer and Treasurer. Mr. Reddy previously served
the Company as Vice President, Corporate Development and Treasurer from December
1998 to March 2000. He joined the Company in August 1998 from Pacific
Enterprises, a Los Angeles, California based utility holding company whose
principal subsidiary was Southern California Gas Co. where he was Vice President
of Planning and Advisory Services responsible for corporate development and
merger and acquisition activities. Mr. Reddy was with Pacific Enterprises from
1980 to 1998 in various management and financial positions.

     R. Earl Fischer was named Senior Vice President, Utility Operations in May
2000. He previously served the Company as President of the Texas Division from
January 1999 to April 2000 and as President of the Kentucky Division from
February 1989 to December 1998.

     JD Woodward was named Senior Vice President, Non-Utility Operations in
April 2001. Prior to joining the Company, Mr. Woodward was President of Woodward
Marketing, L.L.C. from January 1995 to March 2001.

     Louis P. Gregory joined the Company as Senior Vice President and General
Counsel in September 2000. Prior to joining the Company, he practiced law from
April 1999 to August 2000 with the law firm of McManemin & Smith. Prior to that,
he served as a consultant and independent contractor from August 1996 to
December 1998 for Nomas Corp. (formerly known as Lomas Mortgage USA, Inc.) and
Siena Holdings, Inc. (formerly known as Lomas Financial Corporation).

     Wynn D. McGregor was named Vice President, Human Resources in January 1994.
He previously served the Company as Director of Human Resources from February
1991 to December 1993 and as Manager, Compensation and Employment from December
1987 to January 1991.

                                        17
<PAGE>

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our stock trades on the New York Stock Exchange under the trading symbol
"ATO." The high and low sale prices and dividends paid per share of our common
stock for fiscal 2002 and 2001 are listed below. The high and low prices listed
are the actual closing NYSE quotes for shares of our common stock.

<Table>
<Caption>
                                                                              DIVIDENDS
                                                             HIGH     LOW       PAID
                                                            ------   ------   ---------
<S>                                                         <C>      <C>      <C>
FISCAL YEAR 2002
  Quarter ended:
     December 31..........................................  $22.10   $19.46     $.295
     March 31.............................................   24.20    20.26      .295
     June 30..............................................   24.46    21.25      .295
     September 30.........................................   22.75    18.37      .295
                                                                                -----
                                                                                $1.18
                                                                                =====
</Table>

<Table>
<Caption>
                                                                              DIVIDENDS
                                                             HIGH     LOW       PAID
                                                            ------   ------   ---------
<S>                                                         <C>      <C>      <C>
FISCAL YEAR 2001
  Quarter ended:
     December 31..........................................  $26.25   $19.31     $.290
     March 31.............................................   25.25    21.50      .290
     June 30..............................................   24.46    21.45      .290
     September 30.........................................   23.64    19.79      .290
                                                                                -----
                                                                                $1.16
                                                                                =====
</Table>

     See Note 3 of notes to consolidated financial statements for restriction on
payment of dividends. The number of record holders of our common stock on
September 30, 2002 was 28,829.

ITEM 6.  SELECTED FINANCIAL DATA

     The following table sets forth selected financial data of the Company and
should be read in conjunction with the consolidated financial statements
included herein. All income was from continuing operations.

<Table>
<Caption>
                                                   YEAR ENDED SEPTEMBER 30
                                --------------------------------------------------------------
                                   2002         2001         2000         1999         1998
                                ----------   ----------   ----------   ----------   ----------
                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                             <C>          <C>          <C>          <C>          <C>
Operating revenues............  $  950,849   $1,442,275   $  850,152   $  690,196   $  848,208
                                ==========   ==========   ==========   ==========   ==========
Net income....................  $   59,656   $   56,090   $   35,918   $   17,744   $   55,265
                                ==========   ==========   ==========   ==========   ==========
Diluted net income per
  share.......................  $     1.45   $     1.47   $     1.14   $      .58   $     1.84
                                ==========   ==========   ==========   ==========   ==========
Cash dividends paid per
  share.......................  $     1.18   $     1.16   $     1.14   $     1.10   $     1.06
                                ==========   ==========   ==========   ==========   ==========
Total assets at end of year...  $1,980,221   $2,036,180   $1,348,758   $1,230,537   $1,141,390
                                ==========   ==========   ==========   ==========   ==========
Long-term debt at end of
  year........................  $  670,463   $  692,399   $  363,198   $  377,483   $  398,548
                                ==========   ==========   ==========   ==========   ==========
</Table>

                                        18
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

INTRODUCTION

     This section provides management's discussion of the financial condition,
cash flows and results of operations of Atmos Energy Corporation with specific
information on liquidity, capital resources and results of operations. It
includes management's interpretation of such financial results, the factors
affecting these results, the major factors expected to affect future operating
results and future investment and financing plans. This discussion should be
read in conjunction with the Company's consolidated financial statements and
notes thereto.

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE SAFE HARBOR UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

     The statements contained in this Annual Report on Form 10-K may contain
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of historical fact
included in this Report are forward-looking statements made in good faith by the
Company and are intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of 1995. When used
in this Report, or any other of the Company's documents or oral presentations,
the words "anticipate," "expect," "estimate," "plans," "believes," "objective,"
"forecast," "goal" or similar words are intended to identify forward-looking
statements. Such forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied in the statements relating to the Company's strategy,
operations, markets, services, rates, recovery of costs, availability of gas
supply and other factors. These risks and uncertainties include the following:
adverse weather conditions such as warmer than normal weather in the Company's
service territories; national, regional and local economic conditions, including
competition from other energy suppliers as well as alternative forms of energy;
regulatory approvals, including the impact of rate proceedings before various
state regulatory commissions; successful completion and integration of pending
acquisitions; inflation and increased gas costs, including their effect on
commodity prices for natural gas; increased competition; further deregulation or
"unbundling" of the natural gas distribution industry; hedging and market risk
activities and other uncertainties, all of which are difficult to predict and
many of which are beyond the control of the Company. Accordingly, while the
Company believes these forward-looking statements to be reasonable, there can be
no assurance that they will approximate actual experience or that the
expectations derived from them will be realized. Further, the Company undertakes
no obligation to update or revise any of its forward-looking statements whether
as a result of new information, future events or otherwise.

RATEMAKING ACTIVITY

     The following is a discussion of our ratemaking activity for rate cases
that are currently pending as of September 30, 2002 or rate proceedings
completed during the three years ended September 30, 2002.

     Results of our rate activity for the three years ended September 30, 2002
can be summarized as follows: no rate increases implemented in 2002, net annual
rate increases totaling $6.4 million implemented in 2001 and net annual rate
increase totaling $12.1 million in 2000.

     In August 1999, the Texas Division filed rate cases in its West Texas
System cities and Amarillo, Texas, requesting rate increases of approximately
$9.8 million and $4.4 million. The Texas Division received an increase in annual
revenues of approximately $2.1 million in base rates plus an increase of $0.1
million in service charges in Amarillo, Texas, effective for bills rendered on
or after January 1, 2000. The agreement with Amarillo also provided for changes
in the rate structure to reduce the impact of warmer than normal weather and to
improve the recovery of the actual cost of service calls. The Texas Division's
request for an annual increase of approximately $9.8 million from the 67 cities
served by its West Texas System was denied. In March 2000, this decision was
appealed to the Railroad Commission of Texas. Subsequently, 59 cities
representing approximately 58 percent of the Texas Division's customers ratified
a non-binding Settlement Agreement. The Settlement Agreement capped the rate
increase at $3.0 million and entitled the ratifying cities to accept a rate
increase below $3.0 million in the event the Railroad Commission adopted a
lesser

                                        19
<PAGE>

increase for the non-ratifying cities. Eight cities declined to participate in
the settlement and a hearing with the Railroad Commission was held in August
2000. In December 2000, the Railroad Commission approved an increase in annual
revenues of approximately $3.0 million that covered all 67 cities served by the
West Texas System effective December 1, 2000. In addition, the Railroad
Commission approved a new rate design providing more protection from warmer than
normal weather for our West Texas System.

     In June 1999, the Trans La operations of the Louisiana Division were
involved in a rate investigation before the Louisiana Public Service Commission,
including the redesign of rates to mitigate the effects of warm winter weather.
A decision was rendered by the Louisiana Commission in October 1999 that
increased service charges associated with customer service calls and increased
the monthly customer charges from $6 to $9, both effective November 1, 1999.
While these changes are revenue neutral, they have mitigated the impact of
warmer than normal winter weather on earnings. The decision also included a
three-year rate stabilization clause which will allow the Trans La operations of
our Louisiana Division's rates to be adjusted annually to allow us to earn a
return on equity within certain ranges that will be monitored on an annual
basis.

     In connection with its review of our acquisition of Louisiana Gas Service,
the Louisiana Public Service Commission approved a rate structure that requires
us to share cost savings that resulted from the acquisition with the customers
of Louisiana Gas Service. The shared cost savings will be the difference between
operation and maintenance expense in any future year and the 1998 normalized
expense for Louisiana Gas Service, indexed for inflation, annual changes in
labor costs and customer growth. Beginning January 1, 2002, the customers are
assured annual savings, which will be indexed for inflation, annual changes in
labor costs and customer growth. The sharing mechanism will remain in place for
20 years subject to established modification procedures.

     In January and February 2002, our Louisiana division submitted its 2001
Rate Stabilization filings to the Louisiana Public Service Commission for the
two gas systems we operate in Louisiana. Recently completed audits by the
Louisiana Public Service Commission of these filings found our earnings to be
deficient and that rate adjustments were appropriate. Approved tariff revisions,
which became effective November 1, 2002, will result in $15.8 million in
additional revenue per year during the first 24-month period. Subsequent to the
first 24-month period, adjusted rates will provide $12.2 million in total annual
revenue increases. As a result of the actions taken by the Louisiana Public
Service Commission, Atmos Energy has decreased its overall weather sensitivity
in Louisiana.

     In October 2002, Atmos received written notification from the Executive
Secretary of the Louisiana Public Service Commission that he was asserting that
a monthly facilities fee of approximately $0.6 million charged since July 2001
to Atmos by Trans Louisiana Gas Pipeline, Inc., a wholly-owned subsidiary of
Atmos, pursuant to a contract between the parties, was excessive. The Executive
Secretary asserted that all monthly facilities fees in excess of approximately
$0.1 million from July 2001 should be refunded to ratepayers with interest.

     Atmos has responded to the Secretary and noted that it has previously made
all required filings with the Commission fully disclosing the amount of the
facilities fee. Atmos intends to file another petition seeking Commission
approval of the facilities fee by the end of calendar year 2003 similar to that
filed in 2001 but containing updated data. In the interim, Atmos is continuing
to charge a facilities fee of approximately $0.6 million per month, as the
Executive Secretary's correspondence does not constitute action of the
Commission.

     In May 1999, the Kentucky Division requested from the Kentucky Public
Service Commission an increase in revenues, a weather normalization adjustment
and changes in rate design to shift a portion of revenues from commodity charges
to fixed rates. In December 1999, the Kentucky Commission granted an increase in
annual revenues of approximately $9.9 million. The new rates were effective for
services rendered on or after December 21, 1999. In addition, the Kentucky
Commission approved a five-year pilot program for weather normalization
beginning in November 2000.

     On March 25, 2002, the Kentucky Commission issued an Order approving a four
year extension, effective April 1, 2002, of the Performance-based Ratemaking
mechanism related to gas procurement and gas

                                        20
<PAGE>

transportation activities filed by the Kentucky Division. The Performance-based
Ratemaking mechanism is incorporated into the Kentucky Division's gas cost
adjustment clause. As discussed above, it provides for sharing of purchased gas
cost savings between our customers and us. We recognized other income of $1.1
million, $0.2 million and $2.1 million under the Kentucky Performance-based
Ratemaking mechanism in fiscal years 2002, 2001 and 2000.

     In November 2000, the Colorado-Kansas Division filed a rate case with the
Colorado Public Utilities Commission for approximately $4.2 million in
additional annual revenues. In May 2001, we received an increase in annual
revenues of approximately $2.8 million from the Colorado Public Utilities
Commission. The new rates went into effect on May 4, 2001.

     Effective April 1, 1999, the Tennessee Regulatory Authority approved the
Mid-States Division's request to continue its Performance-based Ratemaking
mechanism related to gas procurement and gas transportation activities. The
Tennessee Regulatory Authority revised the mechanism from the original two-year
experimental period, by increasing the cap for incentive gains and/or losses to
$1.25 million per year. Under this agreement, the mechanism has no expiration
date and can be amended or cancelled by either the Mid-States Division or the
Tennessee Regulatory Authority according to the provisions of the agreement.
Similar to Tennessee, the Georgia Public Service Commission renewed our
Performance-based Ratemaking program for an additional three years effective May
1, 2002. The gas purchase and capacity release mechanisms of the
Performance-based Ratemaking mechanism are designed to provide us incentives to
find innovative methods to lower gas costs to our customers. We recognized other
income of $0.4 million, $1.0 million and $0.2 million in fiscal years 2002, 2001
and 2000 attributable to the Georgia and Tennessee Performance-based Ratemaking
mechanisms.

     In February 2000, the Mid-States Division filed a rate case in Illinois
with the Illinois Commerce Commission requesting an increase in annual revenues
of approximately $3.1 million. After review by the Illinois Commerce Commission,
the amount requested was revised to approximately $2.1 million. The Mid-States
Division received an increase in annual revenues of approximately $1.4 million.
The new rates went into effect on October 23, 2000 and are collected primarily
through an increase in monthly customer charges.

     In March 2000, the Mid-States Division filed a rate case in Virginia with
the State Corporation Commission of the Commonwealth of Virginia requesting an
increase in annual revenues of approximately $2.3 million. The State Corporation
Commission of Virginia reviewed the filing to determine if it met the
appropriate rules and regulations. In July 2000, we refiled the case requesting
an increase in revenues of approximately $2.1 million. The Commission accepted
the revised filing. In April 2001, the Mid-States Division agreed to an annual
rate reduction of $0.5 million effective beginning with the April 2001 billing
cycle.

     In March 2001, the Mid-States Division and the Iowa Consumer Advocate
Division of the Department of Justice reached an agreement for an annual rate
reduction of $0.3 million relating to our Iowa operations. The rate reduction
was effective in March 2001.

     In 2001, the Mid-States Division filed requests for accounting orders
related to uncollectable delinquencies in three states. As a result, we were
able to defer $1.5 million as a regulatory asset.

     We continue to monitor rates in all of our service areas to ensure that
they are adequate for the recovery of service costs and return on investment.

WEATHER AND SEASONALITY

     Our natural gas utility distribution business and irrigation sales business
is seasonal and dependent upon weather conditions in our service areas. Natural
gas sales to residential, commercial and public authority customers are affected
by winter heating season requirements. This generally results in higher
operating revenues and net income during the period from October through March
of each year and lower operating revenues and either net losses or lower net
income during the period from April through September of each year. Sales to
industrial customers are much less weather sensitive. Sales to agricultural
customers, who typically use natural gas to power irrigation pumps during the
period from March through September, are

                                        21
<PAGE>

affected by rainfall amounts. The effects of colder than normal winter weather
in 2001 and the effects of warmer than normal winter weather in 2002 and 2000 on
our consolidated volumes delivered are illustrated by the following degree day
information. The degree day information presented below for 2002 and 2001 is
adjusted for service areas with weather normalized operations. The degree day
information for 2000 has not been adjusted for service areas with weather
normalized operations as that information was not available.

<Table>
<Caption>
                                                              YEAR ENDED SEPTEMBER 30
                                                              ------------------------
                                                               2002     2001     2000
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Sales volumes -- Bcf........................................  145.5    156.6    138.2
Transportation volumes -- Bcf...............................   63.0     61.2     59.4
                                                              -----    -----    -----
          Total.............................................  208.5    217.8    197.6
                                                              =====    =====    =====
Degree days:
  Actual....................................................  3,368    4,124    2,096
  Percent of normal.........................................     94%     115%      82%
</Table>

     The effects of temperatures that are above or below normal are partially
offset in the Tennessee and Georgia jurisdictions served by the Mid-States
Division and in the Kentucky jurisdiction served by the Kentucky Division
through weather normalization adjustments. The Georgia Public Service
Commission, the Tennessee Regulatory Authority and the Kentucky Public Service
Commission have approved weather normalization adjustments. The weather
normalization adjustments, effective October through May each year in Georgia,
and November through April each year in Tennessee and Kentucky, allow the
Mid-States Division and the Kentucky Division to increase the base rate portion
of customers' bills when weather is warmer than normal and decrease the base
rate when weather is colder than normal. The net effect of the weather
normalization adjustments was an increase in revenue of $6.0 million in 2002, a
decrease in revenues of $3.3 million for 2001 and an increase in revenues of
$4.1 million in 2000. Approximately 374,000 or 27 percent of our meters in
service are located in Georgia, Tennessee and Kentucky. We did not have weather
normalization adjustments in our other service areas during the year ended
September 30, 2002. We also received approval to change our rate structure in
our West Texas System of the Texas Division beginning in December 2000 to help
offset some of the negative effects of weather.

     In July 2000, we entered into an agreement to purchase weather hedges for
our Texas and Louisiana operations effective for the 2000-2001 heating season.
The hedges were designed to help mitigate the effects of weather that was at
least seven percent warmer than normal in both Texas and Louisiana while
preserving any upside. The cost of the weather hedges was approximately $4.9
million which was amortized over the 2000-2001 heating season. No income was
recognized for the 2000-2001 heating season for these weather hedges due to the
colder than normal weather. The cost of the weather hedges was more than offset
by the positive effects of colder weather on our gross profit.

     In June 2001, we purchased a three year weather insurance policy with an
option to cancel in the third year. We will receive a refund of a portion of the
cost of the policy if we cancel in the third year. The policy is for our Texas
and Louisiana operations and covers the entire heating season of October to
March beginning with the 2001-2002 heating season. The cost of the three-year
policy was $13.2 million which was prepaid and is being amortized over the
appropriate heating seasons based on degree days. The insurance is designed to
protect against weather that is at least seven percent warmer than normal for
the entire heating season. During the 2001-2002 heating season, weather was not
at least seven percent warmer than normal resulting in no claim having been
filed under the insurance policy. Only the amortization of $4.4 million of
premiums was recognized during the heating season.

     We have historically hedged approximately 20 to 25 percent of our gas
supply through the use of our underground storage assets. For the 2001-2002
heating season, we covered approximately 64 percent of our flowing gas
requirements through storage, financial hedges and fixed forward contracts at a
weighted average cost of slightly less than $4.00 per Mcf. For the 2002-2003
heating season, we have covered between 45 and 50 percent of our anticipated
flowing gas requirements through storage, financial hedges and fixed forward

                                        22
<PAGE>

contracts at a weighted average cost of less than $4.00 per Mcf. This should
provide protection to us and our customers against potential sharp increases in
the price of natural gas during the 2002-2003 heating season.

STATUS OF PENDING ACQUISITION

     In September 2001, we entered into a definitive agreement to acquire
Mississippi Valley Gas Company, a privately held natural gas utility, for $150.0
million, consisting of $75.0 million cash and $75.0 million of Atmos common
stock. In addition, we will repay outstanding long-term debt of Mississippi
Valley Gas of approximately $45.0 million. Mississippi Valley Gas provides
natural gas distribution service to approximately 261,500 residential,
commercial, industrial and other customers located primarily in the northern and
central regions of Mississippi. On October 31, 2002, we announced that we had
received approval from the Mississippi Public Service Commission to acquire
Mississippi Valley Gas. The transaction had previously received federal
regulatory approval and approvals from the six other state utility commissions
that require approval. We expect to close the acquisition in December 2002.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     General -- Our consolidated financial statements were prepared in
accordance with accounting principles generally accepted in the United States.
Preparation of these financial statements required us to make estimates and
judgments that affected the reported amounts of assets, liabilities, revenues
and expenses and the related disclosures of contingent assets and liabilities.
We based our estimates on historical experience and various other assumptions
that we believed to be reasonable under the circumstances. On an ongoing basis,
we evaluate our estimates, including those related to risk management and
trading activities, allowance for doubtful accounts, goodwill and pension and
other post retirement plans. Actual results may differ from estimates.

     Regulation -- Our utility operations are subject to regulation with respect
to rates, service, maintenance of accounting records and various other matters
by the respective regulatory authorities in the states in which we operate. Our
accounting policies recognize the financial effects of the ratemaking and
accounting practices and policies of the various regulatory commissions.
Regulated utility operations are accounted for in accordance with Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation." This statement requires cost-based rate regulated entities
that meet certain criteria to reflect the authorized recovery of costs due to
regulatory decisions in their financial statements. As a result, certain costs
are permitted to be capitalized rather than expensed because they can be
recovered through rates.

     Risk Management and Trading Activities -- We use storage, transportation
and requirements contracts, forwards, over-the-counter and exchange-traded
options, futures and swap contracts to conduct our risk management and trading
activities. Changes in the assets and liabilities from risk management activity
result primarily from changes in the valuation of the portfolio of contracts,
maturity and settlement of contracts, and newly originated transactions. The
market prices and models used to value these transactions reflect management's
best estimates considering various factors including closing exchange and
over-the-counter quotations, the time value of money and volatility factors
underlying the contracts. We adjust the values to reflect the potential impact
of liquidating our positions in an orderly manner over a reasonable period of
time under present market conditions. Changes in market prices directly affect
management's estimate of the fair value of these transactions. Assumptions
different from those used would impact these carrying values.

     Allowance for Doubtful Accounts -- For the majority of our receivables, we
establish an allowance for doubtful accounts based on an aging of those
receivable balances. We apply percentages to each aging category based on our
collections experience. On certain other receivables where we are aware of a
specific customer's inability or reluctance to pay, we record an allowance for
doubtful accounts against amounts due to reduce the net receivable balance to
the amount we reasonably expect to collect. We believe our allowance for
doubtful accounts is adequate. However, if circumstances change, our estimate of
the recoverability of accounts receivable could be different.

     Goodwill -- At September 30, 2002, we had $185.0 million of goodwill,
$150.3 million of which was attributable to our utility segment, $21.3 million
was attributable to our natural gas marketing segment and
                                        23
<PAGE>

$13.4 million was attributable to our other non-utility segment. We evaluate our
goodwill balances for impairment each year during our second fiscal quarter. Our
evaluation during the quarter ended March 31, 2002 resulted in no impairment. If
our projections of estimated future cash flows change, those changes could
result in a reduction in the carrying value of our goodwill.

     Pension and Other Postretirement Plans -- Pension and other postretirement
plan expenses and liabilities are determined on an actuarial basis and are
affected by the market value of plan assets, estimates of the expected return on
plan assets and assumed discount rates. Actual changes in the fair market value
of plan assets and differences between the actual return on plan assets and the
expected return on plan assets could have a material effect on the amount of
pension expense ultimately recognized. The assumed return on plan assets is
based on management's expectation of the long-term return on plan assets
portfolio. The discount rate used to compute the present value of plan
liabilities is based generally on rates of high grade corporate bonds with
maturities similar to the average period over which benefits will be paid.

                        CAPITAL RESOURCES AND LIQUIDITY
                 (SEE "CONSOLIDATED STATEMENTS OF CASH FLOWS")

     Fiscal 2002 was a year in which total cash inflows exceeded total cash
outflows. This was generally the result of increased cash flows from operating
activities as a result of the Louisiana Gas Service assets acquired in July
2001, the acquisition of the remaining 55 percent of Woodward Marketing that we
did not already own in April 2001 and a decrease in cash held in margin accounts
partially offset by increased capital expenditures. Common stock issued
primarily through our Retirement Savings Plan and our Direct Stock Purchase Plan
was also used to finance operations.

CASH FLOWS FROM OPERATING ACTIVITIES

     Items on the Consolidated Statement of Cash Flows for the year ended
September 30, 2001 reflect changes in balances for the year, net of assets
acquired and liabilities assumed in the acquisition of the additional interest
in Woodward Marketing, L.L.C. and the assets of Louisiana Gas Service Company
and LGS Natural Gas Company. See Note 10 of notes to consolidated financial
statements.

     Cash flows from operating activities as reported in the consolidated
statements of cash flows totaled $296.2 million for 2002 compared to $83.0
million for 2001 and $54.2 million for 2000. The increase in net cash provided
by operating activities from 2001 to 2002 was primarily the result of increases
in net income, accounts payable and other current liabilities and decreases in
cash held on deposit in margin accounts and deferred gas costs. The increase in
net cash provided by operating activities was partially offset by increases in
accounts receivable. The increase in net income was due primarily to higher
gross profit and income from our gas marketing activities partially offset by
higher operating expenses and interest expense.

CASH FLOWS FROM INVESTING ACTIVITIES

     During the last three years, a substantial portion of our cash resources
was used to fund acquisitions, our ongoing construction program to provide
natural gas services to our customer base and technology improvements. Net cash
used in investing activities totaled $158.2 million in 2002 compared with $468.1
million in 2001 and $100.1 million in 2000. Capital expenditures in fiscal 2002
amounted to $132.3 million, compared with $113.1 million in 2001 and $75.6
million in 2000. The increase in capital expenditures from 2001 to 2002 was
primarily the result of additional capital requirements needed due to our
growing customer base. Included in investing activities for 2002 is $15.7
million, in our natural gas marketing and other non-utility operations, for the
acquisition of Kentucky-based market area storage and associated pipeline
facility assets, certain gas marketing assets and the common stock of Southern
Resources, Inc. Included in investing activities for 2001 is $363.4 million used
to acquire the assets of Louisiana Gas Service Company and LGS Natural Gas
Company as discussed in Note 2 of the notes to consolidated financial
statements. Included in investing activities in 2000 was $32.0 million used to
acquire the Missouri natural gas distribution assets of Associated Natural Gas.
Currently budgeted capital expenditures for fiscal 2003 total approximately
$160.2 million and include funds for additional mains, services, meters and
equipment. In 2003, we also plan to complete the
                                        24
<PAGE>

Mississippi Valley Gas Company acquisition for $150.0 million plus the repayment
of approximately $45.0 million of outstanding long-term debt as discussed in
Note 2 of the notes to consolidated financial statements. Capital expenditures
and acquisitions for fiscal 2003 are planned to be financed from internally
generated funds and financing activities as discussed below. In 2002, we had
$8.5 million in expenditures for assets to be used in leasing activities. In
2001, we had $5.4 million in expenditures for assets to be used in leasing
activities. In connection with our acquisition of Woodward Marketing in 2001, we
received $8.6 million in cash. In 2001, we received net proceeds of $6.6 million
in connection with the sale of certain utility assets. In 2000, we received net
proceeds of $6.5 million in connection with the sale of certain propane assets
to Heritage Propane Partners, L.P.

CASH FLOWS FROM FINANCING ACTIVITIES

     Net cash used by financing activities totaled $106.4 million for 2002
compared with net cash provided by financing activities of $393.0 million for
2001 and $44.7 million for 2000. Financing activities during these periods
included issuance of common stock, dividend payments, short-term borrowings from
banks under our credit facilities and issuance and repayment of long-term debt.
The change in cash used by financing activities in 2002 as compared to cash
provided by financing activities in 2001 was due primarily to the issuance of
long-term debt and the issuance of common stock during 2001. In 2001, we
received $347.1 million in net proceeds from our $350.0 million debt offering in
May 2001. The net proceeds were used to help finance the completion of the
Louisiana Gas Service Company and LGS Natural Gas Company acquisition in July
2001. Long-term debt repayments totaled $20.7 million, $17.7 million and $14.6
million for 2002, 2001 and 2000. Repayments of long-term debt in 2002, 2001 and
2000 consisted of annual installments under the various loan documents. During
2002, short-term debt decreased by $55.5 million due primarily to more effective
collection experience of customer accounts receivable balances which increased
the amount of cash available to reduce short-term debt. During 2001, short-term
debt decreased $48.8 million due primarily to the use of the net proceeds from
our equity offering in December 2000 to reduce commercial paper debt. During
2000, short-term debt increased $81.7 million due to the effect of warmer
weather on net income for 2000, the acquisition of the Missouri natural gas
distribution assets of Associated Natural Gas for $32.0 million and increases in
accounts receivable, cost of gas stored underground and deferred charges.

     Issuance of common stock.  We issued 884,431, 674,468 and 704,540 shares of
common stock in 2002, 2001 and 2000 under our various plans. See the
Consolidated Statements of Shareholders' Equity and Note 6 of notes to
consolidated financial statements for the number of shares issued and available
for issuance under each of our plans. In addition to the shares issued under our
various plans, we also issued 6,741,500 shares through our equity offering in
December 2000 and 1,423,193 shares of restricted common stock for the
acquisition of the remaining 55 percent of Woodward Marketing in April 2001. The
net proceeds from the equity offering were used to reduce commercial paper debt
as discussed above.

     Cash dividends paid.  We paid $48.6 million in cash dividends during 2002
compared with $44.1 million in 2001 and $36.0 million in 2000. We increased the
dividend per share by $.02 in both 2002 and 2001 and $.04 in 2000. The increase
in cash dividends in 2002 over 2001 was also due to the increase in the number
of shares outstanding as discussed above.

                                        25
<PAGE>

LIQUIDITY

     The excess of cash inflows over outflows has resulted in a slight decrease
in debt as a percentage of total capitalization, including short-term debt, as
shown in the table below.

<Table>
<Caption>
                                                               SEPTEMBER 30
                                                 ----------------------------------------
                                                        2002                  2001
                                                 ------------------    ------------------
                                                    (IN THOUSANDS, EXCEPT PERCENTAGES)
<S>                                              <C>          <C>      <C>          <C>
Short-term debt................................  $  145,791    10.3%   $  201,247    13.4%
Long-term debt.................................     692,443    49.1%      713,094    47.6%
Shareholders' equity...........................     573,235    40.6%      583,864    39.0%
                                                 ----------   -----    ----------   -----
Total capitalization, including short-term
  debt.........................................  $1,411,469   100.0%   $1,498,205   100.0%
                                                 ==========   =====    ==========   =====
</Table>

     Total debt as a percentage of total capitalization, including short-term
debt, was 59.4 percent and 61.0 percent at September 30, 2002 and 2001. Our
long-term plans are to decrease the debt to capitalization ratio to nearer its
target range of 50-52 percent through cash flow generated from operations,
continued issuance of new common stock under our Direct Stock Purchase Plan and
Retirement Savings Plan, access to the debt and equity capital markets and
limiting annual maintenance and capital expenditures. It is likely that the debt
to capitalization ratio will remain in its current range in the near term.

     At September 30, 2002, we had short-term committed credit facilities
totaling $318.0 million. One short-term unsecured credit facility is for $300.0
million and serves as a backup liquidity facility for our commercial paper
program. Our commercial paper is rated A-2 by Standard and Poor's, P-2 by
Moody's and F-2 by Fitch. At September 30, 2002, $132.7 million of commercial
paper was outstanding. We have a second credit facility in place for $18.0
million. At September 30, 2002, $13.1 million was outstanding under this credit
facility. These credit facilities are negotiated at least annually and are used
for working capital purposes.

     On October 7, 2002, we entered into a $150.0 million short-term unsecured
committed credit facility. This credit facility will be used to provide initial
funding for the cash portion of the Mississippi Valley Gas acquisition and to
refinance Mississippi Valley Gas' existing debt.

     At September 30, 2002, our Woodward Marketing subsidiary had an uncommitted
demand credit facility for $210.0 million which is used for working capital
purposes for our non-utility business. Atmos Energy Holdings, Inc., our
wholly-owned subsidiary, is the sole guarantor of all amounts outstanding under
this facility. At September 30, 2002, there were no amounts outstanding under
this credit facility. Related letters of credit totaling $41.0 million reduced
the amount available under this facility. The amount available under this credit
facility is also limited by various covenants, including covenants based on
working capital. Under the most restrictive covenant, the amount available to
Woodward Marketing under this credit facility at September 30, 2002 was $59.0
million.

     At September 30, 2002, we also had an unsecured short-term uncommitted
credit line for $20.0 million. There were no borrowings under this uncommitted
credit facility at September 30, 2002. This uncommitted line is renewed or
renegotiated at least annually with varying terms and we pay no fee for the
availability of the line. Borrowings under this line are made on a when- and
as-available basis at the discretion of the bank.

     In addition, Woodward Marketing has up to $100.0 million available from
Atmos Energy Holdings for its non-utility business. At September 30, 2002, $20.0
million was outstanding. Any outstanding amounts under the Atmos Energy Holdings
facility are subordinated to Woodward Marketing's $210.0 million uncommitted
demand credit facility described above. This intercompany loan is eliminated in
the consolidated financial statements.

     The loan agreements pursuant to which our Senior Notes and First Mortgage
Bonds have been issued contain covenants by us with respect to the maintenance
of certain debt-to-equity ratios and cash flows and restrictions on the payment
of dividends. See Note 3 of notes to consolidated financial statements for more
information on these covenants.

                                        26
<PAGE>

     In December 2001, we filed a shelf registration statement with the
Securities and Exchange Commission to issue, from time to time, up to $600.0
million in new common stock and/or debt. In connection with this filing, we
filed applications for approval to issue securities with five state utility
commissions and have received approval from all five commissions. The
registration statement was declared effective by the Securities and Exchange
Commission on January 30, 2002. The proceeds from any issuance of securities
under the registration statement are planned to be used for general corporate
purposes, including acquisitions, debt repayment and other business-related
matters.

     The following tables provide information about contractual obligations and
commercial commitments at September 30, 2002.

<Table>
<Caption>
                                                         PAYMENTS DUE BY PERIOD
                                         -------------------------------------------------------
                                                    LESS THAN                            AFTER
                                          TOTAL      1 YEAR     1-3 YEARS   4-5 YEARS   5 YEARS
                                         --------   ---------   ---------   ---------   --------
                                                             (IN THOUSANDS)
<S>                                      <C>        <C>         <C>         <C>         <C>
CONTRACTUAL OBLIGATIONS
Long-term Debt.........................  $692,443   $ 21,980     $34,962     $25,766    $609,735
Capital Lease Obligations..............     5,754        876       1,719         866       2,293
Operating Leases.......................    66,860      9,572      18,528      15,550      23,210
                                         --------   --------     -------     -------    --------
          Total Contractual
            Obligations................  $765,057   $ 32,428     $55,209     $42,182    $635,238
                                         ========   ========     =======     =======    ========
OTHER COMMERCIAL COMMITMENTS
Lines of Credit........................  $145,791   $145,791     $    --     $    --    $     --
</Table>

RISK MANAGEMENT AND TRADING ACTIVITIES

     We conduct our risk management activities through both our utility and
natural gas marketing segments. See Notes 1 and 15 of notes to consolidated
financial statements for a description of our risk management activities. The
following table shows our risk management assets and liabilities by segment at
September 30, 2002.

<Table>
<Caption>
                                                                  NATURAL GAS
                                                        UTILITY    MARKETING     TOTAL
                                                        -------   -----------   --------
                                                                 (IN THOUSANDS)
<S>                                                     <C>       <C>           <C>
Assets from risk management activities, current.......  $4,424     $ 23,560     $ 27,984
Assets from risk management activities, noncurrent....      --        5,241        5,241
Liabilities from risk management activities,
  current.............................................      --      (18,487)     (18,487)
Liabilities from risk management activities,
  noncurrent..........................................      --       (3,663)      (3,663)
                                                        ------     --------     --------
Net assets (liabilities)..............................  $4,424     $  6,651     $ 11,075
                                                        ======     ========     ========
</Table>

     In accordance with Financial Accounting Standards No. 71 "Accounting for
the Effects of Certain Types of Regulation", current period changes in the
assets and liabilities from risk management activities related to our utility
segment are recorded as deferred gas cost on the consolidated balance sheet as
these costs will ultimately be recovered from ratepayers. Accordingly, there is
no earnings impact as a result of the use of these financial instruments. Upon
maturity, the contracts are recognized in purchased gas cost on the consolidated
statement of income.

     To conduct our risk management and trading activities, Atmos Energy
Marketing uses natural gas storage, transportation and requirements contracts,
forwards, over-the-counter and exchange-traded options, futures and swap
contracts. Prior to May 2002, Atmos Energy Marketing engaged in limited
financial trading for speculative purposes. Effective in May 2002, Atmos Energy
Marketing's financial trading for speculative purposes was discontinued. The
mark-to-market method is used to account for these activities, as prescribed in
EITF Issue No. 98-10, EITF Issue 00-17 and EITF Issue 02-03. Under this method,
the aforementioned contracts are reflected at fair value, inclusive of future
servicing costs and valuation adjustments, with resulting unrealized gains and
losses recorded as "Assets from risk management activities" and "Liabilities
from risk

                                        27
<PAGE>

management activities" on the consolidated balance sheet. Current period changes
in the assets and liabilities from risk management activities are recognized as
net gains or losses on the consolidated statement of income as gas trading
margin. Changes in assets and liabilities from risk management activities result
primarily from changes in valuation of the portfolio of contracts, maturity and
settlement of contracts and newly originated transactions.

     Market prices are primarily used to value these transactions. In addition,
a market price based model is used for valuing certain storage and
transportation contracts. These values reflect management's best estimate
considering various factors, including closing exchange and over-the-counter
quotations, time value, and volatility factors underlying the contracts. The
values are adjusted to reflect the potential impact of liquidating our position
in an orderly manner over a reasonable time frame under present market
conditions. Changes in market prices directly affect management's estimate of
the fair value of these transactions.

     At its October 2002 meeting, the Emerging Issues Task Force rescinded EITF
Issue Nos. 98-10 and 00-17. The impact on Atmos will be to discontinue
mark-to-market accounting of our sales, storage and transportation contracts and
our natural gas storage inventory. Any cumulative effect of this change in
accounting will depend on the number and valuation of our sales, storage and
transportation contracts and our natural gas storage inventory level and
valuation at the time we adopt the new rules.

     The following table reflects the components of the change in fair value of
our non-utility energy trading contract activities for the year ended September
30, 2002 (in thousands).

<Table>
<S>                                                           <C>
Fair value of contracts at September 30, 2001...............  $ 28,349
  Contracts realized/settled................................   (18,910)
  Fair value of new contracts...............................     2,447
  Other changes in value....................................    (5,235)
                                                              --------
Fair value of contracts at September 30, 2002...............  $  6,651
                                                              ========
</Table>

     The fair value of our non-utility energy trading contracts at September 30,
2002, is segregated below, by time period and fair value source.

<Table>
<Caption>
                                               FAIR VALUE OF CONTRACTS AT SEPTEMBER 30, 2002
                                         ----------------------------------------------------------
                                         MATURITY                            MATURITY
                                         LESS THAN   MATURITY    MATURITY    EXCESS OF   TOTAL FAIR
                                          1 YEAR     1-3 YEARS   4-5 YEARS    5 YEARS      VALUE
                                         ---------   ---------   ---------   ---------   ----------
                                                               (IN THOUSANDS)
<S>                                      <C>         <C>         <C>         <C>         <C>
SOURCE OF FAIR VALUE
Prices actively quoted.................   $(2,546)    $  908        $--         $--       $(1,638)
Prices provided by other external
  sources..............................     3,145      1,159         20          --         4,324
Prices based on models and other
  valuation methods....................     4,379       (588)        75          99         3,965
                                          -------     ------        ---         ---       -------
Total Fair Value.......................   $ 4,978     $1,479        $95         $99       $ 6,651
                                          =======     ======        ===         ===       =======
</Table>

FUTURE CAPITAL REQUIREMENTS

     We believe that internally generated funds, our credit facilities,
commercial paper program and access to the public debt and equity capital
markets will provide necessary working capital and liquidity for capital
expenditures and other cash needs for fiscal 2003.

RESULTS OF OPERATIONS

  YEAR ENDED SEPTEMBER 30, 2002 COMPARED WITH YEAR ENDED SEPTEMBER 30, 2001

     Operating revenues decreased by 34 percent to $950.8 million for 2002 from
$1.4 billion for 2001. The most significant factors contributing to the decrease
in operating revenues were a 31 percent decrease in average sales price due to
the decreased cost of gas and a 17 percent decrease in sales volumes due to
warmer weather, excluding the additional sales volumes attributable to the
Louisiana Gas Service operations acquired
                                        28
<PAGE>

in July 2001. During 2002, temperatures were 18 percent warmer than in the
corresponding period of the prior year and were six percent warmer than the
30-year normal, adjusted for service areas with weather normalized operations.
The total volume of gas sold, excluding the Louisiana Gas Service volumes, for
2002 was 130.6 Bcf compared with 156.5 Bcf for 2001. However, the decrease in
sales volumes was partially offset by the additional sales volumes of 14.9 Bcf
attributable to the Louisiana Gas Service operations acquired in July 2001. The
average cost of gas per Mcf sold decreased 44 percent to $3.81 for 2002 from
$6.83 for 2001. However, the decrease in operating revenues was partially offset
by increased revenues resulting from the Louisiana Gas Service acquisition in
July 2001.

     Gross profit increased by five percent to $392.6 million for 2002 from
$374.7 million for 2001. The increase in gross profit was due primarily to the
additional gross profit resulting from the Louisiana Gas Service acquisition in
July 2001 partially offset by the effect of warmer weather. Changes in the cost
of gas do not directly affect gross profit because the fluctuations in gas
prices are passed through to the customer.

     In April 2001, we completed our acquisition of the remaining 55 percent
interest in Woodward Marketing, L.L.C. that we did not already own. As a result
of this acquisition, the revenues and expenses of Woodward Marketing are now
shown on a consolidated basis. For 2002, Atmos Energy Marketing, which includes
the operations of Woodward Marketing and Trans Louisiana Industrial Gas Company,
had income of $38.5 million in gas trading margin. For 2001, Atmos Energy
Marketing had income of $0.5 million in gas trading margin and an equity in
earnings of Woodward Marketing of $8.1 million. The increase for 2002 compared
to 2001 was primarily due to gains on inventory sales and favorable pricing
under natural gas sales contracts as well as our full consolidation of Woodward
Marketing beginning April 2001.

     Operating expenses increased to $275.8 million for 2002 from $244.9 million
for 2001. Operation and maintenance expense increased due primarily to the
addition of $21.5 million relating to the Louisiana Gas Service acquisition in
July 2001 and an increase of $10.7 million in pension costs. In addition,
operation and maintenance expense increased $9.2 million due to the full
consolidation of Woodward Marketing's operations beginning April 1, 2001. A
decrease in the provision for doubtful accounts of $26.2 million partially
offset this increase. The decrease in the provision for doubtful accounts was
attributable to the lower gas commodity prices during 2002 as well as our
effective recovery of customer receivable balances. Depreciation and
amortization increased $13.8 million due to the addition of the assets from the
Louisiana Gas Service acquisition in July 2001. Taxes other than income
decreased as a result of decreased city franchise taxes and state gross receipts
taxes, which are revenue based. However, these taxes are paid by our customers;
thus, these amounts are offset in revenues through customer billings and have no
effect on net income. The decrease in taxes other than income was partially
offset by increases in property and payroll taxes related to the Louisiana Gas
Service acquisition in July 2001.

     Operating income increased 19 percent for 2002 to $155.3 million from
$130.3 million for 2001. The increase in operating income resulted primarily
from the increase in gross profit and the income from our gas trading margin
described above partially offset by an increase in operating expenses.

     Miscellaneous expense decreased $0.6 million to $1.3 million in 2002
compared to $1.9 million in 2001. This decrease was due primarily to an increase
in net recoveries related to our performance based-ratemaking mechanisms, the
recognition of $0.5 million related to a large industrial contract we received
during 2002 and a reduction in the amortization expense recognized related to
weather insurance purchased for the 2001-2002 heating season. In addition, we
had an increase of $3.0 million in interest income in May 2001 due primarily to
interest income earned on the proceeds from our $350.0 million debt offering in
2001. We invested these proceeds in short-term investments until the completion
of the Louisiana Gas Service acquisition in July 2001. No such interest income
was recognized in 2002.

     Interest expense increased $12.2 million to $59.2 million for 2002 compared
to $47.0 million for 2001. This increase was due primarily to the interest
expense on the $350.0 million debt offering in May 2001.

     Net income increased for 2002 by $3.6 million to $59.7 million from $56.1
million for 2001. This increase in net income resulted primarily from the
increase in operating income partially offset by the increase in interest
expense discussed above.

                                        29
<PAGE>

  YEAR ENDED SEPTEMBER 30, 2001 COMPARED WITH YEAR ENDED SEPTEMBER 30, 2000

     Operating revenues increased by 70 percent to $1.4 billion for 2001 from
$850.2 million for 2000. The most significant factors contributing to the
increase in operating revenues were a 58 percent increase in average sales price
due to the increased cost of gas and a 10 percent increase in sales and
transportation volumes due to colder weather. During 2001, excluding service
areas with weather normalized operations, temperatures were 31 percent colder
than in the corresponding period of the prior year and were seven percent colder
than the 30-year normal. The total volume of gas sold and transported for 2001
was 217.8 Bcf compared with 197.6 Bcf for 2000. During the early part of our
2001 fiscal year, natural gas prices throughout the country began to increase
significantly. The average cost of gas per Mcf sold increased to $6.83 for 2001
from $3.79 for 2000. Although we expect to recover our purchased gas costs from
customers through purchased gas adjustment mechanisms, generally there is a lag
between the time we pay for gas purchases and the time when regulators allow us
to place higher rates in service and recover those gas costs. As a result, we
have from time to time used short-term borrowings to temporarily finance
unrecovered purchased gas costs. Where permitted, we have increased our
purchased gas adjustments to help mitigate the increased cost of gas. In
addition, as a result of the increased gas costs, our accounts receivable
balances during fiscal 2001 increased significantly and, consequently, we also
increased our allowance for doubtful accounts, which we considered to be
adequate. We do not, however, expect this rise in natural gas prices to have a
material adverse effect on our financial condition, results of operations or net
cash flows.

     In addition, operating revenues increased due to the impact of rate
increases in Kentucky, Illinois, Colorado, Amarillo, Texas, and west Texas. Also
contributing to the increase in operating revenues was the addition of
approximately 48,000 customers in Missouri due to the Associated Natural Gas
acquisition completed in fiscal 2000 and the addition of approximately 279,000
residential and commercial meters in Louisiana due to the completion of the
Louisiana Gas Service Company acquisition in July 2001. However, operating
revenues were partially offset by a reduction related to our former propane
assets which were placed into a joint venture partnership in August 2000.

     Gross profit increased by 15 percent to $374.7 million for 2001 from $325.7
million for 2000. The increase in gross profit was due primarily to the increase
in volumes sold to weather sensitive customers, an increase of $5.1 million in
transportation revenues due to higher average transportation revenue per Mcf and
increased volumes and a $6.7 million non-recurring adjustment to purchased gas
cost to reflect state filings. In addition, gross profit increased due to the
impact of rate increases and additional customers, partially offset by a
reduction related to our former propane operations. Changes in the cost of gas
do not directly affect gross profit because the fluctuations in gas prices are
passed through to our customers.

     On April 1, 2001, we completed our acquisition of the remaining 55 percent
interest in Woodward Marketing, L.L.C. As a result of this acquisition, the
revenues and expenses of Woodward Marketing are now shown on a consolidated
basis.

     Operating expenses increased to $244.9 million for 2001 from $240.4 million
for 2000. Operation and maintenance expense decreased due to savings resulting
from the continued cost control initiatives started during fiscal 2000 and
reduced operation and maintenance expenses associated with our former propane
operations which were placed into a joint venture partnership in fiscal 2000. An
increase in the provision for doubtful accounts of $8.5 million and pension
costs of $4.5 million partially offset this decrease. Depreciation and
amortization expense increased due to the completion of the Louisiana Gas
Service Company and LGS Natural Gas Company acquisition in July 2001. Taxes
other than income increased as a result of increased city franchise taxes and
state gross receipts taxes, which are revenue based. However, these taxes are
paid by our customers; thus, these amounts are offset in revenues through
customer billings and have no effect on net income.

     Operating income increased 53 percent for 2001 to $130.3 million from $85.3
million for 2000. The increase in operating income resulted primarily from
increased gross profit described above.

                                        30
<PAGE>

     Equity in earnings of Woodward Marketing, L.L.C. was $8.1 million for the
six months ended March 31, 2001 compared with $7.3 million for the year 2000.

     Miscellaneous income (expense) decreased $9.3 million to $(1.9) million for
2001 compared to $7.4 million for 2000. This decrease was due primarily to
charges incurred related to our Performance-based Ratemaking mechanisms and the
amortization of $4.9 million related to weather hedges purchased for our
Louisiana and Texas operations. In addition, we recognized a gain of $5.8
million in 2000 resulting from the sale of certain non-utility assets. No such
gain occurred in 2001. Partially offsetting the decrease in miscellaneous income
(expense) during 2001 was an increase of $3.0 million in interest income due
primarily to interest income earned on the proceeds from our $350.0 million debt
offering in May 2001. We invested these proceeds in short-term investments until
the completion of the Louisiana Gas Service Company and LGS Natural Gas Company
acquisition in July 2001.

     Interest expense increased $3.2 million to $47.0 million for 2001 compared
to $43.8 million for 2000. This increase was due primarily to interest expense
on the $350.0 million debt offering in May 2001.

     Net income increased for 2001 by $20.2 million to $56.1 million from $35.9
million for 2000. This increase in net income resulted primarily from the
increase in sales volumes due to the colder than normal weather and the impact
of rate increases discussed above.

FACTORS THAT MAY AFFECT FUTURE PERFORMANCE OF THE COMPANY

     Our performance in the future will primarily depend on the results of our
utility and natural gas marketing operations. Several factors exist that could
influence Atmos' future financial performance, some of which are described
below. They should be considered in connection with evaluating forward-looking
statements contained in this report or otherwise made by or on behalf of us
since these factors could cause actual results and conditions to differ
materially from those projected in these forward-looking statements.

  ADVERSE WEATHER CONDITIONS

     Our natural gas sales volumes and related revenues are correlated with
heating requirements that result from cold winter weather. Our agricultural
sales volumes are associated with the rainfall levels during the growing season
in our west Texas irrigation market. Weather is one of the most significant
factors influencing our performance. However, as was more fully discussed above,
we have purchased weather insurance to mitigate the effect of warmer than
historically normal weather in our Texas and Louisiana service areas. In
addition, weather normalized rates are in effect in several of our
jurisdictions, which should mitigate the adverse effects of warmer than normal
weather on our operating results.

  NATIONAL, REGIONAL AND LOCAL ECONOMIC CONDITIONS

     Our operations will always be affected by the conditions and overall
strength of the national, regional and local economies, including interest
rates, changes in the capital markets and increases in the costs of our primary
commodity, natural gas. These factors impact the amount of residential,
industrial and commercial growth in our service territories. Higher costs of
natural gas in recent years have already caused many of our customers to
conserve in the use of our gas services and could lead to even more customers
utilizing such conservation methods.

  REGULATORY APPROVALS

     Our utility business is subject to various regulated returns on its rate
base in each of the 11 states in which we operate. We monitor the allowed rates
of return, our effectiveness in earning such rates and initiate rate proceedings
or operating changes as needed. In addition, in the normal course of the
regulatory environment, assets are placed in service and historical test periods
are established before rate cases can be filed. Once rate cases are filed,
regulatory bodies have the authority to suspend implementation of the new rates
while studying the cases. Because of this process, we must temporarily suffer
the negative financial effects of having placed assets in service without the
benefit of rate relief, which is commonly referred to as "regulatory lag". In

                                        31
<PAGE>

addition, our debt and equity financing programs are also subject to approval by
regulatory bodies in five states, which could limit our ability to take
advantage of favorable short-term market conditions.

  SUCCESSFUL COMPLETION AND INTEGRATION OF PENDING ACQUISITION

     Our acquisition strategy depends on our ability to successfully acquire and
integrate the operations of companies such as Mississippi Valley Gas Company,
which acquisition is currently expected to close in December 2002. Acquisitions
such as Mississippi Valley Gas should help us achieve greater economies of scale
by spreading the fixed costs of the utility business over a larger customer
base. In addition, the integration of this acquisition into our operations
during the next fiscal year will require a substantial commitment of financial
resources and management time.

  INFLATION AND INCREASED GAS COSTS

     We believe that inflation has caused, and will continue to cause, increases
in certain operating expenses, and has required, and will continue to require,
assets to be replaced at higher costs. We have a process in place to continually
review the adequacy of our gas rates in relation to the increasing cost of
providing service and the inherent regulatory lag in adjusting those gas rates.
Historically, we have been able to budget and control operating expenses and
investments within the amounts authorized to be collected in rates and intend to
continue to do so. The ability to control expenses is an important factor that
will influence future results.

     In addition, the rapid increases in the price of purchased gas, as has
occurred in some prior years, causes us to experience a significant increase in
short-term debt because we must pay suppliers for such gas when it is purchased
long before such costs may be recovered through the collection of monthly
customer bills for gas delivered. Also, increases in purchased gas costs cause
more customers to be slow to pay their gas bills, leading to higher than normal
accounts receivable which in turn lead to higher short-term debt levels and
increased bad debts. Should the price of purchased gas increase significantly in
the upcoming heating season, we would expect increases in our short-term debt
and accounts receivable during fiscal 2003.

  INCREASED COMPETITION

     We are facing increased competition from other energy suppliers as well as
electric companies and from energy marketing and trading companies. In the case
of industrial customers, such as manufacturing plants, and agricultural
customers, adverse economic conditions, including higher gas costs, could cause
such customers to use alternative sources of energy such as electricity or to
bypass our systems in favor of special competitive contracts with lower per-unit
costs.

  DEREGULATION OR UNBUNDLING

     We are closely monitoring the development of unbundling initiatives in the
natural gas industry. Unbundling is the separation of the provision and pricing
of local distribution gas services into discrete components. It typically
focuses on the separation of the distribution and gas supply components and the
resulting opening of the regulated components of sales services to alternative
unregulated suppliers of those services. Because of our enhanced technology and
distribution system infrastructures, we believe that we are now positively
positioned as unbundling evolves. Consequently, we expect there would be no
significant adverse effect on our business should unbundling or further
deregulation of the natural gas distribution service business occur.

                                        32
<PAGE>

  HEDGING AND MARKET RISK ACTIVITIES

  Utility hedging activities

     To protect against volatility in gas prices, we are hedging gas costs for
the 2002-2003 heating season by utilizing a combination of storage, financial
hedges and fixed forward contracts to stabilize gas prices. For the 2002-2003
heating season, we have covered approximately 45 to 50 percent of our
anticipated flowing gas requirements through storage and financial instruments.
The gas hedges should help to moderate the effects of higher customer accounts
receivable caused by potentially higher gas prices.

  Atmos Energy Marketing activities

     We acquired a 45 percent interest in Woodward Marketing, L.L.C. in July
1997 as a result of the merger of Atmos and United Cities Gas Company, which had
acquired that interest in May 1995. In April 2001, we acquired the 55 percent
interest that we did not own from JD Woodward and others for 1,423,193
restricted shares of our common stock. Immediately following the acquisition,
Mr. Woodward was elected as a Senior Vice President of Atmos in charge of all
non-utility business activities, a position he has held since April 2001. Prior
to that time, Mr. Woodward had not been an officer or employee of Atmos.

     The principal business of Atmos Energy Marketing, including the activities
of Woodward Marketing and Trans Louisiana Industrial Gas Company, Inc., is the
overall management of natural gas requirements for municipalities, local gas
utility companies and industrial customers located primarily in the southeastern
and midwestern United States. This business involves the sale of natural gas by
Atmos Energy Marketing to its customers and the management of storage and
transportation contracts for its customers under contracts generally having one
to two-year terms. At September 30, 2002, Atmos Energy Marketing had 101
municipal customers and 641 industrial customers. Atmos Energy Marketing also
sells natural gas to certain of its industrial customers on a delivered burner
tip basis under contract terms from 30 days to two years. In addition, Atmos
Energy Marketing supplies our regulated operations with a portion of our natural
gas requirements on a competitive bid basis. Any mark-to-market gains or losses
on these affiliate contacts are eliminated.

     In the management of natural gas requirements for municipal and other local
utilities, Atmos Energy Marketing sells physical natural gas for future delivery
and manages the associated price risk through the use of gas futures, forwards,
over-the-counter and exchange-traded options, and swap contracts with
counterparties. These financial contracts are marked-to-market at the daily
close of business. Atmos Energy Marketing links gas derivatives to physical
delivery of natural gas and typically balances its derivatives positions at the
end of each trading day. Over-the-counter swap agreements require Atmos Energy
Marketing to receive or make payments based on the difference between a fixed
price and the market price of natural gas on the settlement date. Atmos Energy
Marketing uses these futures and swaps to manage margins on offsetting fixed-
price purchase or sale commitments for physical quantities of natural gas, which
are also carried on a mark-to-market basis. Mark-to-market accounting refers to
the measurement of contracts at fair value determined at the balance sheet date
with any gains and losses included in earnings. Options held to manage price
risk provide the right, but not the requirement, to buy or sell energy
commodities at a fixed price. Atmos Energy Marketing uses options to manage
margins and to limit overall price risk exposure. At any point in time, Atmos
Energy Marketing may not have completely offset its price risk on these
activities.

     Energy related services provided by Atmos Energy Marketing include the sale
of natural gas to its various customer classes and management of transportation
and storage assets and inventories. More specifically, energy services include
contract negotiation and administration, load forecasting, storage acquisition,
natural gas purchase and delivery and capacity utilization strategies. In
providing these services, Atmos Energy Marketing generates income from its
utility, municipal and industrial customers through negotiated prices based on
the volume of gas supplied to the customer. Atmos Energy Marketing also
generates income by taking advantage of the difference between near-term gas
prices and prices for future delivery as well as the daily movement of gas
prices by utilizing storage and transportation capacity that it controls.

                                        33
<PAGE>

     Prior to May 2002, Atmos Energy Marketing engaged in limited financial
trading for speculative purposes. Financial trading involves utilizing financial
instruments (futures, options, swaps, etc.) to hedge natural gas prices or to
take a position in the market based on anticipated price movement. In some prior
years, Atmos Energy Marketing experienced losses in its financial speculative
trading business. Effective in May 2002, Atmos Energy Marketing's financial
trading for speculative purposes was discontinued. Atmos Energy Marketing will
continue its financial trading for hedging (risk management purposes) related to
its physical trading positions. With regard to its physical trading business,
Atmos Energy Marketing does engage in limited speculative natural gas trading
for its own account primarily related to its storage activity, subject to a risk
management policy established by us which limits the level of trading loss to a
maximum of 25 percent of the budgeted annual operating income of Atmos Energy
Holdings. Physical trading involves utilizing physical assets (storage and
transportation) to sell and deliver gas to customers or to take a position in
the market based on anticipated price movement. Compliance with such risk
management policy is monitored on a daily basis. In addition, Woodward
Marketing's bank credit facility limits trading positions that are not closed at
the end of the day (open positions) to 5.0 Bcf of natural gas. At September 30,
2002, Atmos Energy Marketing's net open positions in its trading operations
totaled 1.9 Bcf. Atmos Energy Marketing's open trading positions are monitored
on a daily basis but are not required to be closed if they remain within the
limits set by the bank loan agreement. In addition to the price risk of any net
open position at the end of each trading day, the financial exposure that
results from intra-day fluctuations of gas prices and the potential for daily
price movements constitutes a risk of loss since the price of natural gas
purchased or sold for future delivery at the beginning of the day may not be
hedged until later in the day.

     Financial instruments, which subject Atmos Energy Marketing to counterparty
risk, consist primarily of financial instruments arising from trading and risk
management activities and overnight repurchase agreements that are not insured.
Counterparty risk is the risk of loss from nonperformance by financial
counterparties to a contract. Exchange-traded future and option contracts are
generally guaranteed by the exchanges.

     Atmos Energy Marketing's operations are concentrated in the natural gas
industry, and its customers and suppliers may be subject to economic risks
affecting that industry.

     From time to time, Woodward Marketing borrows money to fund its natural gas
purchases and to fulfill its obligations to maintain deposit accounts with its
counterparties. See Note 3 of notes to consolidated financial statements.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The risk inherent in our market risk sensitive instruments is the potential
loss arising from adverse changes in natural gas commodity prices and interest
rates as discussed below. The sensitivity analysis does not, however, consider
the effects that such adverse changes may have on overall economic activity nor
do they consider additional actions we may take to mitigate exposure to such
changes. Actual results may differ.

GAS PRICES

  UTILITY SEGMENT

     We purchase natural gas for our operations. Substantially all of the cost
of gas purchased for utility operations is recovered through purchased gas
adjustment mechanisms. The utility segment has a limited market risk in gas
prices related to gas purchases in the open market at spot prices for sale to
non-regulated energy services customers at fixed prices. As a result, our
earnings could be affected by changes in the price and availability of such gas.
To protect against volatility in gas prices, we from time to time hedge our gas
costs by purchasing futures contracts. Our utility segment does not use such
financial instruments for trading purposes and we are not a party to any
leveraged derivatives. Market risk is estimated as a hypothetical 10 percent
increase in the portion of our gas cost related to fixed-price non-regulated
sales. Based on projected fiscal 2003 non-regulated gas sales at fixed prices,
such an increase would result in an increase to cost of gas of approximately
$4.1 million in fiscal 2003.

                                        34
<PAGE>

  NATURAL GAS MARKETING SEGMENT

     In April 2001, we acquired the 55 percent interest in Woodward Marketing,
L.L.C., that we did not already own. Atmos Energy Marketing's principal business
is the management of natural gas requirements for municipalities, local gas
utility companies and industrial customers located primarily in the southeastern
and midwestern United States. This business involves the sale of natural gas and
the management of storage and transportation contracts for customers under
contracts generally having one to two-year terms. Atmos Energy Marketing also
sells natural gas to industrial customers on a delivered burner tip basis under
contract terms from 30 days to two years. In the management of natural gas
requirements for municipal and other local utilities, Atmos Energy Marketing
sells natural gas for future delivery and manages price risk through the use of
gas futures including forwards, over-the-counter and exchange-traded options,
futures and swap contracts. Financial contracts are marked-to-market at the
daily close of business.

     Prior to May 2002, Atmos Energy Marketing engaged in limited financial
trading for speculative purposes for its own account, subject to a risk
management policy established by us which limits the level of trading loss to a
maximum of 25 percent of the budgeted annual operating income of Atmos Energy
Holdings. Compliance with such risk management policy is monitored on a daily
basis. In addition, Woodward Marketing's bank credit facility limits open
trading positions to 5.0 Bcf of natural gas. Atmos Energy Marketing will
continue its financial trading for hedging (risk management purposes) related to
its physical trading positions. At September 30, 2002, Atmos Energy Marketing's
open positions in its trading operations totaled 1.9 Bcf. In its trading, Atmos
Energy Marketing's open trading positions are monitored on a daily basis but are
not required to be closed if within the limits set by the bank credit facility.
The financial exposure that results from intra-day fluctuations of gas prices
and the potential for daily price movements has an impact on the net open
position. Based on its open positions at September 30, 2002, a $.50 increase in
market strip would result in a $1.0 million decrease in the trading gain. A $.50
decrease in market strip would result in a $1.0 million increase in the trading
gain.

     Atmos Energy Marketing uses gas futures contracts, over-the-counter and
exchange-traded options and swap agreements, in the conduct of its business.
Atmos Energy Marketing links gas derivatives to physical delivery of natural gas
and typically balances its derivatives positions at the end of each trading day.
Over-the-counter swap agreements require Atmos Energy Marketing to receive or
make payments based on the difference between a fixed price and the market price
of natural gas on the settlement date. Atmos Energy Marketing uses futures and
swaps to manage margins on offsetting fixed-price purchase or sale commitments
for physical quantities of natural gas. Options held to hedge price risk provide
the right, but not the requirement, to buy or sell energy commodities at a fixed
price. Atmos Energy Marketing uses options to manage margins and to limit
overall price risk exposure.

     Counterparty risk is the risk of loss from nonperformance by financial
counterparties to a contract. Financial instruments, which subject Atmos Energy
Marketing to counterparty risk, consist primarily of financial instruments
arising from trading and risk management activities and overnight repurchase
agreements that are not insured. Exchange traded future and option contracts are
generally guaranteed by the exchanges.

     Atmos Energy Marketing's operations are concentrated in the natural gas
industry, and its customers and suppliers may be subject to economic risks
affecting that industry. Therefore, an economic downturn in the industry could
have an adverse affect on the creditworthiness of Atmos Energy Marketing's
customers. Atmos Energy Marketing manages credit risk to attempt to minimize its
exposure to uncollectible receivables. In compliance with Atmos Energy
Marketing's existing credit policy, prospective and existing customers are
reviewed for creditworthiness and customers not meeting minimum standards, at
the discretion of management, provide security deposits and are subject to
various requisite secured payment terms.

INTEREST RATES

     Our earnings are affected by changes in short-term interest rates as a
result of our issuance of short-term commercial paper and our other short-term
borrowings. If market interest rates for short-term borrowings in

                                        35
<PAGE>

fiscal 2002 had averaged two percent more, our interest expense would have
increased by approximately $2.7 million.

     Market risk for fixed-rate long-term obligations is estimated as the
potential increase in fair value resulting from a hypothetical one percent
decrease in interest rates and amounts to approximately $63.5 million based on
discounted cash flow analyses.

     As of September 30, 2002, we were not engaged in other activities which
would cause exposure to the risk of material earnings or cash flow loss due to
changes in interest rates, foreign currency exchange rates or market commodity
prices.

                                        36
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Index to financial statements and financial statement schedule:

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of independent auditors..............................   38
Financial statements and supplementary data:
  Consolidated balance sheets at September 30, 2002 and
     2001...................................................   39
  Consolidated statements of income for the years ended
     September 30, 2002, 2001 and 2000......................   40
  Consolidated statements of shareholders' equity for the
     years ended September 30, 2002, 2001 and 2000..........   41
  Consolidated statements of cash flows for the years ended
     September 30, 2002, 2001 and 2000......................   42
  Notes to consolidated financial statements................   43
  Subsequent Event (unaudited)..............................   77
  Selected Quarterly Financial Data (unaudited).............   78
  Supplementary Disclosures (unaudited).....................   79
Financial statement schedule for the years ended September
  30, 2002, 2001 and 2000
  II. Valuation and Qualifying Accounts.....................   88
</Table>

     All other financial statement schedules are omitted because the required
information is not present, or not present in amounts sufficient to require
submission of the schedule or because the information required is included in
the financial statements and accompanying notes thereto.

                                        37
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
Atmos Energy Corporation

     We have audited the accompanying consolidated balance sheets of Atmos
Energy Corporation as of September 30, 2002 and 2001, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended September 30, 2002. Our audits also
included the financial statement schedule listed in the Index at Item 15(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Atmos Energy Corporation at September 30, 2002 and 2001, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended September 30, 2002, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

     As discussed in Note 1 to the financial statements, in fiscal 2002 the
Company adopted Statement of Financial Accounting Standards No. 141, Business
Combinations and Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets.

                                          ERNST & YOUNG LLP

Dallas, Texas
November 8, 2002

                                        38
<PAGE>

                            ATMOS ENERGY CORPORATION

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                   SEPTEMBER 30
                                                              -----------------------
                                                                 2002         2001
                                                              ----------   ----------
                                                                  (IN THOUSANDS,
                                                                EXCEPT SHARE DATA)
<S>                                                           <C>          <C>
                                       ASSETS
Property, plant and equipment...............................  $2,103,428   $2,055,986
Construction in progress....................................      24,399       53,881
                                                              ----------   ----------
                                                               2,127,827    2,109,867
Less accumulated depreciation and amortization..............     827,507      774,469
                                                              ----------   ----------
  Net property, plant and equipment.........................   1,300,320    1,335,398
Current assets
  Cash and cash equivalents.................................      46,827       15,263
  Cash held on deposit in margin account....................      10,192       66,666
  Accounts receivable, less allowance for doubtful accounts
     of $10,509 in 2002 and $16,151 in 2001.................     136,227      124,046
  Inventories...............................................       3,769        6,041
  Gas stored underground....................................      91,783       89,555
  Assets from risk management activities....................      27,984       95,968
  Deferred gas cost.........................................          --       10,999
  Other current assets and prepayments......................      13,209       15,713
                                                              ----------   ----------
          Total current assets..............................     329,991      424,251
Intangible assets...........................................       5,365       12,125
Goodwill....................................................     185,015       64,745
Noncurrent assets from risk management activities...........       5,241       29,771
Deferred charges and other assets...........................     154,289      169,890
                                                              ----------   ----------
                                                              $1,980,221   $2,036,180
                                                              ==========   ==========
                           CAPITALIZATION AND LIABILITIES
Shareholders' equity
  Common stock, no par value (stated at $.005 per share);
     100,000,000 shares authorized; issued and outstanding:
     2002 -- 41,675,932 shares, 2001 -- 40,791,501 shares...  $      208   $      204
  Additional paid-in capital................................     508,265      489,948
  Retained earnings.........................................     106,142       95,132
  Accumulated other comprehensive income (loss).............     (41,380)      (1,420)
                                                              ----------   ----------
          Shareholders' equity..............................     573,235      583,864
Long-term debt..............................................     670,463      692,399
                                                              ----------   ----------
          Total capitalization..............................   1,243,698    1,276,263
Current liabilities
  Current maturities of long-term debt......................      21,980       20,695
  Short-term debt...........................................     145,791      201,247
  Accounts payable and accrued liabilities..................     135,609       84,471
  Taxes payable.............................................      15,626       11,620
  Customers' deposits.......................................      31,147       32,351
  Liabilities from risk management activities...............      18,487      119,484
  Deferred gas cost.........................................      21,947           --
  Other current liabilities.................................      72,520       41,161
                                                              ----------   ----------
          Total current liabilities.........................     463,107      511,029
Deferred income taxes.......................................     134,540      138,934
Noncurrent liabilities from risk management activities......       3,663        7,412
Deferred credits and other liabilities......................     135,213      102,542
                                                              ----------   ----------
                                                              $1,980,221   $2,036,180
                                                              ==========   ==========
</Table>

          See accompanying notes to consolidated financial statements

                                        39
<PAGE>

                            ATMOS ENERGY CORPORATION

                       CONSOLIDATED STATEMENTS OF INCOME

<Table>
<Caption>
                                                                     YEAR ENDED SEPTEMBER 30
                                                              --------------------------------------
                                                                 2002          2001          2000
                                                              ----------   ------------   ----------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>          <C>            <C>
Operating revenues..........................................   $950,849     $1,442,275     $850,152
Purchased gas cost..........................................    558,247      1,067,555      524,446
                                                               --------     ----------     --------
Gross profit................................................    392,602        374,720      325,706
Gas trading margin..........................................     38,538            488           --
Operating expenses
  Operation and maintenance.................................    158,119        139,608      147,897
  Depreciation and amortization.............................     81,469         67,664       63,855
  Taxes, other than income..................................     36,221         37,655       28,638
                                                               --------     ----------     --------
          Total operating expenses..........................    275,809        244,927      240,390
                                                               --------     ----------     --------
Operating income............................................    155,331        130,281       85,316
Other income (expense)
  Equity in earnings of Woodward Marketing, L.L.C. .........         --          8,062        7,307
  Miscellaneous income (expense), net.......................     (1,321)        (1,874)       7,437
                                                               --------     ----------     --------
          Total other income (expense)......................     (1,321)         6,188       14,744
Interest charges............................................     59,174         47,011       43,823
                                                               --------     ----------     --------
Income before income taxes..................................     94,836         89,458       56,237
Income taxes................................................     35,180         33,368       20,319
                                                               --------     ----------     --------
          Net income........................................   $ 59,656     $   56,090     $ 35,918
                                                               ========     ==========     ========
Basic net income per share..................................   $   1.45     $     1.47     $   1.14
                                                               ========     ==========     ========
Diluted net income per share................................   $   1.45     $     1.47     $   1.14
                                                               ========     ==========     ========
Cash dividends per share....................................   $   1.18     $     1.16     $   1.14
                                                               ========     ==========     ========
Weighted average shares outstanding:
  Basic.....................................................     41,171         38,156       31,461
                                                               ========     ==========     ========
  Diluted...................................................     41,250         38,247       31,594
                                                               ========     ==========     ========
</Table>

          See accompanying notes to consolidated financial statements

                                        40
<PAGE>

                            ATMOS ENERGY CORPORATION

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<Table>
<Caption>
                                          COMMON STOCK                     ACCUMULATED
                                       -------------------   ADDITIONAL       OTHER
                                       NUMBER OF    STATED    PAID-IN     COMPREHENSIVE   RETAINED
                                         SHARES     VALUE     CAPITAL     INCOME (LOSS)   EARNINGS    TOTAL
                                       ----------   ------   ----------   -------------   --------   --------
                                                         (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                    <C>          <C>      <C>          <C>             <C>        <C>
Balance, September 30, 1999..........  31,247,800    $156     $293,359      $    917      $ 83,231   $377,663
Comprehensive income:
  Net income.........................          --      --           --            --        35,918     35,918
  Unrealized holding gains on
    investments, net.................          --      --           --         1,348            --      1,348
                                                                                                     --------
         Total comprehensive
           income....................                                                                  37,266
Cash dividends ($1.14 per share).....          --      --           --            --       (35,995)   (35,995)
Common stock:
  Direct stock purchase plan.........     440,990       2        8,588            --            --      8,590
  Retirement savings plan............     258,049       1        4,842            --            --      4,843
  Long-term stock plan for United
    Cities Division..................       4,200      --           66            --            --         66
  Outside directors stock-for-fee
    plan.............................       2,601       1           50            --            --         51
  Cancellation of restricted stock...      (1,300)     --          (18)           --            --        (18)
                                       ----------    ----     --------      --------      --------   --------
Balance, September 30, 2000..........  31,952,340     160      306,887         2,265        83,154    392,466
Comprehensive income:
  Net income.........................          --      --           --            --        56,090     56,090
  Unrealized holding losses on
    investments, net.................          --      --           --        (3,685)           --     (3,685)
                                                                                                     --------
         Total comprehensive
           income....................                                                                  52,405
Cash dividends ($1.16 per share).....          --      --           --            --       (44,112)   (44,112)
Common stock issued:
  Direct stock purchase plan.........     411,159       2        8,682            --            --      8,684
  Retirement savings plan............     225,945       1        5,098            --            --      5,099
  Long-term stock plan for United
    Cities Division..................      15,300      --          240            --            --        240
  Long-term incentive plan...........      17,172      --          272            --            --        272
  Directors equity incentive
    compensation plan................       2,740      --           60            --            --         60
  Outside directors stock-for-fee
    plan.............................       2,152      --           50            --            --         50
  Woodward Marketing, L.L.C.
    acquisition......................   1,423,193       7       26,650            --            --     26,657
  Public offering....................   6,741,500      34      142,009            --            --    142,043
                                       ----------    ----     --------      --------      --------   --------
Balance, September 30, 2001..........  40,791,501     204      489,948        (1,420)       95,132    583,864
Comprehensive income:
  Net income.........................          --      --           --            --        59,656     59,656
  Minimum pension liability, net.....          --      --           --       (39,432)           --    (39,432)
  Unrealized holding losses on
    investments, net.................          --      --           --          (528)           --       (528)
                                                                                                     --------
         Total comprehensive
           income....................                                                                  19,696
Cash dividends ($1.18 per share).....          --      --           --            --       (48,646)   (48,646)
Common stock issued:
  Direct stock purchase plan.........     505,202       2       10,546            --            --     10,548
  Retirement savings plan............     326,335       2        7,137            --            --      7,139
  Long-term incentive plan...........      50,465      --          579            --            --        579
  Outside directors stock-for-fee
    plan.............................       2,429      --           55            --            --         55
                                       ----------    ----     --------      --------      --------   --------
Balance, September 30, 2002..........  41,675,932    $208     $508,265      $(41,380)     $106,142   $573,235
                                       ==========    ====     ========      ========      ========   ========
</Table>

          See accompanying notes to consolidated financial statements

                                        41
<PAGE>

                            ATMOS ENERGY CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                 YEAR ENDED SEPTEMBER 30
                                                            ---------------------------------
                                                              2002        2001        2000
                                                            ---------   ---------   ---------
                                                                     (IN THOUSANDS)
<S>                                                         <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income..............................................  $  59,656   $  56,090   $  35,918
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Depreciation and amortization:
       Charged to depreciation and amortization...........     81,469      67,664      63,855
       Charged to other accounts..........................      2,452       2,806       3,065
     Deferred income taxes................................     14,509      18,501      18,251
     Other................................................     (3,371)       (979)         --
     Net assets/liabilities from risk management
       activities.........................................     (9,576)     13,881          --
     Gain on sale of non-regulated assets.................         --          --      (5,831)
  Changes in assets and liabilities:
     (Increase) decrease in cash held on deposit in margin
       account............................................     56,474     (62,181)         --
     (Increase) decrease in accounts receivable...........    (12,181)     65,032     (11,260)
     Decrease in inventories..............................      2,272         374       2,037
     Increase in gas stored underground...................     (2,228)     (3,376)    (17,518)
     (Increase) decrease in deferred gas cost.............     32,946      15,440     (31,353)
     (Increase) decrease in other current assets and
       prepayments........................................      2,504      (6,646)     (4,930)
     Increase in deferred charges and other assets........    (33,515)    (12,143)    (13,053)
     Increase (decrease) in accounts payable..............     51,138     (94,769)      8,643
     Increase in taxes payable............................      4,006         791       9,607
     Increase (decrease) in customers' deposits...........     (1,204)      6,078        (909)
     Increase (decrease) in other current liabilities.....     31,393       9,019      (4,866)
     Increase in deferred credits and other liabilities...     19,487       7,413       2,540
                                                            ---------   ---------   ---------
       Net cash provided by operating activities..........    296,231      82,995      54,196
CASH FLOWS USED IN INVESTING ACTIVITIES
  Capital expenditures....................................   (132,252)   (113,109)    (75,557)
  Acquisitions............................................    (15,747)   (363,399)    (32,000)
  Retirements of property, plant and equipment, net.......     (1,725)     (1,460)        957
  Assets for leasing activities...........................     (8,511)     (5,377)         --
  Increase in cash from acquisition.......................         --       8,644          --
  Proceeds from sale of assets, net.......................         --       6,625       6,467
                                                            ---------   ---------   ---------
       Net cash used in investing activities..............   (158,235)   (468,076)   (100,133)
CASH FLOWS FROM FINANCING ACTIVITIES
  Net increase (decrease) in short-term debt..............    (55,456)    (48,800)     81,743
  Net proceeds from issuance of long-term debt............         --     347,099          --
  Repayment of long-term debt.............................    (20,651)    (17,670)    (14,567)
  Cash dividends paid.....................................    (48,646)    (44,112)    (35,995)
  Issuance of common stock................................     18,321      14,405      13,550
  Net proceeds from equity offering.......................         --     142,043          --
                                                            ---------   ---------   ---------
       Net cash provided (used) by financing activities...   (106,432)    392,965      44,731
                                                            ---------   ---------   ---------
Net increase (decrease) in cash and cash equivalents......     31,564       7,884      (1,206)
Cash and cash equivalents at beginning of year............     15,263       7,379       8,585
                                                            ---------   ---------   ---------
Cash and cash equivalents at end of year..................  $  46,827   $  15,263   $   7,379
                                                            =========   =========   =========
</Table>

          See accompanying notes to consolidated financial statements

                                        42
<PAGE>

                            ATMOS ENERGY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Description of business -- Atmos Energy Corporation and its subsidiaries
are engaged primarily in the natural gas utility business as well as certain
non-regulated businesses. We distribute natural gas through sales and
transportation arrangements to approximately 1.4 million residential,
commercial, public authority and industrial customers through our five regulated
utility divisions: Atmos Energy Colorado-Kansas Division (formerly Greeley Gas
Division) in Colorado, Kansas and Missouri; Atmos Energy Kentucky Division
(formerly Western Kentucky Gas Division) in Kentucky; Atmos Energy Louisiana
Division (formerly Atmos Energy Louisiana Gas Division) in Louisiana; Atmos
Energy Mid-States Division (formerly United Cities Gas Division) in Illinois,
Tennessee, Iowa, Virginia, Georgia and Missouri; and Atmos Energy Texas Division
(formerly Energas Division) in Texas. Such business is subject to federal and
state regulation and/or regulation by local authorities in each of the states in
which the utility divisions operate. Our shared services unit is located in
Dallas, Texas and our customer support centers are located in Amarillo, Texas
and Metairie, Louisiana. Our non-utility businesses include various energy
service businesses as described below.

     Through Atmos Energy Marketing, L.L.C., we are engaged in gas marketing and
energy management services. Atmos Energy Marketing provides gas supply
management services to industrial customers, municipalities and local
distribution companies including our five regulated utility divisions. Woodward
Marketing, L.L.C. and Trans Louisiana Industrial Gas Company, Inc. are
wholly-owned subsidiaries of Atmos Energy Marketing.

     Through Atmos Pipeline and Storage, L.L.C., we own and operate natural gas
storage fields in Kansas, Kentucky and Louisiana to supplement natural gas used
by customers of the regulated utility divisions in Kansas, Kentucky, Tennessee
and Louisiana and to provide storage services to other customers including
customers in other states.

     Through Atmos Power Systems, Inc., we construct and operate electrical
power generating plants and associated facilities. Atmos Power Systems may also
enter into agreements to either lease or sell such plants.

     In addition, our non-utility businesses provide various retail services and
own an indirect interest in Heritage Propane Partners as described below.

     We were formerly engaged in the retail and wholesale distribution of
propane gas through United Cities Propane Gas, Inc. On February 15, 2000, we
entered into an agreement to form a joint venture which combined our propane
operations with the propane operations of three other unrelated companies. The
combined joint venture was named U.S. Propane, L.P. On June 15, 2000, U.S.
Propane, in which we are a 19 percent partner, entered into an agreement to
combine its operations with Heritage Holdings, Inc. Upon closing of this
transaction, which occurred in August 2000, U.S. Propane owns all of the general
partnership interest and approximately 30 percent of the limited partnership
interest in Heritage Propane Partners, a publicly traded master limited
partnership. Through our ownership in U.S. Propane, we own an approximate six
percent interest in Heritage Propane Partners.

     Principles of consolidation -- The accompanying consolidated financial
statements include the accounts of Atmos Energy Corporation and its wholly-owned
subsidiaries. All material intercompany transactions have been eliminated.

     Prior to April 1, 2001, we owned a 45 percent interest in Woodward
Marketing, L.L.C. and accounted for that ownership using the equity method of
accounting for investments. Subsequent to April 1, 2001, we owned 100 percent of
Woodward Marketing and have accounted for that ownership on a consolidated
basis. See Note 2.

     Subsequent to August 10, 2000, we accounted for our interest in U.S.
Propane using the equity method of accounting.

                                        43
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Intangible assets -- Intangible assets consist primarily of customer
contracts valued at fair market value. These contracts have a gross carrying
value of $5.8 million. The weighted average amortization period is 10 years and
amortization expense is $0.6 million per year.

     Goodwill -- Total goodwill was $185.0 million and $64.7 million at
September 30, 2002 and 2001. Goodwill applicable to the utility segment was
$150.3 million and $36.9 at September 30, 2002 and 2001. Goodwill applicable to
the natural gas marketing segment was $21.3 million and $15.0 million at
September 30, 2002 and 2001. Goodwill applicable to the other non-utility
segment was $13.4 million and $12.8 million at September 30, 2002 and 2001.
Goodwill applicable to the utility segment resulted from the acquisition of the
Louisiana Gas Service Company assets on July 1, 2001 and is not subject to
amortization under the provisions of Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets." Goodwill applicable to the
natural gas marketing segment was amortized over 20 years through September 30,
2001. Effective October 1, 2001, goodwill applicable to the natural gas
marketing segment was not amortized under the provisions of SFAS No. 142. The
proforma effect of adopting SFAS No. 142 would be to increase net income by $0.3
million in 2001 and $0.1 million in 2000. Under the provisions of SFAS No. 142,
we evaluate our goodwill balance annually in our second quarter or as impairment
indicators arise. The initial evaluation took place during the second quarter of
fiscal 2002. We use a present value technique based on discounted cash flows to
estimate the fair value of our reporting groups. No impairment of our goodwill
balance was indicated as a result of that evaluation.

     Impairment of Long-Lived Assets -- We periodically evaluate whether events
or circumstances have occurred that indicate that other long-lived assets may
not be recoverable or that the remaining useful life may warrant revision. When
such events or circumstances are present, we assess the recoverability of
long-lived assets by determining whether the carrying value will be recovered
through the expected future cash flows. In the event the sum of the expected
future cash flows resulting from the use of the asset is less than the carrying
value of the asset, an impairment loss equal to the excess of the asset's
carrying value over its fair value is recorded. To date, no impairment has been
recognized.

     Regulation -- Our utility operations are subject to regulation with respect
to rates, service, maintenance of accounting records and various other matters
by the respective regulatory authorities in the states in which we operate. Our
accounting policies recognize the financial effects of the ratemaking and
accounting practices and policies of the various regulatory commissions.
Regulated utility operations are accounted for in accordance with Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation." This statement requires cost-based rate regulated entities
that meet certain criteria to reflect the authorized recovery of costs due to
regulatory decisions in their financial statements.

     We record regulatory assets which represent assets that are being recovered
through customer rates or are probable of being recovered through customer
rates. Significant regulatory assets as of September 30, 2002 included merger
and integration costs included in deferred charges and other assets and
environmental costs of $3.7 million. Regulatory liabilities represent probable
future reductions in revenues associated with amounts that are to be credited to
customers through the ratemaking process. As of September 30, 2002, we had
recorded a regulatory liability of $3.3 million for deferred income taxes.

     Revenue recognition -- Sales of natural gas are billed on a monthly cycle
basis; however, the billing cycle periods for certain classes of customers do
not necessarily coincide with accounting periods used for financial reporting
purposes. We follow the revenue accrual method of accounting for natural gas
revenues whereby revenues applicable to gas delivered to customers, but not yet
billed under the cycle billing method, are estimated and accrued and the related
costs are charged to expense. Estimated losses due to credit risk are reserved
at the time revenue is recognized.

     Accounts receivable and allowance for doubtful accounts -- Accounts
receivable consist of natural gas sales to residential, commercial, industrial,
agricultural and other customers. The allowance for doubtful

                                        44
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

accounts is computed based on the aging of outstanding accounts receivable and
historical collections experience and represents in management's opinion, an
adequate allowance to provide for probable uncollectable accounts.

     Utility property, plant and equipment -- Utility property, plant and
equipment is stated at original cost net of contributions in aid of
construction. The cost of additions includes direct construction costs, payroll
related costs (taxes, pensions and other fringe benefits), administrative and
general costs and an allowance for funds used during construction. (See
allowance for funds used during construction below). Major renewals and
betterments are capitalized while the costs of maintenance and repairs are
charged to expense as incurred. The costs of large projects are accumulated in
construction in progress until the project is completed. When the project is
completed, tested and placed in service, the balance is transferred to the
utility plant in service account included in the rate base and depreciation
begins. Property, plant and equipment is depreciated at various rates on a
straight-line basis over the estimated useful lives of the assets. The composite
rates were 3.8 percent for 2002, 3.7 percent for 2001 and 4.1 percent for 2000.
At the time property, plant and equipment is retired, the cost, plus removal
expenses less salvage, is charged to accumulated depreciation.

     Allowance for funds used during construction -- Allowance for funds used
during construction represents the estimated cost of funds used to finance the
construction of major projects. Under regulatory practices, the costs are
capitalized and included in rate base for ratemaking purposes when the completed
projects are placed in service. Interest expense of $1.3 million and $1.2
million was capitalized in 2002 and 2001. No interest expense was capitalized
during 2000.

     Non-utility property, plant and equipment -- Balances are stated at cost
and depreciation is generally computed on the straight-line method for financial
reporting purposes. The estimated useful lives of our non-utility assets range
between 8 and 38 years.

     Gas stored underground -- Net additions of inventory gas to storage and
withdrawals of inventory gas from storage are priced using the average cost
method for all our utility divisions, except for the Mid-States Division, where
it is priced on the first-in first-out method. Gas stored underground and owned
by Atmos Pipeline and Storage is priced on the last-in first-out method. Gas in
storage that is retained as cushion gas to maintain reservoir pressure is
classified as property, plant and equipment and is priced at cost.

     Risk management assets, natural gas marketing segment -- We use storage,
transportation and requirements contracts, forwards, over-the-counter and
exchange-traded options, futures and swap contracts to conduct our risk
management activities. We use the mark-to-market method to account for these
activities in accordance with Emerging Issues Task Force Issue No. 98-10,
"Accounting for Energy Trading and Risk Management Activities." Under this
method, the aforementioned contracts are reflected at fair value, inclusive of
future servicing costs and valuation adjustments, with resulting unrealized
gains and losses recorded as assets or liabilities from risk management
activities on the consolidated balance sheet. Current period changes in the
assets and liabilities from risk management activities are recognized as net
gains or losses on the consolidated statement of income. Changes in the assets
and liabilities from risk management activities result primarily from changes in
the valuation of the portfolio of contracts, maturity and settlement of
contracts and newly originated transactions. Market prices and models used to
value these transactions reflect our best estimate considering various factors
including closing exchange and over-the-counter quotations, time value and
volatility factors underlying the contracts. Values are adjusted to reflect the
potential impact of liquidating our positions in an orderly manner over a
reasonable period of time under present market conditions. Changes in market
prices directly affect our estimate of the fair value of these transactions.
Certain contracts within this segment are not subject to EITF Issue No. 98-10
and are therefore accounted for on the accrual basis.

     At September 30, 2002, we had net outstanding contracts representing 1.9
Bcf of net notional volumes with average contract maturities of less than two
years. These contracts were marked to market. Contracts

                                        45
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

representing 75 percent of the fair value of these contracts are scheduled to
mature within one year. Contracts representing 22 percent of the remaining fair
value are scheduled to mature within three years.

     Risk management assets, utility segment -- Our divisions have entered into
financial instruments for the 2002-2003 heating season. The purpose of entering
into these financial instruments is to protect us and our customers from
unusually large winter period gas price increases. We use the mark-to-market
method as prescribed by Financial Accounting Standard No. 133 "Accounting for
Derivatives and Hedging Activities" to account for these activities. In
accordance with Financial Accounting Standards No. 71 "Accounting for the
Effects of Certain Types of Regulation", current period changes in the assets
and liabilities from risk management activities are recorded as deferred gas
costs on the consolidated balance sheet due to recoverability in rates.
Accordingly, there is no earnings impact as a result of the use of these
financial instruments. See Note 15. Upon maturity, the contracts are recognized
in purchased gas cost.

     Income taxes -- Income taxes are provided based on the liability method,
resulting in income tax assets and liabilities due to temporary differences.
Temporary differences are differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements that will
result in taxable or deductible amounts in future years. The liability method
requires the effect of tax rate changes on current and accumulated deferred
income taxes to be reflected in the period in which the rate change was enacted.
The liability method also requires that deferred tax assets be reduced by a
valuation allowance unless it is more likely than not that the assets will be
realized.

     Cash and cash equivalents -- We consider all highly liquid investments with
an initial or remaining maturity of three months or less to be cash equivalents.

     Deferred charges and other assets -- Deferred charges and other assets at
September 30, 2002 and 2001 include merger and integration costs of $27.0
million and $24.2 million, net of the related reserve for possible non-recovery
and accumulated amortization and the indirect investment in Heritage Propane
Partners of $22.2 million and $23.8 million in 2002 and 2001. Also included in
deferred charges and other assets are assets of our qualified defined benefit
retirement plans in excess of the plans' obligations of none and $44.4 million,
assets related to the nonqualified retirement plans of $27.7 million and $25.1
million, unamortized debt acquisition expense of $8.9 million and $9.7 million,
prepaid weather insurance premiums of $8.8 million and $8.8 million, long-term
receivable on leased assets of $8.8 million and $9.8 million and deferred asset
projects of $6.6 million and $12.6 million at September 30, 2002 and 2001.

     Deferred credits and other liabilities -- Deferred credits and other
liabilities at September 30, 2002 and 2001 include customer advances for
construction of $12.0 million and $11.7 million; net additional minimum pension
liability related to our qualified defined benefit retirement plan of $15.7
million and none; obligations under other postretirement benefits of $39.5
million and $38.1 million; and obligations under our nonqualified retirement
plans of $38.0 million and $34.2 million.

     Pension and Other Postretirement Plans -- Pension and other postretirement
plan expenses and liabilities are determined on an actuarial basis and are
affected by the market value of plan assets, estimates of the expected return on
plan assets and assumed discount rates. Actual changes in the fair market value
of plan assets and differences between the actual return on plan assets and the
expected return on plan assets could have a material effect on the amount of
pension expense ultimately recognized. The assumed return on plan assets is
based on management's expectation of the long-term return on plan assets
portfolio. The discount rate used to compute the present value of plan
liabilities is based generally on rates of high grade corporate bonds with
maturities similar to the average period over which benefits will be paid. At
September 30, 2002 and 2001, prepaid pension assets were $47.9 million and $44.4
million. At September 30, 2002, we recorded an additional minimum pension
liability of $63.6 million resulting in a net pension liability of $15.7 million
which is included in deferred credits and other liabilities on the consolidated
balance sheet. At September 30, 2001,

                                        46
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

no minimum pension liability was required and the prepaid pension assets were
included in deferred charges and other assets on the consolidated balance sheet.

     Earnings per share -- The calculation of basic earnings per share is based
on net income divided by the weighted average number of common shares
outstanding. The calculation of diluted earnings per share is based on net
income divided by the weighted average number of shares outstanding plus the
dilutive shares related to the United Cities' Long-term Stock Plan, the
Long-Term Incentive Plan and Atmos' Restricted Stock Grant Plan.

     Comprehensive income -- In 1999, we adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This statement
requires reporting of comprehensive income and its components (revenues,
expenses, gains and losses) in any complete presentation of general purpose
financial statements. Comprehensive income describes all changes, except those
resulting from investments by owners and distributions to owners, in the equity
of a business enterprise from transactions and other events including, as
applicable, foreign-currency items, minimum pension liability adjustments and
unrealized gains and losses on certain investments in debt and equity
securities. While the primary component of comprehensive income is our reported
net income, the other components of comprehensive income relate to unrealized
gains and losses associated with certain investments held as available for sale
and minimum pension liability adjustments.

     The following table presents the components of other comprehensive income
(loss) and the related tax effect for the years ended September 30, 2002, 2001
and 2000:

<Table>
<Caption>
                                                            2002      2001      2000
                                                          --------   -------   ------
                                                                (IN THOUSANDS)
<S>                                                       <C>        <C>       <C>
Unrealized holding gains (losses) on investments........  $   (840)  $(5,845)  $2,106
Minimum pension liability...............................   (63,600)       --       --
                                                          --------   -------   ------
                                                           (64,440)   (5,845)   2,106
Tax expense (benefit)...................................   (24,480)   (2,160)     758
                                                          --------   -------   ------
Other comprehensive income (loss).......................  $(39,960)  $(3,685)  $1,348
                                                          ========   =======   ======
</Table>

     Use of estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.

     Weather insurance and hedges -- In June 2001, we purchased a three year
weather insurance policy with an option to cancel in the third year. We will
receive a refund of a portion of the cost of the policy if we cancel in the
third year. The policy is for our Texas and Louisiana operations and covers the
entire heating season of October to March beginning with the 2001-2002 heating
season. The cost of the three year policy was $13.2 million which was prepaid
and is being amortized over the appropriate heating seasons based on degree
days. The insurance is designed to protect against weather that is at least
seven percent warmer than normal for the entire heating season. During the
2001-2002 heating season, weather was not at least seven percent warmer than
normal resulting in no claim having been filed under the insurance policy. Only
the amortization of $4.4 million of premiums was recognized during the heating
season.

     In July 2000, we entered into an agreement to purchase weather hedges for
our Texas and Louisiana operations effective for the 2000-2001 heating season.
The hedges were designed to help mitigate the effects of weather that was at
least seven percent warmer than normal in both Texas and Louisiana while
preserving any upside. The cost of the weather hedges was approximately $4.9
million which was amortized over the 2000-

                                        47
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2001 heating season. No income was recognized for the 2000-2001 heating season
for these weather hedges due to the colder than normal weather. The cost of the
weather hedges was more than offset by the positive effects of colder weather on
our gross profit.

     Recently issued accounting standards not yet adopted -- In June 2001, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations." This Statement
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. The provisions of this Statement are effective for financial statements
issued for fiscal years beginning after June 15, 2002. We believe that the
impact of adopting SFAS No. 143 will not be material. This conclusion was based
on the perpetual nature of our franchise agreements and on our experience in the
businesses in which we operate.

     In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This Statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. The
provisions of this Statement are effective for financial statements issued for
fiscal years beginning after December 15, 2001. We believe that the impact of
adopting SFAS No. 144 will not be material.

     At its October 2002 meeting, the Emerging Issues Task Force rescinded EITF
Issue Nos. 98-10 and 00-17. The impact on Atmos Energy Marketing will be to
discontinue mark-to-market accounting of our sales, storage and transportation
contracts and our natural gas storage inventory. Any cumulative effect of this
change in accounting will depend on the number and valuation of our sales,
storage and transportation contracts and our natural gas storage inventory level
and valuation at the time we adopt the new rules. The consensus to rescind EITF
Issue No. 98-10 is effective for all new contracts entered into (and physical
inventory purchased or produced) after October 25, 2002. The consensus is
effective for fiscal periods beginning after December 15, 2002 for energy
trading and energy-related contracts that existed on or before October 25, 2002
that remain in effect at the date the consensus is initially applied. We are
currently evaluating the impact of this rescission on our financial condition,
results of operations and cash flows.

     Reclassifications -- Certain prior year amounts have been reclassified to
conform with the current year presentation.

2.  ACQUISITIONS

  ACQUISITION OF REMAINING EQUITY INTEREST IN WOODWARD MARKETING

     In April 2001, we acquired from Woodward Marketing, Inc. the 55 percent
interest in Woodward Marketing, L.L.C. that we did not already own in exchange
for 1,423,193 restricted shares of our common stock. The consideration is
subject to a potential upward adjustment, based on our share price, of up to
232,547 shares plus an amount of shares to compensate for dividends paid after
the completion of the acquisition. The adjustment period expires on March 31,
2006. The pro forma effects for the fiscal year ended September 30, 2001 of
combining 100 percent of Woodward Marketing's results of operations with Atmos'
consolidated results of operations would have been a $17.9 million increase in
gas trading margin to $18.4 million, elimination of the $8.1 million equity in
earnings of Woodward Marketing, a $6.2 million increase in net income to $62.3
million and a $.13 increase in diluted earnings per share to $1.60.

     Such pro forma effects for the fiscal year ended September 30, 2000 would
have been a $16.2 million increase in gas trading margin to $16.2 million,
elimination of the $7.3 million equity in earnings of Woodward Marketing, a $5.7
million increase in net income to $41.2 million and a $.12 increase in diluted
earnings per share to $1.26.

                                        48
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The acquisition enabled us to control Woodward Marketing's future direction
and strategies. Since April 1, 2001, 100 percent of Woodward Marketing's
operations have been consolidated with our operations.

     The following table summarizes the fair market value of Woodward
Marketing's assets as of April 1, 2001, in thousands:

<Table>
<S>                                                           <C>
Net property, plant and equipment...........................  $   1,649
Current assets..............................................    128,386
Other intangible assets.....................................        250
Goodwill....................................................     12,310
Deferred charges and other assets...........................         22
                                                              ---------
          Total assets acquired.............................    142,617
Current liabilities.........................................   (102,997)
Noncurrent liabilities......................................       (856)
Value of 45 percent already owned...........................    (12,107)
                                                              ---------
          Net assets acquired...............................  $  26,657
                                                              =========
</Table>

     Other intangible assets represent the fair market value of non-compete
contracts. The cost assigned to these contracts is being amortized over 10
years. The value assigned to goodwill was based on our belief that ownership of
100 percent of Woodward Marketing would enable us to exercise greater control
over Woodward Marketing's operation, thereby increasing its value. The goodwill
amount is applicable to our Natural Gas Marketing segment. We expect that the
goodwill amount will not be deductible for tax purposes.

  ACQUISITION OF NATURAL GAS OPERATIONS IN LOUISIANA

     Effective July 1, 2001, we acquired the assets of Louisiana Gas Service
Company and LGS Natural Gas Company for $363.4 million. The acquired assets
provide natural gas distribution service through approximately 279,000
residential and commercial meters in southeastern and northern Louisiana. The
service territory includes the suburban areas of metropolitan New Orleans
(excluding Orleans Parish), the north shore of Lake Pontchartrain and the
Monroe/West Monroe metropolitan area. The non-utility operations include a
natural gas marketing company and an intrastate pipeline company which provides
gas transportation service to industrial customers in Louisiana and to the
acquired assets.

     The acquisition increased the size of our operations in Louisiana and
allowed us to achieve certain synergies and cost savings by combining the
acquired operations with our existing Louisiana operations. Beginning in July
2001, results of operations of the Louisiana Gas Service assets have been
consolidated with our results of operations.

                                        49
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table summarizes the fair market values of the assets
acquired and liabilities assumed as of July 1, 2001, in thousands:

<Table>
<S>                                                            <C>
Net property, plant and equipment...........................   $313,251
Current assets..............................................     31,423
Other intangible assets.....................................     11,200
Goodwill....................................................     49,793
Noncurrent assets from risk management activities...........      5,355
Deferred charges and other assets...........................        958
                                                               --------
          Total assets acquired.............................    411,980
Current liabilities.........................................    (45,972)
Noncurrent liabilities......................................     (2,609)
                                                               --------
          Net assets acquired...............................   $363,399
                                                               ========
</Table>

     Other intangible assets represent the fair market value of industrial
customer contracts and are being amortized over 10 years. The value assigned to
goodwill was based on our belief that the acquisition of the Louisiana Gas
assets will enable us to realize cost savings in the state of Louisiana when
combined with our existing Louisiana operations. The amount assigned to goodwill
was increased from $49.8 million in fiscal 2001 to $162.5 million in fiscal
2002. The revised amount was based on additional information acquired during
2002 about the regulated rate base of the acquired assets and the value assigned
to other intangible assets. At September 30, 2002, goodwill was assigned $144.2
million to our utility segment, $5.8 million to our natural gas marketing
segment and $12.5 million to our other non-utility segment. We expect the entire
goodwill amount to be deductible for tax purposes.

     The pro forma effects for the fiscal year ended September 30, 2001 of
combining the results of operations of the Louisiana Gas assets with our
consolidated results of operations were a $306.2 million increase in operating
revenues to $1.7 billion, a $24.2 million decrease in net income to $31.9
million and a $.64 decrease in diluted earnings per share to $.83.

     Such pro forma effects for the fiscal year ended September 30, 2000 were a
$186.1 million increase in operating revenues to $1.0 billion, a $6.9 million
decrease in net income to $29.0 million and a $.22 decrease in diluted earnings
per share to $.92.

  PENDING ACQUISITION OF MISSISSIPPI VALLEY GAS COMPANY

     In September 2001, we entered into a definitive agreement to acquire
Mississippi Valley Gas Company, a privately held natural gas utility. This
acquisition will be accounted for as a purchase and will be acquired using $75.0
million in cash and the issuance of $75.0 million of our common stock. We will
also repay Mississippi Valley Gas' outstanding long-term debt of approximately
$45.0 million. Mississippi Valley Gas provides natural gas distribution service
to approximately 261,500 residential, commercial, industrial and other customers
located primarily in the northern and central regions of Mississippi.
Mississippi Valley Gas has two underground storage facilities with 2.05 Bcf of
working gas capacity. On October 31, 2002, we announced that we had received
approval from the Mississippi Public Service Commission to acquire Mississippi
Valley Gas. The transaction had previously received federal regulatory approval
and approvals from the six other state utility commissions that require
approval. We expect to close the acquisition in December 2002.

                                        50
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3.  DEBT

  LONG-TERM DEBT

     Long-term debt at September 30, 2002 and 2001 consisted of the following:

<Table>
<Caption>
                                                                2002       2001
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Unsecured 11.2% Senior Notes, due 2002, payable in annual
  installments of $2,000....................................  $  2,000   $  4,000
Unsecured 9.76% Senior Notes, due 2004, payable in annual
  installments of $3,000....................................     9,000     12,000
Unsecured 9.57% Senior Notes, due 2006, payable in annual
  installments of $2,000....................................     8,000     10,000
Unsecured 7.95% Senior Notes, due 2006, payable in annual
  installments of $1,000....................................     4,000      5,000
Unsecured 10% Notes, due 2011...............................     2,303      2,303
Unsecured 7.375% Senior Notes, due 2011.....................   350,000    350,000
Unsecured 8.07% Senior Notes, due 2006, payable in annual
  installments of $4,000 beginning 2002.....................    20,000     20,000
Unsecured 8.26% Senior Notes, due 2014, payable in annual
  installments of $1,818 beginning 2004.....................    20,000     20,000
Medium term notes
  Series A, 1995-1, 6.67%, due 2025.........................    10,000     10,000
  Series A, 1995-2, 6.27%, due 2010.........................    10,000     10,000
Unsecured 6.75% Debentures, due 2028........................   150,000    150,000
First Mortgage Bonds
  Series J, 9.40% due 2021..................................    17,000     17,000
  Series P, 10.43% due 2017.................................    16,250     18,750
  Series Q, 9.75% due 2020..................................    18,000     19,000
  Series R, 11.32% due 2004.................................     4,300      6,440
  Series T, 9.32% due 2021..................................    18,000     18,000
  Series U, 8.77% due 2022..................................    20,000     20,000
  Series V, 7.50% due 2007..................................    10,000     10,000
Rental property, propane and other term notes due in
  installments through 2013.................................     3,590     10,601
                                                              --------   --------
          Total long-term debt..............................   692,443    713,094
Less current maturities.....................................   (21,980)   (20,695)
                                                              --------   --------
                                                              $670,463   $692,399
                                                              ========   ========
</Table>

     Most of the Senior Notes and First Mortgage Bonds contain provisions that
allow us to prepay the outstanding balance in whole at any time, subject to a
prepayment premium. The Senior Note agreements and First Mortgage Bond
indentures provide for certain cash flow requirements and restrictions on
additional indebtedness, sale of assets and payment of dividends. Under the most
restrictive of such covenants, cumulative cash dividends paid after December 31,
1988 may not exceed the sum of accumulated net income for periods after December
31, 1988 plus $15.0 million. At September 30, 2002, approximately $67.7 million
of retained earnings was unrestricted.

                                        51
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     As of September 30, 2002, all of the Colorado-Kansas Division utility plant
assets with a net book value of approximately $184.8 million were subject to a
lien under the 9.4 percent Series J First Mortgage Bonds assumed by us in the
acquisition of Greeley Gas Company. Also, substantially all of the Mid-States
Division utility plant assets, totaling $328.8 million, were subject to a lien
under the Indenture of Mortgage of the Series P through V First Mortgage Bonds.

     Based on the borrowing rates currently available to us for debt with
similar terms and remaining average maturities, the fair value of long-term debt
at September 30, 2002 and 2001 is estimated, using discounted cash flow
analysis, to be $775.5 million and $709.9 million.

     Maturities of long-term debt at September 30, 2002 were as follows (in
thousands):

<Table>
<S>                                                           <C>
2003........................................................  $ 21,980
2004........................................................    18,766
2005........................................................    16,196
2006........................................................    14,259
2007........................................................    11,507
Thereafter..................................................   609,735
                                                              --------
                                                              $692,443
                                                              ========
</Table>

  SHORT-TERM DEBT

     At September 30, 2002, short-term debt consisted of $132.7 million of
commercial paper and $13.1 million outstanding under bank credit facilities. At
September 30, 2001, short-term debt was composed of $171.0 million of commercial
paper and $30.2 million outstanding under bank credit facilities. The weighted
average interest rate on short-term borrowings outstanding was 2.3 percent and
4.0 percent at September 30, 2002 and 2001.

  Committed credit facilities

     We have short-term committed credit facilities totaling $318.0 million. One
short-term unsecured credit facility is for $300.0 million and serves as a
backup liquidity facility for our commercial paper program. Our commercial paper
is rated A-2 by Standard and Poor's, P-2 by Moody's and F-2 by Fitch. At
September 30, 2002, $132.7 million of commercial paper was outstanding. At
September 30, 2001, $171.0 million of commercial paper was outstanding. We have
a second credit facility in place for $18.0 million. At September 30, 2002,
$13.1 million was outstanding under this credit facility. At September 30, 2001,
$2.2 million was outstanding under this credit facility. These credit facilities
are negotiated at least annually and are used for working capital purposes.

  Uncommitted credit facilities

     Our Woodward Marketing subsidiary has an uncommitted demand credit facility
for $210.0 million which is used for its non-utility business. Atmos Energy
Holdings, Inc., our wholly-owned subsidiary, is the sole guarantor of all
amounts outstanding under this facility. At September 30, 2002, there were no
amounts outstanding under this credit facility. Related letters of credit
totaling $41.0 million reduced the amount available under this facility. This
facility is used for working capital purposes. The amount available under this
credit facility is also limited by various covenants, including covenants based
on working capital. Under the most restrictive covenant, the amount available to
Woodward Marketing under this credit facility at September 30, 2002 was $59.0
million. During the quarter ended September 30, 2002, Woodward was not in

                                        52
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

technical compliance with certain of the covenants contained in this uncommitted
demand credit facility. Woodward has obtained waivers for the periods of
non-compliance.

     We also have an unsecured short-term uncommitted credit line for $20.0
million. There were no borrowings under this uncommitted credit facility at
September 30, 2002. At September 30, 2001, we had unsecured short-term
uncommitted credit lines from two banks totaling $40.0 million of which there
were no amounts outstanding. This uncommitted line is renewed or renegotiated at
least annually with varying terms and we pay no fee for the availability of the
line. Borrowings under this line are made on a when- and as-available basis at
the discretion of the bank.

     In addition, Woodward Marketing has up to $100.0 million available from
Atmos Energy Holdings for its non-utility business. At September 30, 2002, $20.0
million was outstanding. Any outstanding amounts under the Atmos Energy Holdings
facility are subordinated to Woodward Marketing's $210.0 million uncommitted
demand credit facility described above. This intercompany loan is eliminated in
the consolidated financial statements.

     On October 7, 2002, we entered into a $150.0 million short-term unsecured
committed credit facility. This credit facility will be used to provide initial
funding for the cash portion of the Mississippi Valley Gas acquisition and to
refinance Mississippi Valley Gas' existing debt.

4.  INCOME TAXES

     The components of income tax expense for 2002, 2001 and 2000 were as
follows:

<Table>
<Caption>
                                                           2002      2001      2000
                                                          -------   -------   -------
                                                                (IN THOUSANDS)
<S>                                                       <C>       <C>       <C>
Current
  Federal...............................................  $17,638   $13,624   $    --
  State.................................................    3,575     2,189     2,500
Deferred
  Federal...............................................   12,964    14,971    18,611
  State.................................................    1,420     3,013      (345)
Investment tax credits..................................     (417)     (429)     (447)
                                                          -------   -------   -------
                                                          $35,180   $33,368   $20,319
                                                          =======   =======   =======
</Table>

                                        53
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Deferred income taxes reflect the tax effect of differences between the
basis of assets and liabilities for book and tax purposes. The tax effect of
temporary differences that give rise to significant components of the deferred
tax liabilities and deferred tax assets at September 30, 2002 and 2001 are
presented below:

<Table>
<Caption>
                                                                2002        2001
                                                              ---------   ---------
                                                                 (IN THOUSANDS)
<S>                                                           <C>         <C>
Deferred tax assets:
  Costs expensed for book purposes and capitalized for tax
     purposes...............................................  $   2,398   $   1,269
  Accruals not currently deductible for tax purposes........      3,968       4,527
  Customer advances.........................................      4,578       4,443
  Nonqualified benefit plans................................     14,325      11,098
  Postretirement benefits...................................     22,153      21,638
  Unamortized investment tax credit.........................        902       1,049
  Regulatory liabilities....................................      1,328       1,396
  Tax net operating loss and credit carryforwards...........      6,377      13,154
  Other, net................................................      9,201       9,801
                                                              ---------   ---------
          Total deferred tax assets.........................     65,230      68,375
Deferred tax liabilities:
  Difference in net book value and net tax value of
     assets.................................................   (194,573)   (171,734)
  Pension funding...........................................      6,450     (16,010)
  Gas cost adjustments......................................      6,464       4,670
  Regulatory assets.........................................     (3,154)     (3,153)
  Cost capitalized for book purposes and expensed for tax
     purposes...............................................     (7,717)     (8,387)
  Other, net................................................     (7,240)    (12,695)
                                                              ---------   ---------
          Total deferred tax liabilities....................   (199,770)   (207,309)
                                                              ---------   ---------
Net deferred tax liabilities................................  $(134,540)  $(138,934)
                                                              =========   =========
SFAS No. 109 deferred accounts for rate regulated
  entities..................................................  $   1,704   $   1,327
                                                              =========   =========
</Table>

     Reconciliations of the provisions for income taxes computed at the
statutory rate to the reported provisions for income taxes for 2002, 2001 and
2000 are set forth below:

<Table>
<Caption>
                                                           2002      2001      2000
                                                          -------   -------   -------
                                                                (IN THOUSANDS)
<S>                                                       <C>       <C>       <C>
Tax at statutory rate of 35%............................  $33,193   $31,310   $19,683
Common stock dividends deductible for tax reporting.....     (707)     (857)     (774)
State taxes (net of federal benefit)....................    3,489     3,652     1,677
Other, net..............................................     (795)     (737)     (267)
                                                          -------   -------   -------
Provision for income taxes..............................  $35,180   $33,368   $20,319
                                                          =======   =======   =======
</Table>

     We have tax credit carryforwards amounting to $6.1 million, the majority of
which represent alternative minimum tax credits which do not expire. The
remaining tax credit carryforwards will expire at varying times between 2011 and
2018. We also have net operating loss carryforwards for state income tax
purposes amounting to $0.3 million which expire at varying times depending on
the jurisdiction in which the net operating loss was generated.

                                        54
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5.  CONTINGENCIES

  LITIGATION

  Colorado-Kansas Division

     On September 23, 1999, a suit was filed in the District Court of Stevens
County, Kansas, by Quinque Operating Company, Tom Boles and Robert Ditto,
against more than 200 companies in the natural gas industry including us and our
Colorado-Kansas Division. The plaintiffs, who purport to represent a class
consisting of gas producers, royalty owners, overriding royalty owners, working
interest owners and state taxing authorities, accuse the defendants of
underpaying royalties on gas taken from wells situated on non-federal and
non-Indian lands throughout the United States and offshore waters predicated
upon allegations that the defendants' gas measurements are simply inaccurate and
that the defendants failed to comply with applicable regulations and industry
standards over the last 25 years. Although the plaintiffs do not specifically
allege an amount of damages, they contend that this suit was brought to recover
billions of dollars in revenues that the defendants have allegedly unlawfully
diverted from the plaintiffs to themselves. On April 10, 2000, this case was
consolidated for pre-trial proceedings with other similar pending litigation in
federal court in Wyoming in which we are also a defendant along with over 200
other defendants in the case of In Re Natural Gas Royalties Quitam Litigation.
In January 2001, the federal court elected to remand this case back to the
Kansas state court. A reconsideration of remand was filed, but it was denied.
The state court now has jurisdiction over this proceeding and has issued a
preliminary case management order. We believe that the plaintiffs' claims are
lacking in merit, and we intend to vigorously defend this action. While the
results of this litigation cannot be predicted with certainty, we believe the
final outcome of such litigation will not have a material adverse effect on our
financial condition, results of operations or net cash flows.

  Texas Division

     On May 18, 2001, a suit was filed in the 99th District Court of Lubbock
County, Texas, by the City of Lubbock, Texas, and the West Texas Municipal
Agency against Stewart & Stevenson Energy Products, Inc., a division of GE
Packaged Power, Inc. ("GE") and our Texas Division. The action arose out of (i)
the construction and installation of a gas-fired electric generating facility
designed and installed by GE and (ii) the natural gas pipeline, which provides
natural gas to the facility, that was designed and installed by our Texas
Division. This suit was settled in October 2002.

     On February 13, 2002, a suit was filed in the 287th District Court of
Parmer County, Texas by Anderson Brothers, a Partnership, against Atmos Energy
Corporation, et al. The plaintiffs' claims arise out of an alleged breach of
contract by us and by a number of our divisions and subsidiaries concerning the
sale of natural gas used in irrigation activities since 1998 and an alleged
violation of the Texas Agricultural Gas Users Act of 1985. The Court has ruled
proper venue to be in Parmer County, Texas. We have been responding to numerous
discovery requests from the plaintiffs. We have also filed suit in Travis
County, Texas to have the Texas Agricultural Gas Users Act of 1985 declared
unconstitutional. The plaintiffs seek class action status and to recover
unspecified damages plus attorney's fees. We have denied any liability and
intend to vigorously defend against the plaintiffs' claims. While the results of
this litigation cannot be predicted with certainty, we believe the final outcome
of such litigation will not have a material adverse effect on our financial
condition, results of operations or net cash flows.

     We are a plaintiff in the case styled Energas Company, a Division of Atmos
Energy Corporation v. ONEOK Energy Marketing and Trading Company, L.P., ONEOK
Westex Transmission, Inc. and ONEOK Energy Marketing and Trading Company II,
filed in December 2001, pending in the District Court of Lubbock County, Texas,
72nd Judicial District. In this case, we are seeking to collect our receivable
related to approximately 5.0 Bcf of natural gas that we believe was not
delivered. We believe the receivable is fully recoverable.

                                        55
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Louisiana Division

     Prior to our acquisition of the assets of Louisiana Gas Service Company, a
division of Citizens Communications Company, on July 1, 2001, Louisiana Gas
Service Company was involved in a proceeding with the Louisiana Public Service
Commission relating to past costs associated with the purchase of gas that it
charged to its customers. Subsequent to our acquisition of the Louisiana Gas
assets on July 1, 2001, we agreed to take responsibility for assuring the
payment of refunds and/or credits to ratepayers that may arise from Citizens
Communications' past activities with respect to purchased gas costs. On April
10, 2002, the Louisiana Public Service Commission issued a Report of Proceedings
in which it approved a Stipulation and Agreement between Citizens
Communications, Atmos and the Commission Staff. This Stipulation and Agreement
resulted in no refunds being due to customers.

  United Cities Propane Gas, Inc.

     United Cities Propane Gas, Inc., one of our wholly-owned subsidiaries, is a
party to an action filed in June 2000 which is pending in the Circuit Court of
Sevier County, Tennessee. The plaintiffs' claims arise out of injuries alleged
to have been caused by a low-level propane explosion. The plaintiffs seek to
recover damages of $13.0 million. Discovery activities have begun in this case.
We have denied any liability, and we intend to vigorously defend against the
plaintiffs' claims. While the results of this litigation cannot be predicted
with certainty, we believe the final outcome of such litigation will not have a
material adverse effect on our financial condition, results of operations or net
cash flows.

     We are a party to other litigation and claims that arise in the ordinary
course of our business. While the results of such litigation and claims cannot
be predicted with certainty, we believe the final outcome of such litigation and
claims will not have a material adverse effect on our financial condition,
results of operations or net cash flows.

  ENVIRONMENTAL MATTERS

  Manufactured Gas Plant Sites

     The Mid-States Division is the owner or previous owner of manufactured gas
plant sites in Johnson City and Bristol, Tennessee and Hannibal, Missouri which
were used to supply gas prior to availability of natural gas. The gas
manufacturing process resulted in certain by-products and residual materials
including coal tar. The manufacturing process used by our predecessors was an
acceptable and satisfactory process at the time such operations were being
conducted. Under current environmental protection laws and regulations, we may
be responsible for response actions with respect to such materials if response
actions are necessary.

     United Cities Gas Company and the Tennessee Department of Environment and
Conservation entered into a consent order effective January 23, 1997, to
facilitate the investigation, removal and remediation of the Johnson City site.
United Cities Gas Company began the implementation of the consent order in the
first quarter of 1997 which continued through September 30, 2002. The
investigative phase of the work at the site has been completed. An interim
removal action was completed in June 2001. We have completed a risk assessment
report which is currently under review by the Tennessee Department of
Environment and Conservation. The Tennessee Regulatory Authority granted United
Cities Gas Company permission to defer, until its next rate case, all costs
incurred in Tennessee in connection with state and federally mandated
environmental control requirements.

     In March 2002, the Tennessee Department of Environment and Conservation
contacted us about conducting an investigation at the former manufactured gas
plant located in Bristol, Tennessee. We agreed to perform a preliminary
investigation at the site which was completed in June 2002. The investigation
identified manufactured gas plant residual materials in the soil beneath the
site and we have proposed performing a removal action to remove any such
residuals in the first quarter of fiscal 2003. The Tennessee Department of
                                        56
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Environment and Conservation has requested that the removal action be conducted
pursuant to a voluntary agreement and we are currently preparing a draft
agreement.

     On July 22, 1998, we entered into an Abatement Order on Consent with the
Missouri Department of Natural Resources addressing the former manufactured gas
plant located in Hannibal, Missouri. Through our Mid-States Division, we agreed
to perform a removal action, a subsequent site evaluation and to reimburse the
response costs incurred by the state of Missouri in connection with the
property. The removal action was conducted and completed in August 1998 and the
site evaluation field work was conducted in August 1999. A risk assessment for
the site has been completed and is currently under review by the Missouri
Department of Natural Resources. In preparation for the risk assessment, we
executed and recorded certain site use limitations including restricting use of
the site to commercial and industrial purposes and prohibiting the withdrawal of
groundwater for use as drinking water. On March 9, 1999, the Missouri Public
Service Commission issued an Order authorizing us to defer the costs associated
with this site until March 9, 2001. A renewal of the Order has been requested.
The matter is still pending before the Commission.

     As of September 30, 2002, we had incurred costs of approximately $1.1
million for the investigations of the Johnson City and Bristol, Tennessee and
Hannibal, Missouri sites and had a remaining accrual relating to these sites of
$0.6 million.

  Mercury Contamination Sites

     We have completed investigation and remediation activities pursuant to
Consent Orders between the Kansas Department of Health and Environment and
United Cities Gas Company. The Orders provided for the investigation and
remediation of mercury contamination at gas pipeline sites which utilize or
formerly utilized mercury meter equipment in Kansas. The Final Interim
Characterization and Remediation Report has been submitted to the Kansas
Department of Health. We have amended the Orders with the Kansas Department of
Health to include all mercury meters that belonged to our Colorado-Kansas
Division before the merger with United Cities Gas Company on July 31, 1997. All
work on these sites will be completed in fiscal 2003.

     As of September 30, 2002, we had incurred costs of $0.1 million for these
sites and had a remaining accrual of $0.3 million for recovery. The Kansas
Corporation Commission has authorized us to defer these costs and seek recovery
in a future rate case.

     We are a party to other environmental matters and claims, including those
discussed above, that arise in the ordinary course of our business. While the
ultimate results of response actions to these environmental matters and claims
cannot be predicted with certainty, we believe the final outcome of such
response actions will not have a material adverse effect on our financial
condition, results of operations or net cash flows because we believe that the
expenditures related to such response actions will either be recovered through
rates, shared with other parties or covered by adequate insurance.

6.  COMMON STOCK AND STOCK OPTIONS

  SHAREHOLDERS' RIGHTS PLAN

     We have a Rights Agreement under which each right ("Right") will entitle
the holder thereof, until May 10, 2008 or the date of redemption of the Rights,
to buy 1/10 of one share of Common Stock of Atmos at the exercise price of
$8.00, subject to adjustment. At no time will the Rights have any voting rights.
The exercise price payable and the number of shares of Common Stock or other
securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution. At the date upon which the
rights become separate from our Common Stock (the "Distribution Date"), we will
issue one right with each share of Common Stock that becomes outstanding so that
all shares of Common Stock will have

                                        57
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

attached Rights. After the Distribution Date, we may issue Rights when we issue
Common Stock if the Board deems such issuance to be necessary or appropriate.

     The Rights will separate from the Common Stock and a Distribution Date will
occur upon the occurrence of certain events specified in the Rights Agreement,
including but not limited to, the acquisition by certain persons of at least 15
percent of the beneficial ownership of our Common Stock. The Rights have certain
anti-takeover effects and may cause substantial dilution to a person or entity
that attempts to acquire the Company on terms not approved by the Board of
Directors except pursuant to an offer conditioned upon a substantial number of
Rights being acquired. The Rights should not interfere with any merger or other
business combination approved by the Board of Directors because, prior to the
time that the Rights become exercisable or transferable, the Rights may be
redeemed by us at $.01 per Right.

  SHARES ISSUED UNDER VARIOUS PLANS

     The following table presents the number of shares issued under our various
plans in 2002 and 2001, as well as the number of shares available for future
issuance at September 30, 2002.

<Table>
<Caption>
                                                                         SHARES AVAILABLE
                                                       SHARES ISSUED     FOR ISSUANCE AT
                                                     -----------------    SEPTEMBER 30,
                                                      2002      2001           2002
                                                     -------   -------   ----------------
<S>                                                  <C>       <C>       <C>
Restricted Stock Grant Plan........................       --        --        732,750
Retirement Savings Plan............................  326,335   225,945        608,729
Direct Stock Purchase Plan.........................  505,202   411,159        869,536
Outside Directors Stock-For-Fee Plan...............    2,429     2,152         33,356
United Cities Long-Term Stock Plan.................       --    15,300        168,550
Long-Term Incentive Plan...........................   50,465    17,172      2,374,757
Equity Incentive and Deferred Compensation Plan for
  Non-Employee Directors...........................       --     2,740        147,260
</Table>

  RESTRICTED STOCK GRANT PLAN

     Our Restricted Stock Grant Plan for management and key employees of the
Company, which became effective October 1, 1987 and was amended and restated in
February 1998, provides for awards of common stock that are subject to certain
restrictions. The Restricted Stock Grant Plan is administered by the Board of
Directors. The members of the Board who are not employees of Atmos make the
final determinations regarding participation in the Plan, awards under the Plan
and restrictions on the restricted stock awarded. The restricted stock may
consist of previously issued shares purchased on the open market or shares
issued directly from us. During 1998, we increased the number of shares of our
common stock that may be issued under the Restricted Stock Grant Plan by 650,000
shares. Compensation expense of $0.8 million, $1.1 million and $2.3 million was
recognized in 2002, 2001 and 2000 in connection with the vesting of shares
awarded under the Plan. Effective in February 2002, no additional shares of
Restricted Stock will be granted under this Plan.

  RETIREMENT SAVINGS PLAN

     Prior to January 1, 1999, we had an Employee Stock Ownership Plan and the
Mid-States Division had a 401(k) savings plan. The Employee Stock Ownership Plan
was amended effective January 1, 1999, as is more fully discussed in Note 7.
Effective March 1, 2002, the Employee Stock Ownership Plan was renamed the Atmos
Energy Corporation Retirement Savings Plan and Trust.

                                        58
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  DIRECT STOCK PURCHASE PLAN

     We also have a Direct Stock Purchase Plan. Participants in the Direct Stock
Purchase Plan may have all or part of their dividends reinvested at a three
percent discount from market prices. Direct Stock Purchase Plan participants may
purchase additional shares of Atmos common stock as often as weekly with
voluntary cash payments of at least $25, up to an annual maximum of $100,000.

  OUTSIDE DIRECTORS STOCK-FOR-FEE PLAN

     In November 1994, the Board adopted the Outside Directors Stock-for-Fee
Plan which was approved by the shareholders of Atmos in February 1995 and was
amended and restated in November 1997. The plan permits non-employee directors
to receive all or part of their annual retainer and meeting fees in stock rather
than in cash.

  EQUITY INCENTIVE AND DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

     In November 1998, the Board adopted the Equity Incentive and Deferred
Compensation Plan for Non-Employee Directors which was approved by the
shareholders of Atmos in February 1999. Such plan represents an amendment to the
Atmos Energy Corporation Deferred Compensation Plan for Outside Directors
adopted by the Company on May 10, 1990 and replaced the pension payable under
the Company's Retirement Plan for Non-Employee Directors. Only non-employee
directors of Atmos are eligible to participate in the Equity Incentive and
Deferred Compensation Plan, the purpose of which is to provide non-employee
directors with the opportunity to defer receipt of compensation for services
rendered to the Company, invest deferred compensation into either a cash account
or a stock account and to receive an annual grant of share units for each year
of service on the Board.

  STOCK-BASED COMPENSATION PLANS

     We have two stock-based compensation plans that provide for the granting of
stock options to officers, key employees and non-employee directors. The
objectives of these plans include attracting and retaining the best personnel,
providing for additional performance incentives and promoting the success of
Atmos by providing employees the opportunity to acquire common stock.

  United Cities Long-Term Stock Plan

     Prior to the merger with Atmos, certain United Cities Gas Company officers
and key employees participated in the United Cities Long-Term Stock Plan
implemented in 1989. At the time of the merger on July 31, 1997, Atmos adopted
this plan by registering a total of 250,000 shares of Atmos stock to be issued
under the Long-Term Stock Plan for the Mid-States Division. Under this plan,
incentive stock options, nonqualified stock options, stock appreciation rights,
restricted stock or any combination thereof may be granted to officers and key
employees of the Mid-States Division. Options granted under the plan become
exercisable at a rate of 20 percent per year and expire 10 years after the date
of grant. During 2002, no options were exercised under the plan. At September
30, 2002, there were 19,300 options outstanding, all of which were fully vested.
No incentive stock options, nonqualified stock options, stock appreciation
rights or restricted stock have been granted under the plan since 1996. Because
of the limited activities of this plan, the pro forma effects of applying
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" would have less than a $.01 per diluted share effect on earnings
per share or $4,030, $4,764 and $8,580 for 2002, 2001 and 2000.

                                        59
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Long-Term Incentive Plan

     On August 12, 1998, the Board of Directors approved and adopted the 1998
Long-Term Incentive Plan, which became effective October 1, 1998 after approval
by the shareholders of Atmos. An amendment to this plan increasing the share
reserve by 2,500,000 shares was amended by the shareholders at its annual
meeting on February 13, 2002. The Long-Term Incentive Plan represents a part of
our Total Rewards strategy which we developed as a result of a study we
conducted of all employee, executive and non-employee director compensation and
benefits. The Long-Term Incentive Plan is a comprehensive, long-term incentive
compensation plan providing for discretionary awards of incentive stock options,
non-qualified stock options, stock appreciation rights, bonus stock, restricted
stock and performance-based stock to help attract, retain and reward employees
and non-employee directors of Atmos and its subsidiaries.

     We are authorized to grant awards for up to a maximum of 4,000,000 shares
of common stock under the Long-Term Incentive Plan subject to certain adjustment
provisions. To date only non-qualified stock options have been issued. The
option price is equal to the market price of our stock at the date of grant. The
stock options expire 10 years from the date of the grant and options vest
annually over a service period ranging from one to three years. At September 30,
2002, we had 1,557,606 options outstanding under the Long- Term Incentive Plan
at an exercise price ranging from $14.68 to $25.66.

     In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," was issued. This statement
established a fair value-based method of accounting for employee stock options
or similar equity instruments and encourages, but does not require, all
companies to adopt that method of accounting for all of their employee stock
compensation plans. SFAS No. 123 allows companies to continue to measure
compensation cost for employee stock options or similar equity instruments using
the intrinsic value method of accounting described in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees". We have
elected to continue using the intrinsic value method as prescribed by APB No.
25. Under this method, no compensation cost for stock options is recognized for
stock option awards granted at or above fair market value.

     A summary of activity for grants of stock options under the Long-Term
Incentive Plan follows:

<Table>
<Caption>
                                                                          WEIGHTED
                                                                          AVERAGE
                                                              NUMBER OF   EXERCISE
                                                               OPTIONS     PRICE
                                                              ---------   --------
<S>                                                           <C>         <C>
Outstanding -- September 30, 1999...........................    325,000    $24.43
  Granted...................................................    379,500     16.03
  Exercised.................................................         --        --
  Forfeited.................................................    (46,000)    22.03
                                                              ---------
Outstanding -- September 30, 2000...........................    658,500     19.76
                                                              ---------
  Granted...................................................    439,500     23.45
  Exercised.................................................    (17,172)    15.82
  Forfeited.................................................    (71,498)    19.86
                                                              ---------
Outstanding -- September 30, 2001...........................  1,009,330     21.43
                                                              ---------
  Granted...................................................    607,877     22.35
  Exercised.................................................    (19,102)    16.69
  Forfeited.................................................    (40,499)    20.53
                                                              ---------
Outstanding -- September 30, 2002...........................  1,557,606    $21.87
                                                              =========
</Table>

                                        60
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Information about outstanding and exercisable options under the Long-Term
Incentive Plan, as of September 30, 2002, follows:

<Table>
<Caption>
                                          OPTIONS OUTSTANDING           OPTIONS EXERCISABLE
                                   ----------------------------------   --------------------
                                                WEIGHTED
                                                 AVERAGE
                                                REMAINING    WEIGHTED               WEIGHTED
                                               CONTRACTUAL   AVERAGE                AVERAGE
                                   NUMBER OF      LIFE       EXERCISE   NUMBER OF   EXERCISE
RANGE OF EXERCISE PRICES            OPTIONS    (IN YEARS)     PRICE      OPTIONS     PRICE
------------------------           ---------   -----------   --------   ---------   --------
<S>                                <C>         <C>           <C>        <C>         <C>
$14.68 to $17.49.................    246,562       7.4        $15.63     133,562     $15.62
$17.50 to $20.24.................     32,000       7.9        $19.84      21,333     $19.84
$20.25 to $22.99.................    627,877       9.3        $22.30      10,667     $21.66
$23.00 to $25.66.................    651,167       7.7        $23.91     367,167     $24.18
$14.68 to $25.66.................  1,557,606       8.3        $21.87     532,729     $21.81
</Table>

     A summary of outstanding options under the Long-Term Incentive Plan that
are fully exercisable follows:

<Table>
<Caption>
                                                                             WEIGHTED
                                                              NUMBER OF      AVERAGE
                                                               OPTIONS    EXERCISE PRICE
                                                              ---------   --------------
<S>                                                           <C>         <C>
Exercisable -- September 30, 2000...........................    90,503        $24.43
Exercisable -- September 30, 2001...........................   285,448        $21.37
Exercisable -- September 30, 2002...........................   532,729        $21.81
</Table>

     The following table sets forth the number of securities authorized for
issuance under our equity compensation plans at September 30, 2002.

<Table>
<Caption>
                                                                                     NUMBER OF
                                                                                    SECURITIES
                                                                                     REMAINING
                                                 NUMBER OF         WEIGHTED-       AVAILABLE FOR
                                              SECURITIES TO BE      AVERAGE       FUTURE ISSUANCE
                                                ISSUED UPON      EXERCISE PRICE    UNDER EQUITY
                                                EXERCISE OF            OF          COMPENSATION
                                                OUTSTANDING       OUTSTANDING     PLANS EXCLUDING
                                                  OPTIONS,          OPTIONS,        SECURITIES
                                                WARRANTS AND      WARRANTS AND     REFLECTED IN
                                                   RIGHTS            RIGHTS         COLUMN (A)
                                              ----------------   --------------   ---------------
                                                    (A)               (B)               (C)
<S>                                           <C>                <C>              <C>
Equity compensation plans approved by
  security holders:
Long-Term Incentive Plan....................     1,557,606           $21.87          2,374,757
United Cities Long-Term Stock Plan..........        19,300           $15.76            168,550
                                                 ---------           ------          ---------
Total equity compensation plans approved by
  security holders..........................     1,576,906           $21.79          2,543,307
                                                 ---------           ------          ---------
Equity compensation plans not approved by
  security holders..........................            --               --                 --
                                                 ---------           ------          ---------
Total.......................................     1,576,906           $21.79          2,543,307
                                                 =========           ======          =========
</Table>

                                        61
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  PRO FORMA FAIR VALUE DISCLOSURES

     Had compensation expense for our stock options been recognized based on the
fair value on the grant date under the methodology prescribed by SFAS No. 123,
our net income and earnings per share for 2002, 2001 and 2000 would have been
impacted as shown in the following table.

<Table>
<Caption>
                                                              2002    2001    2000
                                                              -----   -----   -----
<S>                                                           <C>     <C>     <C>
Net income -- as reported (millions)........................  $59.7   $56.1   $35.9
Net income -- pro forma (millions)..........................  $59.2   $55.7   $35.7
Basic earnings per share -- as reported.....................  $1.45   $1.47   $1.14
Basic earnings per share -- pro forma.......................  $1.44   $1.46   $1.13
Diluted earnings per share -- as reported...................  $1.45   $1.47   $1.14
Diluted earnings per share -- pro forma.....................  $1.43   $1.46   $1.13
</Table>

     In accordance with the fair value method of determining compensation
expense, the weighted average grant date fair value per share of options granted
was as follows:

     - $3.55 in fiscal 2002;

     - $3.97 in fiscal 2001; and

     - $2.88 in fiscal 2000.

     We used the Black-Scholes pricing model to estimate the fair value of each
option granted with the following weighted average assumptions for 2002, 2001
and 2000:

<Table>
<Caption>
                                                              2002   2001   2000
                                                              ----   ----   ----
<S>                                                           <C>    <C>    <C>
Expected Life (years).......................................     7      5      5
Interest rate...............................................   3.9%   4.7%   5.8%
Volatility..................................................  24.2%  25.5%  25.1%
Dividend yield..............................................   4.8%   4.9%   5.0%
</Table>

     7.  EMPLOYEE RETIREMENT, STOCK OWNERSHIP AND OTHER PLANS

  DEFINED BENEFIT PLANS

     Effective January 1, 1999, we established the Atmos Pension Account Plan
which covers substantially all employees of Atmos. Opening account balances were
established for participants as of January 1, 1999 equal to the present value of
their respective accrued benefits under the pension plans which were previously
in effect as of December 31, 1998. The Pension Account Plan credits an
allocation to each participant's account at the end of each year according to a
formula based on the participant's age, service and total pay (excluding
incentive pay).

     The Pension Account Plan also provides for an additional annual allocation
based upon a participant's age as of January 1, 1999 for those participants who
were participants in the prior pension plans. The plan will credit this
additional allocation each year through December 31, 2008. In addition, at the
end of each year, a participant's account will be credited with interest on the
employee's prior year account balance. A special grandfather benefit also
applies through December 31, 2008, for participants who were at least age 50 as
of January 1, 1999, and who were participants in one of the prior plans on
December 31, 1998. Participants are fully vested in their account balances after
five years of service and may choose to receive their account balances as a lump
sum or an annuity.

                                        62
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Our funding policy is to contribute annually an amount in accordance with
the requirements of the Employee Retirement Income Security Act of 1974.
Contributions are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future.

     At September 30, 2002, we recorded the accrued pension asset against the
additional minimum pension liability resulting in a net pension liability in
deferred credits and other liabilities. At September 30, 2001, we recorded the
accrued pension asset in deferred charges and other assets. The following table
sets forth the total for the Pension Account Plan's funded status for 2002 and
2001.

<Table>
<Caption>
                                                                2002       2001
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Change in benefit obligation:
  Benefit obligation at beginning of year...................  $210,878   $210,152
  Service cost..............................................     5,247      3,557
  Interest cost.............................................    15,544     16,408
  Actuarial (gain) loss.....................................    12,732       (875)
  Acquisition/merger........................................        --       (385)
  Benefits paid.............................................   (18,204)   (17,979)
                                                              --------   --------
  Benefit obligation at end of year.........................   226,197    210,878
Change in plan assets:
  Fair value of plan assets at beginning of year............   246,327    279,498
  Actual return on plan assets..............................   (18,182)   (14,807)
  Acquisition/merger........................................        --       (385)
  Benefits paid.............................................   (18,204)   (17,979)
                                                              --------   --------
  Fair value of plan assets at end of year..................   209,941    246,327
                                                              --------   --------
Funded status...............................................   (16,256)    35,449
Unrecognized transition asset...............................        --        (72)
Unrecognized prior service cost.............................    (7,112)    (7,995)
Unrecognized net loss.......................................    71,233     17,021
                                                              --------   --------
Accrued pension asset.......................................  $ 47,865   $ 44,403
                                                              ========   ========
</Table>

<Table>
<Caption>
                                                              2002   2001    2000
                                                              ----   -----   -----
<S>                                                           <C>    <C>     <C>
Weighted average assumptions for end of year disclosure:
  Discount rate.............................................  7.25%   7.50%   8.00%
  Rate of compensation increase.............................  4.00%   4.00%   4.00%
  Expected return on plan assets............................  9.25%  10.00%  10.00%
</Table>

     The plan assets consist primarily of investments in common stocks, interest
bearing securities and interests in commingled pension trust funds.

                                        63
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Net periodic pension cost, which is recorded as an operation expense, for
the Pension Account Plan for 2002, 2001 and 2000, included the following
components:

<Table>
<Caption>
                                                         2002       2001       2000
                                                       --------   --------   --------
                                                               (IN THOUSANDS)
<S>                                                    <C>        <C>        <C>
Components of net periodic pension cost:
  Service cost.......................................  $  5,247   $  3,557   $  2,352
  Interest cost......................................    15,544     16,408     14,573
  Expected return on assets..........................   (23,298)   (27,093)   (27,403)
  Amortization of:
     Transition asset................................       (72)      (290)      (263)
     Prior service cost..............................      (883)      (883)      (802)
     Actuarial gain..................................        --         --     (1,610)
                                                       --------   --------   --------
       Net periodic pension cost.....................  $ (3,462)  $ (8,301)  $(13,153)
                                                       ========   ========   ========
</Table>

  SUPPLEMENTAL EXECUTIVE BENEFITS PLANS

     We have a nonqualified Supplemental Executive Benefits Plan which provides
additional pension, disability and death benefits to the officers and certain
other employees of Atmos. The Supplemental Executive Benefits Plan was amended
and restated in August 1998. In addition, in August 1998, we adopted the
Performance-Based Supplemental Executive Benefits Plan which covers all
employees who become officers or division presidents after August 12, 1998 or
any other employees selected by our Board of Directors in its discretion.

                                        64
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     We record the accrued pension cost in deferred credits and other
liabilities. The following table sets forth the total for the Supplemental
Plans' funded status for 2002 and 2001.

<Table>
<Caption>
                                                                2002       2001
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Change in benefit obligation:
  Benefit obligation at beginning of year...................  $ 52,845   $ 47,426
  Service cost..............................................     1,028        832
  Interest cost.............................................     3,938      3,751
  Actuarial loss............................................     4,227      3,642
  Benefits paid.............................................    (2,886)    (2,806)
                                                              --------   --------
  Benefit obligation at end of year.........................    59,152     52,845
Change in plan assets:
  Fair value of plan assets at beginning of year............        --         --
  Employer contribution.....................................     2,886      2,806
  Benefits paid.............................................    (2,886)    (2,806)
                                                              --------   --------
  Fair value of plan assets at end of year..................        --         --
                                                              --------   --------
Funded status...............................................   (59,152)   (52,845)
Unrecognized transition obligation..........................       196        292
Unrecognized prior service cost.............................     5,772      6,793
Unrecognized net loss.......................................    15,221     11,538
                                                              --------   --------
Accrued pension cost........................................  $(37,963)  $(34,222)
                                                              ========   ========
</Table>

<Table>
<Caption>
                                                              2002   2001    2000
                                                              ----   -----   -----
<S>                                                           <C>    <C>     <C>
Weighted average assumptions for end of year disclosure:
  Discount rate.............................................  7.25%   7.50%   8.00%
  Rate of compensation increase.............................  4.00%   4.00%   4.00%
  Expected return on plan assets............................  9.25%  10.00%  10.00%
</Table>

     Assets for the Supplemental Plans are held in our rabbi trusts (see Note
12) and consist primarily of investments in equity mutual funds. The market
value of the rabbi trusts amounted to $27.7 million and $25.1 million at
September 30, 2002 and 2001. The assets in the rabbi trusts are included on our
balance sheet under deferred charges and other assets and are not presented
above as plan assets.

     The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the Supplemental Plans with accumulated benefit
obligations in excess of plan assets were $59.2 million, $53.2 million and none
as of September 30, 2002 and $52.8 million, $45.5 million and none, as of
September 30, 2001.

                                        65
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Net periodic pension cost, which is recorded as an operation expense, for
the Supplemental Plans for 2002, 2001 and 2000 consisted of the following
components:

<Table>
<Caption>
                                                              2002     2001     2000
                                                             ------   ------   ------
                                                                  (IN THOUSANDS)
<S>                                                          <C>      <C>      <C>
Components of net periodic pension cost:
  Service cost.............................................  $1,028   $  832   $  937
  Interest cost............................................   3,938    3,751    2,916
  Amortization of:
     Transition obligation.................................      96       96       96
     Prior service cost....................................   1,022    1,022    1,022
     Actuarial loss........................................     542      325      215
                                                             ------   ------   ------
       Net periodic pension cost...........................  $6,626   $6,026   $5,186
                                                             ======   ======   ======
</Table>

  RETIREMENT SAVINGS PLAN

     Atmos sponsors a Retirement Savings Plan for substantially all employees.
Effective January 1, 1999 the Retirement Savings Plan was amended to provide for
deferral of a portion of a participant's salary ranging from a minimum of one
percent of eligible compensation, as defined by the Plan, up to the maximum
allowed by the Internal Revenue Service. In addition, among other changes to the
Retirement Savings Plan, participants are provided with automatic matching
contributions of 100 percent of each participant's salary reduction up to four
percent of the participant's salary and are provided the option of taking out
loans against their accounts subject to certain restrictions. Each participant
enters into a salary reduction agreement with Atmos pursuant to which the
participant's salary is reduced by an amount not to exceed the maximum amount
allowed by the Internal Revenue Service. Taxes on the amount by which the
participant's salary is reduced are deferred pursuant to Section 401(k) of the
Internal Revenue Code. The amount of the salary reduction is contributed by us
to the Retirement Savings Plan for the account of the participant. Matching
contributions to the Plan were expensed as incurred and amounted to $3.6
million, $3.2 million, and $3.0 million for 2002, 2001 and 2000. The directors
may also approve discretionary contributions, subject to the provisions of the
Internal Revenue Code of 1986 and applicable regulations of the Internal Revenue
Service. No discretionary contributions were made for 2002, 2001 or 2000.

  VARIABLE PAY PLAN

     The Variable Pay Plan was created to give each employee an opportunity to
share in the success of Atmos based on certain criteria. Each fiscal year, we
establish key performance measures for the Variable Pay Plan. These performance
measures are considered critical to achieving business objectives for a given
year and may include such things as growth in earnings, improved cash flows or
crucial customer satisfaction and safety results. Each year a performance
measure is established, and we make accruals during the year of the expected
payout based on the best estimates available at that time.

8.  OTHER POSTRETIREMENT BENEFITS

     Prior to January 1, 1999, Atmos sponsored two postretirement plans other
than pensions. Each provided health care benefits to retired employees. One
provided benefits to the Mid-States Division retirees and the other provided
medical benefits to all other retired Atmos employees.

     Effective January 1, 1999, the United Cities plan was merged into the Atmos
plan and began providing benefits to future retirees that are essentially the
same as provided to other Atmos employees.

                                        66
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Substantially all of our employees become eligible for these benefits if
they reach retirement age while working for us and attain certain specified
years of service. In addition, participant contributions are required under the
plan.

     We record the accrued postretirement cost primarily in deferred credits and
other liabilities. The following table sets forth the total liability currently
recognized for the postretirement plan other than pensions for 2002 and 2001.

<Table>
<Caption>
                                                                2002       2001
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Change in benefit obligation:
  Benefit obligation at beginning of year...................  $ 82,850   $ 63,029
  Service cost..............................................     2,891      2,274
  Interest cost.............................................     6,199      5,434
  Plan participants' contributions..........................       312        649
  Actuarial loss............................................    26,270      6,023
  Acquisitions/divestitures.................................        --     10,402
  Benefits paid.............................................    (6,227)    (4,961)
                                                              --------   --------
  Benefit obligation at end of year.........................   112,295     82,850
Change in plan assets:
  Fair value of plan assets at beginning of year............    13,854     11,872
  Actual return on plan assets..............................     2,396       (463)
  Employer contributions....................................     5,915      6,757
  Plan participants' contributions..........................       312        649
  Benefits paid.............................................    (6,227)    (4,961)
                                                              --------   --------
  Fair value of plan assets at end of year..................    16,250     13,854
                                                              --------   --------
Funded status...............................................   (96,045)   (68,996)
Unrecognized transition obligation..........................    17,198     18,709
Unrecognized prior service cost.............................     1,534      2,054
Unrecognized net loss.......................................    29,466      4,834
                                                              --------   --------
Accrued postretirement cost.................................  $(47,847)  $(43,399)
                                                              ========   ========
</Table>

<Table>
<Caption>
                                                              2002    2001   2000
                                                              -----   ----   ----
<S>                                                           <C>     <C>    <C>
Weighted average assumptions for end of year liability
  disclosure:
     Discount rate..........................................   7.25%  7.50%  8.00%
     Expected return on plan assets.........................   5.30%  5.30%  5.30%
     Initial trend rate.....................................  10.00%  7.00%  8.00%
     Ultimate trend rate....................................   5.00%  5.00%  5.00%
     Number of years from initial to ultimate trend.........      6      3      4
</Table>

     The plan assets consist primarily of investments in registered investment
companies and common/collective trusts.

                                        67
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Net periodic postretirement cost, which is recorded as an operation
expense, for the postretirement benefit plan for 2002, 2001 and 2000 included
the following components:

<Table>
<Caption>
                                                             2002      2001     2000
                                                            -------   ------   ------
                                                                 (IN THOUSANDS)
<S>                                                         <C>       <C>      <C>
Components of net periodic postretirement cost:
  Service cost............................................  $ 2,891   $2,274   $2,543
  Interest cost...........................................    6,199    5,434    4,119
  Expected return on assets...............................     (759)    (653)    (540)
  Amortization of:
     Transition obligation................................    1,511    1,511    1,511
     Prior service cost...................................      520      520      520
     Actuarial gain.......................................       --       --      (94)
                                                            -------   ------   ------
       Net periodic postretirement cost...................  $10,362   $9,086   $8,059
                                                            =======   ======   ======
</Table>

     Assumed health care cost trend rates have a significant effect on the
amounts reported for the plan. A one-percentage point change in assumed health
care cost trend rates would have the following effects on the latest actuarial
calculations:

<Table>
<Caption>
                                                             1-PERCENTAGE     1-PERCENTAGE
                                                            POINT INCREASE   POINT DECREASE
                                                            --------------   --------------
                                                                    (IN THOUSANDS)
<S>                                                         <C>              <C>
Effect on total service and interest cost components......      $1,066          $  (859)
Effect on postretirement benefit obligation...............      $9,055          $(9,604)
</Table>

     We are currently recovering other postretirement benefits costs through our
regulated rates under Statement of Financial Accounting Standards No. 106
accrual accounting in Colorado, Kansas, the majority of the Texas service area
and Kentucky. We receive rate treatment as a cost of service item for other
postretirement benefits costs on the pay-as-you-go basis in Louisiana. Other
postretirement benefits costs have been specifically addressed in rate orders in
each jurisdiction served by the Mid-States Division or have been included in a
rate case and not disallowed. Management believes that accrual accounting in
accordance with SFAS No. 106 is appropriate and will continue to seek rate
recovery of accrual-based expenses in its ratemaking jurisdictions that have not
yet approved the recovery of these expenses.

9.  EARNINGS PER SHARE

     Basic earnings per share have been computed by dividing net income for the
period by the weighted average number of common shares outstanding during the
period. Diluted earnings per share have been computed by dividing net income for
the period by the weighted average number of common shares outstanding during
the period adjusted for restricted stock and other contingently issuable shares
of common stock. Net income for the years ended September 30, 2002, 2001 and
2000 for basic and diluted earnings per share is the same, as there were no
contingently issuable shares of stock whose issuance would have impacted

                                        68
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

net income. A reconciliation between basic and diluted weighted average common
shares outstanding at September 30 follows:

<Table>
<Caption>
                                                              2002     2001     2000
                                                             ------   ------   ------
                                                                  (IN THOUSANDS)
<S>                                                          <C>      <C>      <C>
Weighted average common shares -- basic....................  41,171   38,156   31,461
Effect of dilutive securities:
  Restricted stock.........................................      54       79      125
  Stock options............................................      25       12        8
                                                             ------   ------   ------
Weighted average common shares -- diluted..................  41,250   38,247   31,594
                                                             ======   ======   ======
</Table>

10.  STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURES

     Supplemental disclosures of cash flow information for 2002, 2001 and 2000
are presented below.

<Table>
<Caption>
                                                           2002      2001      2000
                                                          -------   -------   -------
                                                                (IN THOUSANDS)
<S>                                                       <C>       <C>       <C>
Cash paid (received) for
  Interest..............................................  $59,639   $41,042   $46,243
  Income taxes..........................................  $16,588   $16,808   $(7,989)
</Table>

     In connection with the transaction related to the sale in 2000 of our
propane business (see Note 1), we contributed property, plant and equipment of
$38.9 million with a related accumulated depreciation of $17.1 million and
deferred charges and other assets of $3.9 million in exchange for an indirect
investment in Heritage Propane Partners. In addition, we received net proceeds
of $6.5 million and recorded a gain on the transaction of $5.8 million.

     In May 2000, we completed the acquisition, which was accounted for as a
purchase, of the Missouri natural gas distribution assets of Southwestern Energy
Company and subsequent thereto, its operations were included in our consolidated
results. We paid $32.0 million in connection with this acquisition. Of the $32.0
million paid in cash, we recorded property, plant and equipment of $52.3 million
with a related accumulated depreciation of $21.7 million, accounts receivable of
$1.3 million, inventories of $0.3 million and gas stored underground of $2.0
million. In addition, we recorded accounts payable of $0.2 million, taxes
payable of $0.4 million, customer deposits of $1.2 million and deferred credits
of $0.4 million.

     In April 2001, we completed the acquisition, which was accounted for as a
purchase, of the remaining 55 percent of Woodward Marketing that we did not
already own in exchange for 1,423,193 restricted shares of our common stock.
Subsequent to the acquisition, Woodward Marketing's operations were included in
our consolidated results. Consideration given for the stock purchase was $26.7
million. In connection with the issuance of the stock for this acquisition, we
recorded property, plant and equipment of $2.1 million with a related
accumulated depreciation of $0.4 million, accounts receivable of $94.8 million,
gas stored underground of $10.7 million, assets from risk management activities
of $9.8 million, intangible assets of $0.2 million and goodwill of $12.3
million. In addition, we received $8.6 million in cash and $4.5 million of cash
held on deposit in margin accounts. We also reduced deferred charges and other
assets by $12.1 million which related to the net of the amounts received in the
purchase and the removal of the 45 percent equity investment we had in Woodward
Marketing which we had previously owned. Liabilities assumed in the acquisition
included $95.2 million in accounts payable, $0.5 million in customer deposits,
$7.3 million in other current liabilities and $0.8 million in deferred credits
and other liabilities.

     In July 2001, we completed the acquisition, which was accounted for as a
purchase, of the natural gas operations of Louisiana Gas Service Company and LGS
Natural Gas Company. Subsequent to the

                                        69
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

acquisition, the operations of Louisiana Gas Service and LGS Natural Gas were
included in our consolidated results. We paid $363.4 million in cash in
connection with this acquisition. We recorded property, plant and equipment of
$466.5 million with a related accumulated depreciation of $153.2 million,
accounts receivable of $18.1 million, gas stored underground of $12.4 million, a
deferred gas credit of $10.8 million, assets from risk management activities of
$11.7 million, noncurrent assets from risk management activities of $5.3 million
and deferred charges and other assets of $1.0 million. In addition, we recorded
intangible assets of $11.2 million, goodwill of $49.8 million and $9.0 million
in deferred tax assets. Liabilities assumed in the acquisition included $12.8
million in accounts payable, $16.0 million in customer deposits, $14.1 million
in liabilities from risk management activities, $3.1 million in other current
liabilities and $11.6 million in deferred credits and other liabilities. The
amount assigned to goodwill was increased from $49.8 million in fiscal 2001 to
$162.5 million in fiscal 2002. The revised amount was based on additional
information acquired during 2002 about the regulated rate base of the acquired
assets and the value assigned to other intangible assets.

11.  SEGMENT INFORMATION

     Our determination of reportable segments considers the strategic operating
units under which we manage sales of various products and services to customers
in differing regulatory environments. The accounting policies of the segments
are the same as those described in the summary of significant accounting
policies. All intersegment sales prices are market based. We evaluate
performance based on net income or loss of the respective operating units.

     Included in purchased gas cost were purchases from Atmos Energy Marketing
of $190.6 million, $525.6 million and $228.6 million in 2002, 2001 and 2000.
Volumes purchased were 67.7 Bcf, 96.3 Bcf and 74.4 Bcf in 2002, 2001 and 2000.
These purchases were made in a competitive open bidding process and reflect
market prices. Average prices per Mcf for gas purchased from Atmos Energy
Marketing were $2.82, $5.46 and $3.07 in 2002, 2001 and 2000. In addition, we
have entered into contracts with Atmos Energy Marketing to manage a significant
portion of our underground storage facilities. Atmos Energy Marketing has acted
as agent in placing financial instruments for the various divisions that protect
us and our customers from unusually large winter period gas price increases.

     In accordance with Statement of Financial Accounting Standards No. 131
"Disclosure about Segments of an Enterprise and Related Information", we have
identified the Utility, Natural Gas Marketing and Other Non-Utility segments, as
described in Note 1. We consider each division within our utility segment to be
a reporting unit of the utility segment and not a separate reportable segment.
The individual operations that comprise the other non-utility segment are not
currently material to our consolidated financial position or results of
operation and therefore do not require separate reporting. Income from our other
non-utility segment is generated primarily from pipeline and storage operations.

                                        70
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Summarized financial information concerning our reportable segments is
shown in the following table:

<Table>
<Caption>
                                                     NATURAL GAS   OTHER NON-
                                         UTILITY      MARKETING     UTILITY       TOTAL
                                        ----------   -----------   ----------   ----------
                                                          (IN THOUSANDS)
<S>                                     <C>          <C>           <C>          <C>
As of and for the year ended
  September 30, 2002:
Operating revenues....................  $  937,526    $    678      $ 24,705    $  962,909
Intersegment revenues.................       1,472         274        10,314        12,060
Gas trading margin....................          --      38,538            --        38,538
Depreciation and amortization.........      77,704       2,069         1,696        81,469
Operating income......................     125,506      20,610         9,215       155,331
Interest charges......................      58,084         860           230        59,174
Net income............................      42,994      12,614         4,048        59,656
Total assets..........................   1,789,833     258,624        71,036     2,119,493
Equity investment in unconsolidated
  entity..............................          --          --        22,175        22,175
Expenditures for additions to
  long-lived assets...................     129,632         779         1,841       132,252
As of and for the year ended
  September 30, 2001:
Operating revenues....................  $1,380,148    $  7,946      $ 59,436    $1,447,530
Intersegment revenues.................       1,989          --         3,266         5,255
Gas trading margin....................          --         488            --           488
Depreciation and amortization.........      65,614       1,062           988        67,664
Operating income (loss)...............     127,980      (3,122)        5,423       130,281
Equity in earnings of Woodward
  Marketing, L.L.C....................          --       8,062            --         8,062
Interest charges......................      45,313         660         1,038        47,011
Net income............................      49,881       2,551         3,658        56,090
Total assets..........................   1,732,697     255,729       111,427     2,099,853
Equity investment in unconsolidated
  entity..............................          --          --        23,840        23,840
Expenditures for additions to
  long-lived assets...................     112,683          32           394       113,109
</Table>

                                        71
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                     NATURAL GAS   OTHER NON-
                                         UTILITY      MARKETING     UTILITY       TOTAL
                                        ----------   -----------   ----------   ----------
                                                          (IN THOUSANDS)
<S>                                     <C>          <C>           <C>          <C>
As of and for the year ended
  September 30, 2000:
Operating revenues....................  $  739,951    $    929      $117,926    $  858,806
Intersegment revenues.................       5,116          --         3,538         8,654
Gas trading margin....................          --          --            --            --
Depreciation and amortization.........      60,120         606         3,129        63,855
Operating income......................      77,207         155         7,954        85,316
Equity in earnings of Woodward
  Marketing, L.L.C....................          --       7,307            --         7,307
Interest charges......................      42,096          --         1,727        43,823
Net income............................      22,459       5,344         8,115        35,918
Total assets..........................   1,253,023      37,621        74,673     1,365,317
Equity investment in unconsolidated
  entity..............................          --      17,351        24,979        42,330
Expenditures for additions to
  long-lived assets...................     105,012          --         1,128       106,140
</Table>

     The following table presents a reconciliation of the operating revenues to
total consolidated revenues for the years ended September 30, 2002, 2001 and
2000.

<Table>
<Caption>
                                                        2002        2001        2000
                                                      --------   ----------   --------
                                                               (IN THOUSANDS)
<S>                                                   <C>        <C>          <C>
Total revenues for reportable segments..............  $962,909   $1,447,530   $858,806
Elimination of intersegment revenues................   (12,060)      (5,255)    (8,654)
                                                      --------   ----------   --------
          Total operating revenues..................  $950,849   $1,442,275   $850,152
                                                      ========   ==========   ========
</Table>

     A reconciliation of total assets for the reportable segments to total
consolidated assets for September 30, 2002, 2001 and 2000 is presented below.

<Table>
<Caption>
                                                      2002         2001         2000
                                                   ----------   ----------   ----------
                                                              (IN THOUSANDS)
<S>                                                <C>          <C>          <C>
Total assets for reportable segments.............  $2,119,493   $2,099,853   $1,365,317
Elimination of intercompany accounts.............    (139,272)     (63,673)     (16,559)
                                                   ----------   ----------   ----------
          Total consolidated assets..............  $1,980,221   $2,036,180   $1,348,758
                                                   ==========   ==========   ==========
</Table>

                                        72
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table summarizes our revenues by products and services for
the year ended September 30.

<Table>
<Caption>
                                                        2002        2001        2000
                                                      --------   ----------   --------
                                                               (IN THOUSANDS)
<S>                                                   <C>        <C>          <C>
Gas sales revenues:
  Residential.......................................  $535,981   $  788,902   $405,552
  Commercial........................................   221,728      342,945    176,712
  Public authority and other........................    31,731       58,539     27,198
  Industrial........................................    98,765      148,180     97,089
                                                      --------   ----------   --------
          Total gas sales revenues..................   888,205    1,338,566    706,551
Transportation revenues.............................    36,591       28,668     23,610
Other gas revenues..................................    11,258       10,925      4,674
                                                      --------   ----------   --------
          Total utility revenues....................   936,054    1,378,159    734,835
Propane revenues....................................        --           --     22,550
Non-Utility revenues................................    14,795       64,116     92,767
                                                      --------   ----------   --------
          Total operating revenues..................  $950,849   $1,442,275   $850,152
                                                      ========   ==========   ========
</Table>

12.  MARKETABLE SECURITIES

     In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," all
marketable securities are classified as available-for-sale and are reported at
market value with unrealized gains and losses shown as a component of
"accumulated other comprehensive income (loss)" labeled "unrealized holding
gains (losses) on investments, net." All marketable securities are held in rabbi
trusts for the Supplemental Executive Benefits Plans.

     The cost, unrealized holding gain (loss) and the market value of the
marketable securities are as follows:

<Table>
<Caption>
                                                                  UNREALIZED
                                                                    HOLDING     MARKET
                                                         COST     GAIN (LOSS)    VALUE
                                                        -------   -----------   -------
                                                                (IN THOUSANDS)
<S>                                                     <C>       <C>           <C>
As of September 30, 2002:
  Available-for-sale securities:
     Domestic equity mutual funds.....................  $28,788     $(3,113)    $25,675
     Foreign equity mutual funds......................    2,087         (27)      2,060
                                                        -------     -------     -------
                                                        $30,875     $(3,140)    $27,735
                                                        =======     =======     =======
As of September 30, 2001:
  Available-for-sale securities:
     Domestic equity mutual funds.....................  $24,565     $(1,496)    $23,069
     Foreign equity mutual funds......................    2,845        (804)      2,041
                                                        -------     -------     -------
                                                        $27,410     $(2,300)    $25,110
                                                        =======     =======     =======
</Table>

13.  LEASES

     We have entered into non-cancelable operating leases for office and
warehouse space used in our operations. The remaining lease terms range from one
to 15 years and generally provide for the payment of taxes, insurance and
maintenance by the lessee. Renewal options exist for certain of these leases. We
have also

                                        73
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

entered into capital leases for division offices and operating facilities.
Property, plant and equipment included amounts for capital leases of $5.2
million at September 30, 2002 and 2001. Accumulated depreciation for these
capital leases totaled $2.2 million and $1.9 million at September 30, 2002 and
2001.

     The related future minimum lease payments at September 30, 2002 were as
follows:

<Table>
<Caption>
                                                              CAPITAL   OPERATING
                                                              LEASES     LEASES
                                                              -------   ---------
                                                                (IN THOUSANDS)
<S>                                                           <C>       <C>
2003........................................................  $   876    $ 9,572
2004........................................................      876      9,307
2005........................................................      843      9,221
2006........................................................      433      8,782
2007........................................................      433      6,768
Thereafter..................................................    2,293     23,210
                                                              -------    -------
Total minimum lease payments................................    5,754    $66,860
                                                                         =======
Less amount representing interest...........................   (2,713)
                                                              -------
Present value of net minimum lease payments.................  $ 3,041
                                                              =======
</Table>

     Consolidated lease and rental expense amounted to $8.1 million, $5.9
million and $9.0 million for fiscal 2002, 2001 and 2000.

14.  RELATED PARTY TRANSACTIONS

     JD Woodward became Senior Vice President, Non-Utility Operations of the
Company on April 1, 2001. Woodward Marketing L.L.C., a wholly-owned subsidiary
of the Company, leases office space and furniture from two corporations owned by
Mr. Woodward. The lease originated in April 2002 and expires in March 2007. Base
lease payments are $225,000 in the first year of the lease and increase to
$253,000 in the final year.

     Effective in October 1994, Charles Vaughan retired as an officer and
employee of the Company and entered into a consulting agreement with the
Company. Under the terms of the agreement, Mr. Vaughan performed such consulting
services as the Board requested from time to time. During fiscal 2002, Mr.
Vaughan received $130,000 in payment for his services during that period. In
addition, pursuant to the terms of the agreement, upon early termination of the
agreement by the Company in September 2002, Mr. Vaughan received a total of
$175,000, representing the total sums due him under the remainder of the
agreement that was due to expire September 30, 2004.

15.  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     Effective October 1, 2000, we adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended. This Statement established accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that all
derivative financial instruments be recognized in the financial statements and
measured at fair value regardless of the purpose or intent for holding them.
Changes in the fair value of derivative financial instruments are either
recognized periodically in income or as deferred gas costs, depending on the
classification of the derivative. Derivative instruments may be classified as
either fair value hedges or cash flow hedges. The cumulative effect of the
change in accounting for the adoption of this Statement did not have a material
impact on our financial position, results of operations or cash flows.

                                        74
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  WEATHER HEDGES AND INSURANCE

     In July 2000, we entered into an agreement to purchase weather hedges for
our Texas and Louisiana operations effective for the 2000-2001 heating season.
The hedges were designed to help mitigate the effects of weather that was at
least seven percent warmer than normal in both Texas and Louisiana while
preserving any upside. The cost of the weather hedges was approximately $4.9
million which was amortized over the 2000-2001 heating season. No income was
recognized for the 2000-2001 heating season for these weather hedges due to the
colder than normal weather. The cost of the weather hedges was more than offset
by the positive effects of colder weather on our gross profit.

     In June 2001, we purchased a three year weather insurance policy with an
option to cancel in the third year. We will receive a refund of a portion of the
cost of the policy if we cancel in the third year. The policy is for our Texas
and Louisiana operations and covers the entire heating season of October to
March beginning with the 2001-2002 heating season. The cost of the three year
policy was $13.2 million which was prepaid and is being amortized over the
appropriate heating seasons based on degree days. The insurance is designed to
protect against weather that is at least seven percent warmer than normal for
the entire heating season. During the 2001-2002 heating season, weather was not
at least seven percent warmer than normal resulting in no claim having been
filed under the insurance policy. Only the amortization of $4.4 million of
premiums was recognized during the heating season.

  UTILITY HEDGING ACTIVITIES

     We have historically hedged 20 to 25 percent of our gas supply through the
use of our underground storage assets. For the 2002-2003 heating season, we have
covered between 45 and 50 percent of our anticipated flowing gas requirements
through storage, financial hedges and fixed forward contracts at a weighted
average cost of less than $4.00 per Mcf. This should provide protection to us
and our customers against potential sharp increases in the price of natural gas
during the 2002-2003 heating season.

     In accordance with Statement of Financial Accounting Standards No. 133, we
use the mark-to-market method to account for our financial instruments discussed
previously. In accordance with Statement of Financial Accounting Standards No.
71 "Accounting for the Effects of Certain Types of Regulation", current period
changes in the assets and liabilities from risk management activities are
recorded as deferred gas costs on the condensed consolidated balance sheet as
these costs will ultimately be recovered from ratepayers. Accordingly, there is
no earnings impact as a result of the use of these financial instruments. Upon
maturity, the contracts are recognized in purchased gas cost on the consolidated
statement of income.

  NON-UTILITY HEDGING ACTIVITIES

     At the close of business on September 30, 2002, we had outstanding
contracts representing 1.9 Bcf of net notional volumes with average contract
maturities of less than two years. These contracts were marked to market.
Contracts representing 75 percent of the fair value of these contracts are
scheduled to mature within one year. Contracts representing 22 percent of the
remaining fair value are scheduled to mature within three years.

     Effective April 1, 2001, natural gas sales from our natural gas trading
operations have been netted against purchased gas costs and shown as gas trading
margin on the condensed consolidated statements of income. For the year ended
September 30, 2002, our gas trading margin consisted of a $49.0 million realized
trading gain and a $10.5 million unrealized trading loss. For the year ended
September 30, 2001, our gas trading margin consisted of a $4.0 million realized
trading loss and a $4.5 million unrealized trading gain.

     We acquired a 45 percent interest in Woodward Marketing in July 1997 as a
result of the merger of Atmos and United Cities Gas Company, which had acquired
that interest in May 1995. In April 2001, we acquired the 55 percent interest
that we did not own from JD Woodward and others for 1,423,193 restricted
                                        75
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

shares of our common stock. Immediately following the acquisition, Mr. Woodward
was elected as a Senior Vice President of Atmos in charge of all non-utility
business activities, a position he has held since April 1, 2001. Prior to that
time, Mr. Woodward had not been an officer or employee of Atmos.

     The principal business of Atmos Energy Marketing, including the activities
of Woodward Marketing and Trans Louisiana Industrial Gas Company, is the overall
management of natural gas requirements for municipalities, local gas utility
companies and industrial customers located primarily in the southeastern and
midwestern United States. This business involves the sale of natural gas by
Atmos Energy Marketing to its customers and the management of storage and
transportation contracts for its customers under contracts generally having one
to two-year terms. At September 30, 2002, Atmos Energy Marketing had a total of
101 municipal customers and 641 industrial customers. Atmos Energy Marketing
also sells natural gas to certain of its industrial customers on a delivered
burner tip basis under contract terms from 30 days to two years. In addition,
Atmos Energy Marketing supplies our regulated operations with a portion of our
natural gas requirements on a competitive bid basis. Any mark-to-market gains or
losses on these affiliate contracts are eliminated.

     In the management of natural gas requirements for municipal and other local
utilities, Atmos Energy Marketing sells physical natural gas to those customers
for future delivery and manages the associated price risk through the use of gas
futures, including forwards, over-the-counter and exchange-traded options and
swap contracts with counterparties. These financial contracts are
marked-to-market daily at the close of business. Atmos Energy Marketing links
gas futures to physical delivery of natural gas and typically balances its
futures positions at the end of each trading day. Over-the-counter swap
agreements require Atmos Energy Marketing to receive or make payments based on
the difference between a fixed price and the market price of natural gas on the
settlement date. Atmos Energy Marketing uses these futures and swaps to manage
margins on offsetting fixed-price purchase or sale commitments for physical
quantities of natural gas, which are also carried on a mark-to-market basis.
Mark-to-market accounting refers to the measurement of contracts at fair value
determined at the balance sheet date with any gains and losses included in
earnings. Options held to manage price risk provide the right, but not the
requirement, to buy or sell energy commodities at a fixed price. Atmos Energy
Marketing uses options to manage margins and to limit overall price risk
exposure. At any point in time, Atmos Energy Marketing may not have completely
offset its price risk on these activities.

     Energy related services provided by Atmos Energy Marketing include the sale
of natural gas to its various customer classes and management of transportation
and storage assets and inventories. More specifically, energy services include
contract negotiation and administration, load forecasting, storage acquisition,
natural gas purchase and delivery and capacity utilization strategies. In
providing these services, Atmos Energy Marketing generates income from its
utility, municipal and industrial customers through negotiated prices based on
the volume of gas supplied to the customer. Atmos Energy Marketing also
generates income by taking advantage of the difference between near-term gas
prices and prices for future delivery as well as the daily movement of gas
prices by utilizing storage and transportation capacity that it controls.

     Prior to May 2002, Atmos Energy Marketing engaged in limited financial
trading for speculative purposes. Financial trading involves utilizing financial
instruments (futures, options, swaps, etc.) to hedge natural gas prices or to
take a position in the market based on anticipated price movement. In some prior
years, Atmos Energy Marketing experienced losses in its financial speculative
trading business. Effective in May 2002, Atmos Energy Marketing's financial
trading for speculative purposes was discontinued. Atmos Energy Marketing will
continue its financial trading for hedging (risk management purposes) related to
its physical trading positions. With regard to its physical trading business,
Atmos Energy Marketing does engage in limited speculative natural gas trading
for its own account primarily related to its storage activity, subject to a risk
management policy established by us which limits the level of trading loss to a
maximum of 25 percent of the budgeted annual operating income of Atmos Energy
Holdings. Physical trading involves utilizing physical assets (storage and
transportation) to sell and deliver gas to customers or to take a position in
the

                                        76
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

market based on anticipated price movement. Compliance with such risk management
policy is monitored on a daily basis. In addition, Woodward Marketing's bank
credit facility limits trading positions that are not closed at the end of the
day (open positions) to 5.0 Bcf of natural gas. At September 30, 2002, Atmos
Energy Marketing's net open positions in its trading operations totaled 1.9 Bcf.
Atmos Energy Marketing's open trading positions are monitored on a daily basis
but are not required to be closed if they remain within the limits set by the
bank loan agreement. In addition to the price risk of any net open position at
the end of each trading day, the financial exposure that results from intra-day
fluctuations of gas prices and the potential for daily price movements
constitutes a risk of loss since the price of natural gas purchased or sold for
future delivery at the beginning of the day may not be hedged until later in the
day.

     Financial instruments, which subject Atmos Energy Marketing to counterparty
risk, consist primarily of financial instruments arising from trading and risk
management activities and overnight repurchase agreements that are not insured.
Counterparty risk is the risk of loss from nonperformance by financial
counterparties to a contract. Exchange-traded future and option contracts are
generally guaranteed by the exchanges.

     Atmos Energy Marketing's operations are concentrated in the natural gas
industry, and its customers and suppliers may be subject to economic risks
affecting that industry.

     From time to time, Woodward Marketing borrows money to fund its natural gas
purchases and to fulfill its obligations to maintain deposit accounts with its
counterparties. See Note 3 of notes to consolidated financial statements.

16.  SUBSEQUENT EVENT (UNAUDITED)

     On October 31, 2002, the Mississippi Public Service Commission approved the
acquisition by Atmos of Mississippi Valley Gas Company, a privately held natural
gas utility. The acquisition, which we expect to be effective in December 2002,
will be accounted for as a purchase. The acquisition price is $75.0 million in
cash and the issuance of $75.0 million of our common stock. In addition, we will
repay approximately $45.0 million of Mississippi Valley Gas' long-term debt. On
October 7, 2002, we entered into a $150.0 million short-term unsecured committed
credit facility that will be used to provide initial funding for the cash
portion of the acquisition and to refinance Mississippi Valley Gas' existing
debt.

                                        77
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     Summarized unaudited quarterly financial data is presented below. The sum
of net income per share by quarter may not equal the net income per share for
the year due to variations in the weighted average shares outstanding used in
computing such amounts. Our businesses are seasonal due to weather conditions in
our service areas. For further information on its effects on quarterly results,
see the "Weather and Seasonality" discussion included in the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section herein.

<Table>
<Caption>
                                                          QUARTER ENDED
                                         ------------------------------------------------
                                         DECEMBER 31   MARCH 31   JUNE 30    SEPTEMBER 30
                                         -----------   --------   --------   ------------
                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                      <C>           <C>        <C>        <C>
FISCAL YEAR 2002
  Operating revenues...................   $271,342     $379,481   $161,800     $138,226
  Gross profit.........................    109,365      149,883     73,833       59,521
  Operating income.....................     43,446       86,333     19,178        6,374
  Net income (loss)....................     20,633       41,378      3,254       (5,609)
  Diluted income (loss) per share......        .50         1.01        .08         (.14)
FISCAL YEAR 2001
  Operating revenues...................   $442,790     $675,113   $164,260     $160,112
  Gross profit.........................    109,948      138,324     61,279       65,169
  Operating income.....................     48,941       73,891      3,174        4,275
  Net income (loss)....................     22,972       44,074     (3,400)      (7,556)
  Diluted income (loss) per share......        .70         1.13       (.08)        (.19)
</Table>

                                        78
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

18.  SUPPLEMENTAL DISCLOSURES (UNAUDITED)

     The following supplemental condensed financial statements show our three
operating segments and the elimination of material intercompany transactions.
The following supplemental condensed balance sheet is as of September 30, 2002.

<Table>
<Caption>
                                                     NATURAL     OTHER
                                                       GAS       NON-
                                        UTILITY     MARKETING   UTILITY   ELIMINATIONS   CONSOLIDATED
                                       ----------   ---------   -------   ------------   ------------
                                                               (IN THOUSANDS)
<S>                                    <C>          <C>         <C>       <C>            <C>
ASSETS
Property, plant and equipment, net...  $1,223,901   $  9,893    $66,526    $      --      $1,300,320
Investment in subsidiaries...........     122,988     (5,752)        --     (117,236)             --
Current assets
  Cash and cash equivalents..........      (1,164)    47,887        104           --          46,827
  Cash held on deposit in margin
     account.........................          --     10,192         --           --          10,192
  Accounts receivable, net...........      51,855    105,203     (4,144)     (16,687)        136,227
  Inventories........................       3,550         --        219           --           3,769
  Gas stored underground.............      63,343     21,329      7,111           --          91,783
  Assets from risk management
     activities......................       4,424     28,909         --       (5,349)         27,984
  Other current assets and
     prepayments.....................       7,318      4,802      1,089           --          13,209
  Intercompany receivables...........      76,174    (33,027)   (43,147)          --              --
                                       ----------   --------    -------    ---------      ----------
          Total current assets.......     205,500    185,295    (38,768)     (22,036)        329,991
Intangible assets....................          --      5,365         --           --           5,365
Goodwill.............................     150,287     21,288     13,440           --         185,015
Noncurrent assets from risk
  management activities..............          --      5,241         --           --           5,241
Deferred charges and other assets....      87,157     37,294     29,838           --         154,289
                                       ----------   --------    -------    ---------      ----------
                                       $1,789,833   $258,624    $71,036    $(139,272)     $1,980,221
                                       ==========   ========    =======    =========      ==========
CAPITALIZATION AND LIABILITIES
Shareholders' equity.................  $  573,235   $ 75,675    $47,313    $(122,988)     $  573,235
Long-term debt.......................     667,946         --      2,517           --         670,463
                                       ----------   --------    -------    ---------      ----------
          Total capitalization.......   1,241,181     75,675     49,830     (122,988)      1,243,698
Current liabilities
Current maturities of long-term
  debt...............................      20,907         --      1,073           --          21,980
  Short-term debt....................     145,791         --         --           --         145,791
  Liabilities from risk management
     activities......................          --     18,487         --           --          18,487
  Deferred gas cost..................      16,404      5,097        446           --          21,947
  Other current liabilities..........     116,570    145,949      8,667      (16,284)        254,902
                                       ----------   --------    -------    ---------      ----------
          Total current
            liabilities..............     299,672    169,533     10,186      (16,284)        463,107
Deferred income taxes................     130,575     (3,227)     7,192           --         134,540
Noncurrent liabilities from risk
  management activities..............          --      3,663         --           --           3,663
Deferred credits and other
  liabilities........................     118,405     12,980      3,828           --         135,213
                                       ----------   --------    -------    ---------      ----------
                                       $1,789,833   $258,624    $71,036    $(139,272)     $1,980,221
                                       ==========   ========    =======    =========      ==========
</Table>

                                        79
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following supplemental condensed statement of income is for the year
ended September 30, 2002.

<Table>
<Caption>
                                          NATURAL      OTHER
                                            GAS        NON-
                              UTILITY    MARKETING    UTILITY   ELIMINATIONS   CONSOLIDATED
                              --------   ----------   -------   ------------   ------------
                                                     (IN THOUSANDS)
<S>                           <C>        <C>          <C>       <C>            <C>
Operating revenues..........  $937,526   $1,040,191   $24,705   $(1,051,573)     $950,849
Purchased gas cost..........   559,891      994,319     8,022    (1,003,985)      558,247
                              --------   ----------   -------   -----------      --------
  Gross profit..............   377,635       45,872    16,683       (47,588)      392,602
Gas trading margin..........        --      (10,674)       --        49,212        38,538
Operating expenses..........   252,129       16,946     7,468          (734)      275,809
                              --------   ----------   -------   -----------      --------
Operating income............   125,506       18,252     9,215         2,358       155,331
Miscellaneous income
  (expense).................     1,427        1,331       554        (4,633)       (1,321)
Interest charges............   (58,796)      (2,866)   (2,145)        4,633       (59,174)
                              --------   ----------   -------   -----------      --------
Income before income
  taxes.....................    68,137       16,717     7,624         2,358        94,836
Provision for income
  taxes.....................    25,143        6,058     3,576           403        35,180
                              --------   ----------   -------   -----------      --------
          Net income........  $ 42,994   $   10,659   $ 4,048   $     1,955      $ 59,656
                              ========   ==========   =======   ===========      ========
</Table>

     Organization -- Atmos Energy Corporation distributes natural gas in 11
states through its regulated utility operating divisions -- Colorado-Kansas
Division, Kentucky Division, Louisiana Division, Mid-States Division and Texas
Division. Our nonutility operations are organized under Atmos Energy Holdings,
Inc., which includes Atmos Energy Marketing, L.L.C., Atmos Pipeline and Storage,
Inc., Atmos Power Systems, Inc. and an indirect equity interest in Heritage
Propane Partners, L.P. Atmos Energy Marketing includes the operations of
Woodward Marketing and Trans Louisiana Industrial Gas Company.

     Consolidating Financial Statements -- The column headed "Utility" consists
of the operations of Atmos' five operating divisions. The column headed "Natural
Gas Marketing" consists of Atmos Energy Marketing, Woodward Marketing and Trans
Louisiana Industrial Gas Company. The column headed "Other Non-Utility" consists
of our nonutility operations excluding natural gas marketing. Operating revenues
and purchased gas costs from our natural gas marketing operations are shown on a
gross basis in the "Natural Gas Marketing" column. Such natural gas marketing
activities are reclassified in the elimination column as gas trading margin.

     Current and noncurrent assets and liabilities from risk management
activities on the supplemental condensed consolidated balance sheet consist of
the fair value, inclusive of future servicing costs and valuation adjustments,
of our storage, transportation and requirements contracts, forwards,
over-the-counter and exchange traded options, futures and swap contracts.

     The gas trading margin on the supplemental condensed consolidated statement
of income consists primarily of the difference between revenue arising from
Natural Gas Marketing's sale of physical natural gas to its customers less the
cost to purchase natural gas and current period changes in assets and
liabilities from risk management activities.

     Risk Management Assets and Liabilities, Natural Gas Marketing -- We use
storage, transportation and requirements contracts, forwards, over-the-counter
and exchange-traded options, futures and swap contracts to conduct our risk
management activities. We use the mark-to-market method to account for these
activities in accordance with Emerging Issues Task Force Issue No. 98-10,
"Accounting for Energy Trading and Risk Management Activities" and EITF 00-17,
"Measuring the Fair Value of Energy-Related Contracts in Applying Issue No.
98-10." Under this method, the aforementioned contracts are reflected at fair
value,

                                        80
<PAGE>
                            ATMOS ENERGY CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

inclusive of future servicing costs and valuation adjustments, with resulting
unrealized gains and losses recorded as assets or liabilities from risk
management activities on the condensed consolidated balance sheet. Current
period changes in the assets and liabilities from risk management activities are
recognized as gas trading margins on the condensed consolidated statement of
income. Changes in the mark-to-market valuation of assets and liabilities from
risk management activities result primarily from changes in the valuation of the
portfolio of contracts, maturity and settlement of contracts and newly
originated transactions. Market prices and models used to value these
transactions reflect our best estimate considering various factors including
closing exchange and over-the-counter quotations, time value and volatility
factors underlying the contracts. Values are adjusted to reflect the potential
impact of liquidating our positions in an orderly manner over a reasonable
period of time under present market conditions. Changes in market prices
directly affect our estimate of the fair value of these transactions.

     At its October 2002 meeting, the Emerging Issues Task Force rescinded EITF
Issue Nos. 98-10 and 00-17. The impact on Atmos will be to discontinue
mark-to-market accounting of our sales, storage and transportation contracts and
our natural gas storage inventory. Any cumulative effect of this change in
accounting will depend on the number and valuation of our sales, storage and
transportation contracts and our natural gas storage inventory level and
valuation at the time we adopt the new rules. We are evaluating the impact on
Atmos of this action.

     Eliminations -- Included in purchased gas cost in the Utility column are
natural gas purchases from Atmos Energy Marketing. These purchases were made in
a competitive open bidding process and reflect market prices. In addition, we
have entered into contracts with Atmos Energy Marketing to manage a significant
portion of our underground storage facilities. Atmos Energy Marketing has acted
as agent in placing financial instruments for the various divisions that protect
us and our customers from unusually large winter period gas price increases.

                                        81
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information regarding directors and compliance with Section 16(a) of the
Securities Exchange Act of 1934 is incorporated herein by reference from the
Company's Definitive Proxy Statement for the Annual Meeting of Shareholders on
February 12, 2003. Information regarding executive officers is included in Part
I of this Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION

     Incorporated herein by reference from the Company's Definitive Proxy
Statement for the Annual Meeting of Shareholders on February 12, 2003.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Incorporated herein by reference from the Company's Definitive Proxy
Statement for the Annual Meeting of Shareholders on February 12, 2003.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Incorporated herein by reference from the Company's Definitive Proxy
Statement for the Annual Meeting of Shareholders on February 12, 2003.

ITEM 14.  CONTROLS AND PROCEDURES

     Within the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including the Chairman, President and Chief Executive Officer and Senior Vice
President and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14. Based upon that evaluation, the Chairman, President and Chief
Executive Officer; and Senior Vice President and Chief Financial Officer have
concluded that our disclosure controls and procedures are effective.

     Such disclosure controls and procedures are controls and procedures
designed to ensure that all information required to be disclosed in our reports
filed under the Exchange Act is recorded, processed, summarized and reported
within the time periods set forth in applicable Securities and Exchange
Commission forms, rules and regulations. In addition, we have reviewed our
internal controls and have concluded that there have been no significant changes
in such internal controls or other factors that could significantly affect those
controls subsequent to the date of our review.

                                    PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a) 1. and 2.  Financial Statements and Financial Statement Schedules

     The financial statements and financial statement schedules listed in the
Index to Financial Statements in Item 8 are filed as part of this Form 10-K.

     3.  Exhibits

     The exhibits listed in the accompanying Exhibits Index are filed as part of
this Form 10-K. The exhibits numbered 10.21(a) through 10.32(b) are management
contracts or compensatory plans or arrangements.

                                        82
<PAGE>

     (b) Reports on Form 8-K

     The Company filed a Form 8-K Current Report, Item 9, Regulation FD
Disclosure, dated August 14, 2002, disclosing that on August 14, 2002, each of
the Principal Executive Officer, Robert W. Best, and Principal Financial
Officer, John P. Reddy, of Atmos Energy Corporation, submitted to the Securities
and Exchange Commission sworn statements pursuant to Securities and Exchange
Commission Order No. 4-460. Also, two exhibits were attached: a copy of these
statements dated August 14, 2002.

                                        83
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          ATMOS ENERGY CORPORATION
                                          (REGISTRANT)

                                          By        /s/ JOHN P. REDDY
                                            ------------------------------------
                                                       John P. Reddy
                                                   Senior Vice President
                                                and Chief Financial Officer

Date: November 22, 2002

                                        84
<PAGE>

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert W. Best and John P. Reddy, or
either of them acting alone or together, as his true and lawful attorney-in-fact
and agent with full power to act alone, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this Form
10-K, and to file the same, with all exhibits thereto, and all other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated:

<Table>
<S>     <C>                              <C>                               <C>

          /s/ ROBERT W. BEST              Chairman, President and Chief    November 22, 2002
--------------------------------------          Executive Officer
            Robert W. Best

          /s/ JOHN P. REDDY              Senior Vice President and Chief   November 22, 2002
--------------------------------------          Financial Officer
            John P. Reddy

        /s/ F.E. MEISENHEIMER             Vice President and Controller    November 22, 2002
--------------------------------------   (Principal Accounting Officer)
          F.E. Meisenheimer

        /s/ TRAVIS W. BAIN, II                      Director               November 22, 2002
--------------------------------------
          Travis W. Bain, II

            /s/ DAN BUSBEE                          Director               November 22, 2002
--------------------------------------
              Dan Busbee

        /s/ RICHARD W. CARDIN                       Director               November 22, 2002
--------------------------------------
          Richard W. Cardin

        /s/ THOMAS J. GARLAND                       Director               November 22, 2002
--------------------------------------
          Thomas J. Garland

        /s/ RICHARD K. GORDON                       Director               November 22, 2002
--------------------------------------
          Richard K. Gordon

          /s/ GENE C. KOONCE                        Director               November 22, 2002
--------------------------------------
            Gene C. Koonce

        /s/ THOMAS C. MEREDITH                      Director               November 22, 2002
--------------------------------------
          Thomas C. Meredith

        /s/ PHILLIP E. NICHOL                       Director               November 22, 2002
--------------------------------------
          Phillip E. Nichol

          /s/ CARL S. QUINN                         Director               November 22, 2002
--------------------------------------
            Carl S. Quinn

        /s/ CHARLES K. VAUGHAN                      Director               November 22, 2002
--------------------------------------
          Charles K. Vaughan

         /s/ RICHARD WARE II                        Director               November 22, 2002
--------------------------------------
           Richard Ware II
</Table>

                                        85
<PAGE>

                                 CERTIFICATIONS

I, Robert W. Best, certify that:

     1. I have reviewed this annual report on Form 10-K of Atmos Energy
Corporation;

     2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          (a) designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

          (b) evaluated the effectiveness of the registrant's disclosure
     controls and procedures as of a date within 90 days prior to the filing
     date of this annual report (the "Evaluation Date"); and

          (c) presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

          (a) all significant deficiencies in the design or operation of
     internal controls which could adversely affect the registrant's ability to
     record, process, summarize and report financial data and have identified
     for the registrant's auditors any material weaknesses in internal controls;
     and

          (b) any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

                                          By       /s/ ROBERT W. BEST
                                            ------------------------------------
                                                       Robert W. Best
                                               Chairman, President and Chief
                                                      Executive Officer

Date: November 22, 2002

                                        86
<PAGE>

                                 CERTIFICATIONS

I, John P. Reddy, certify that:

     1. I have reviewed this annual report on Form 10-K of Atmos Energy
Corporation;

     2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          (a) designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

          (b) evaluated the effectiveness of the registrant's disclosure
     controls and procedures as of a date within 90 days prior to the filing
     date of this annual report (the "Evaluation Date"); and

          (c) presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

          (a) all significant deficiencies in the design or operation of
     internal controls which could adversely affect the registrant's ability to
     record, process, summarize and report financial data and have identified
     for the registrant's auditors any material weaknesses in internal controls;
     and

          (b) any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

                                          By        /s/ JOHN P. REDDY
                                            ------------------------------------
                                                       John P. Reddy
                                              Senior Vice President and Chief
                                                      Financial Officer

Date: November 22, 2002

                                        87
<PAGE>

                                                                     SCHEDULE II

                            ATMOS ENERGY CORPORATION

                       VALUATION AND QUALIFYING ACCOUNTS
                      THREE YEARS ENDED SEPTEMBER 30, 2002

<Table>
<Caption>
                                                             ADDITIONS
                                                      -----------------------
                                         BALANCE AT   CHARGED TO   CHARGED TO                   BALANCE
                                         BEGINNING      COST &       OTHER                      AT END
                                         OF PERIOD     EXPENSES     ACCOUNTS    DEDUCTIONS     OF PERIOD
                                         ----------   ----------   ----------   ----------     ---------
                                                                 (IN THOUSANDS)
<S>                                      <C>          <C>          <C>          <C>            <C>
2002
  Allowance for doubtful accounts......   $16,151      $    --       $1,500(1)   $ 7,142(2)     $10,509
2001
  Allowance for doubtful accounts......   $10,589      $26,226           --      $20,664(2)     $16,151
2000
  Allowance for doubtful accounts......   $ 9,231      $17,724           --      $16,366(2)     $10,589
</Table>

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

(1) This amount was charged to regulatory assets within deferred charges and
    other assets as recovery was specifically permitted by the relevant
    regulators.

(2) Uncollectible accounts written off

                                        88
<PAGE>

                                 EXHIBITS INDEX

ITEM 14.(A)(3)

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
               Plan of Reorganization
  2.1          Purchase and Sale Agreement (Louisiana    Exhibit 2.1 to Registration Statement on
               Gas Operations), by and among Citizens    Form S-3/A filed November 6, 2000 (File No.
               Utilities Company (now known as Citizens  333-73705)
               Communications Company), LGS Natural Gas
               Company and Atmos Energy Corporation,
               dated as of April 13, 2000
  2.2          Agreement and Plan of Merger and          Exhibit 2.2 of Form 10-K for fiscal year
               Reorganization dated as of September 21,  ended September 30, 2001 (File No. 1-10042)
               2001, by and among Atmos Energy
               Corporation, Mississippi Valley Gas
               Company and the Shareholders Named on
               the Signature Pages hereto
               Articles of Incorporation and Bylaws
  3.1(a)       Restated Articles of Incorporation of     Exhibit 3.1 of Form 10-K for fiscal year
               the Company, as Amended (as of July 31,   ended September 30, 1997 (File No. 1-10042)
               1997)
  3.1(b)       Articles of Amendment to the Restated     Exhibit 3a of Form 10-Q for quarter ended
               Articles of Incorporation of Atmos        March 31, 1999 (File No. 1-10042)
               Energy Corporation as Amended (Texas)
  3.1(c)       Articles of Amendment to the Restated     Exhibit 3b of Form 10-Q for quarter ended
               Articles of Incorporation of Atmos        March 31, 1999 (File No. 1-10042)
               Energy Corporation as Amended (Virginia)
  3.2(a)       Bylaws of the Company (Amended and Re-    Exhibit 3.2 of Form 10-K for fiscal year
               stated as of November 12, 1997)           ended September 30, 1997 (File No. 1-10042)
  3.2(b)       Amendment No. 1 to Bylaws of Atmos        Exhibit 3.1 of Form 10-Q for quarter ended
               Energy Corporation (Amended and Restated  March 31, 2001 (File No. 1-10042)
               as of November 12, 1997)
               Instruments Defining Rights of Security
               Holders
  4.1          Specimen Common Stock Certificate (Atmos  Exhibit (4)(b) of Form 10-K for fiscal year
               Energy Corporation)                       ended September 30, 1988 (File No. 1-10042)
  4.2          Rights Agreement, dated as of November    Exhibit 4.1 of Form 8-K dated November 12,
               12, 1997, between the Company and         1997 (File No. 1-10042)
               BankBoston, N.A., as Rights Agent
  4.3          First Amendment to Rights Agreement       Exhibit 2 of Form 8-A, Amendment No. 1,
               dated as of August 11, 1999, between the  dated August 12, 1999 (File No. 1-10042)
               Company and BankBoston, N.A., as Rights
               Agent
  4.4          Second Amendment to Rights Agreement      Exhibit 4 of Form 10-Q for quarter ended
               dated as of February 13, 2002, between    December 31, 2001 (File No. 1-10042)
               the Company and EquiServe Trust Company,
               N.A., as Rights Agent
  4.5          Form of Indenture between Atmos Energy    Exhibit 4.1 to Registration Statement on
               Corporation and U.S. Bank Trust National  Form S-3 filed April 20, 1998 (File No.
               Association, Trustee                      333-50477)
  4.6          Indenture between Atmos Energy            Exhibit 99.3 of Form 8-K dated May 15, 2001
               Corporation, as Issuer, and Suntrust      (File No. 1-10042)
               Bank, Trustee dated as of May 22, 2001
</Table>

                                        89
<PAGE>

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
  4.7(a)       Indenture of Mortgage, dated as of July   Exhibit to Registration Statement of United
               15, 1959, from United Cities Gas Company  Cities Gas Company on Form S-3 (File No.
               to First Trust of Illinois, National      33-56983)
               Association, and M.J. Kruger, as
               Trustees, as amended and supplemented
               through December 1, 1992 (the Indenture
               of Mortgage through the 20th Sup-
               plemental Indenture)
  4.7(b)       Twenty-First Supplemental Indenture       Exhibit 10.7(a) of Form 10-K for fiscal year
               dated as of February 5, 1997 by and       ended September 30, 1997 (File No. 1-10042)
               among United Cities Gas Company and Bank
               of America Illinois and First Trust
               National Association and Russell C.
               Bergman supplementing Indenture of
               Mortgage dated as of July 15, 1959
  4.7(c)       Twenty-Second Supplemental Indenture      Exhibit 10.7(b) of Form 10-K for fiscal year
               dated as of July 29, 1997 by and among    ended September 30, 1997 (File No. 1-10042)
               the Company and First Trust National
               Association and Russell C. Bergman
               supplementing Indenture of Mortgage
               dated as of July 15, 1959
  4.8(a)       Form of Indenture between United Cities   Exhibit to Registration Statement of United
               Gas Company and First Trust of Illinois,  Cities Gas Company on Form S-3 (File No.
               National Association, as Trustee dated    33-56983)
               as of November 15, 1995
  4.8(b)       First Supplemental Indenture between the  Exhibit 10.8(a) of Form 10-K for fiscal year
               Company and First Trust of Illinois,      ended September 30, 1997 (File No. 1-10042)
               National Association, as Trustee dated
               as of July 29, 1997
  4.9(a)       Seventh Supplemental Indenture, dated as  Exhibit 10.1 of Form 10-Q for quarter ended
               of October 1, 1983 between Greeley Gas    June 30, 1994 (File No. 1-10042)
               Company ("The Greeley Gas Division") and
               the Central Bank of Denver, N.A.
               ("Central Bank")
  4.9(b)       Ninth Supplemental Indenture, dated as    Exhibit 10.2 of Form 10-Q for quarter ended
               of April 1, 1991, between The Greeley     June 30, 1994 (File No. 1-10042)
               Gas Division and Central Bank
  4.9(c)       Tenth Supplemental Indenture, dated as    Exhibit 10.4 of Form 10-Q for quarter ended
               of December 1, 1993, between the Company  June 30, 1994 (File No. 1-10042)
               and Colorado National Bank, formerly
               Central Bank
  9            Not Applicable
</Table>

                                        90
<PAGE>

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
               Material Contracts
 10.1(a)       Note Purchase Agreement, dated as of      Exhibit 10(c) of Form 8-K filed January 7,
               December 21, 1987, by and between the     1988 (File No. 0-11249)
               Company and John Hancock Mutual Life
               Insurance Company
               Note Purchase Agreement, dated as of
               December 21, 1987, by and between the
               Company and John Hancock Charitable
               Trust I (Agreement is identical to
               Hancock Agreement listed above except as
               to the parties thereto.)
               Note Purchase Agreement dated as of
               December 21, 1987, by and between the
               Company and Mellon Bank, N.A., Trustee
               under Master Trust Agreement of AT&T
               Corporation, dated January 1, 1984, for
               Employee Pension Plans -- AT&T -- John
               Hancock -- Private Placement (Agreement
               is identical to Hancock Agreement listed
               above except as to the parties thereto.)
 10.1(b)       Amendment to Note Purchase Agreement,     Exhibit (10)(b)(ii) of Form 10-K for fiscal
               dated October 11, 1989, by and between    year ended September 30, 1989 (File No.
               the Company and John Hancock Mutual Life  1-10042)
               Insurance Company revising Note Purchase
               Agreement dated December 21, 1987
               Amendment to Note Purchase Agreement,
               dated October 11, 1989, by and between
               the Company and John Hancock Charitable
               Trust I revising Note Purchase Agreement
               dated December 21, 1987. (Amendment is
               identical to Hancock amendment listed
               above except as to the parties thereto.)
               Amendment to Note Purchase Agreement,
               dated October 11, 1989, by and between
               the Company and Mellon Bank, N.A.,
               Trustee under Master Trust Agreement of
               AT&T Corporation, dated January 1, 1984,
               for Employee Pension
               Plans -- AT&T -- John Hancock -- Private
               Placement revising Note Purchase
               Agreement dated December 21, 1987
               (Amendment is identical to Hancock
               amendment listed above except as to the
               parties thereto.)
</Table>

                                        91
<PAGE>

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
 10.1(c)       Amendment to Note Purchase Agreement,     Exhibit 10(b)(iii) of Form 10-K for fiscal
               dated November 12, 1991, by and between   year ended September 30, 1991 (File No.
               the Company and John Hancock Mutual Life  1-10042)
               Insurance Company revising Note Purchase
               Agreement dated December 21, 1987
               Amendment to Note Purchase Agreement,
               dated November 12, 1991, by and between
               the Company and John Hancock Charitable
               Trust I revising Note Purchase Agreement
               dated December 21, 1987. (Amendment is
               identical to Hancock amendment listed
               above except as to the parties thereto.)
               Amendment to Note Purchase Agreement,
               dated November 12, 1991, by and between
               the Company and Mellon Bank, N.A.,
               Trustee under Master Trust Agreement of
               AT&T Corporation, dated January 1, 1984,
               for Employee Pension
               Plans -- AT&T -- John Hancock -- Private
               Placement revising Note Purchase
               Agreement dated December 21, 1987.
               (Amendment is identical to Hancock
               amendment above except as to the parties
               thereto.)
 10.1(d)       Amendment to Note Purchase Agreement,     Exhibit 4.3(d) to Registration Statement on
               dated December 22, 1993, by and between   Form S-3 filed April 20, 1998 (File No.
               the Company and John Hancock Mutual Life  333-50477)
               Insurance Company revising Note Purchase
               Agreement dated December 21, 1987
               Amendment to Note Purchase Agreement,
               dated December 22, 1993, by and between
               the Company and Mellon Bank, N.A.,
               Trustee under Master Trust Agreement of
               AT&T Corporation, dated January 1, 1984,
               for Employee Pension
               Plans -- AT&T -- John Hancock -- Private
               Placement revising Note Purchase
               Agreement dated December 21, 1987
               (Amendment is identical to Hancock
               amendment listed above except as to the
               parties thereto and the amounts thereof)
 10.1(e)       Amendment to Note Purchase Agreement,     Exhibit 4.3(e) to Registration Statement on
               dated December 20, 1994, by and between   Form S-3 filed April 20, 1998 (File No.
               the Company and John Hancock Mutual Life  333-50477)
               Insurance Company revising Note Purchase
               Agreement dated December 21, 1987
               Amendment to Note Purchase Agreement,
               dated December 20, 1994, by and between
               the Company and Mellon Bank, N.A.,
               Trustee under Master Trust Agreement of
               AT&T Corporation, dated January 1, 1984,
               for Employee Pension
               Plans -- AT&T -- John Hancock -- Private
               Placement revising Note Purchase
               Agreement dated December 21, 1987
               (Amendment is identical to Hancock
               amendment listed above)
</Table>

                                        92
<PAGE>

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
 10.1(f)       Amendment to Note Purchase Agreement,     Exhibit 4.3(f) to Registration Statement on
               dated July 29, 1997, by and between the   Form S-3 filed April 20, 1998 (File No.
               Company and John Hancock Mutual Life      333-50477)
               Insurance Company revising Note Purchase
               Agreement dated December 21, 1987
               Amendment to Note Purchase Agreement,
               dated July 29, 1997, by and between the
               Company and Mellon Bank, N.A., Trustee
               under Master Trust Agreement of AT&T
               Corporation, dated January 1, 1984, for
               Employee Pension Plans -- AT&T -- John
               Hancock -- Private Placement revising
               Note Purchase Agreement dated December
               21, 1987 (Amendment is identical to
               Hancock amendment listed above except as
               to the parties thereto and the amounts
               thereof)
 10.2(a)       Note Purchase Agreement, dated as of      Exhibit 10(c) of Form 10-K for fiscal year
               October 11, 1989, by and between the      ended September 30, 1989 (File No. 1-10042)
               Company and John Hancock Mutual Life
               Insurance Company
 10.2(b)       Amendment to Note Purchase Agreement,     Exhibit 10(c)(ii) of Form 10-K for fiscal
               dated as of November 12, 1991, by and     year ended September 30, 1991 (File No.
               between the Company and John Hancock      1-10042)
               Mutual Life Insurance Company revising
               Note Purchase Agreement dated October
               11, 1989
 10.2(c)       Amendment to Note Purchase Agreement,     Exhibit 4.4(c) to Registration Statement on
               dated December 22, 1993, by and between   Form S-3 filed April 20, 1998 (File No.
               the Company and John Hancock Mutual Life  333-50477)
               Insurance Company revising Note Purchase
               Agreement dated October 11, 1989
 10.2(d)       Amendment to Note Purchase Agreement,     Exhibit 4.4(d) to Registration Statement on
               dated December 20, 1994, by and between   Form S-3 filed April 20, 1998 (File No.
               the Company and John Hancock Mutual Life  333-50477)
               Insurance Company revising Note Purchase
               Agreement dated October 11, 1989
 10.2(e)       Amendment to Note Purchase Agreement,     Exhibit 4.4(e) to Registration Statement on
               dated July 29, 1997, by and between the   Form S-3 filed April 20, 1998 (File No.
               Company and John Hancock Mutual Life      333-50477)
               Insurance Company revising Note Purchase
               Agreement dated October 11, 1989
 10.3(a)       Note Purchase Agreement, dated as of Au-  Exhibit 10(f)(i) of Form 10-K for fiscal
               gust 29, 1991, by and between the         year ended September 30, 1991 (File No.
               Company and The Variable Annuity Life     1-10042)
               Insurance Company
 10.3(b)       Amendment to Note Purchase Agreement,     Exhibit 10(f)(ii) of Form 10-K for fiscal
               dated November 26, 1991, by and between   year ended September 30, 1991 (File No.
               the Company and The Variable Annuity      1-10042)
               Life Insurance Company revising Note
               Purchase Agreement dated August 29, 1991
</Table>

                                        93
<PAGE>

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
 10.3(c)       Amendment to Note Purchase Agreement,     Exhibit 4.5(c) to Registration Statement on
               dated December 22, 1993, by and between   Form S-3 filed April 20, 1998 (File No.
               the Company and The Variable Annuity      333-50477)
               Life Insurance Company revising Note
               Purchase Agreement dated August 29, 1991
 10.3(d)       Amendment to Note Purchase Agreement,     Exhibit 4.5(d) to Registration Statement on
               dated July 29, 1997, by and between the   Form S-3 filed April 20, 1998 (File No.
               Company and The Variable Annuity Life     333-50477)
               Insurance Company revising Note Purchase
               Agreement dated August 29, 1991
 10.4(a)       Note Purchase Agreement, dated as of Au-  Exhibit (10)(f) of Form 10-K for fiscal year
               gust 31, 1992, by and between the         ended September 30, 1992 (File No. 1-10042)
               Company and The Variable Annuity Life
               Insurance Company
 10.4(b)       Amendment to Note Purchase Agreement,     Exhibit 4.6(b) to Registration Statement on
               dated December 22, 1993, by and between   Form S-3 filed April 20, 1998 (File No.
               the Company and The Variable Annuity      333-50477)
               Life Insurance Company revising Note
               Purchase Agreement dated August 31, 1992
 10.4(c)       Amendment to Note Purchase Agreement,     Exhibit 4.6(c) to Registration Statement on
               dated July 29, 1997, by and between the   Form S-3 filed April 20, 1998 (File No.
               Company and The Variable Annuity Life     333-50477)
               Insurance Company revising Note Purchase
               Agreement dated August 31, 1992
 10.5(a)       Note Purchase Agreement, dated Novem-     Exhibit 10.1 of Form 10-Q for quarter ended
               ber 14, 1994, by and among the Company    December 31, 1994 (File No. 1-10042)
               and New York Life Insurance Company, New
               York Life Insurance and Annuity Corpo-
               ration, The Variable Annuity Life
               Insurance Company, American General Life
               Insurance Company, and Merit Life
               Insurance Company
 10.5(b)       Amendment to Note Purchase Agreement,     Exhibit 4.7(b) to Registration Statement on
               dated July 29, 1997 by and among the      Form S-3 filed April 20, 1998 (File No.
               Company and New York Life Insurance       333-50477)
               Company, New York Life Insurance and
               Annuity Corporation, The Variable
               Annuity Life Insurance Company, American
               General Life Insurance Company and Merit
               Life Insurance Company revising Note
               Purchase Agreement dated November 14,
               1994
 10.6          Bond Purchase Agreement, dated as of      Exhibit 10.3 of Form 10-Q for quarter ended
               April 1, 1991, between the Greeley        June 30, 1994 (File No. 1-10042)
               Division and Central Bank
 10.7(a)       Purchase Agreement for 6 3/4% Debentures  Exhibit 99.1 of Form 8-K dated July 22, 1998
               due 2028 by and among Merrill Lynch Co.,  (File No. 1-10042)
               NationsBanc Montgomery Securities
               L.L.C., Edward D. Jones & Co., L.P. and
               Atmos Energy Corporation dated July 22,
               1998
</Table>

                                        94
<PAGE>

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
 10.7(b)       Purchase Agreement for 7 3/8% Senior      Exhibit 99.1 of Form 8-K dated May 15, 2001
               Notes due 2011 by and among Banc of       (File No. 1-10042)
               America Securities L.L.C., Banc One
               Capital markets, Inc, First Union
               Securities, Inc, Fleet Securities, Inc,
               SG Cowen Securities Corporation and
               Atmos Energy Corporation dated May 15,
               2001
 10.7(c)       Purchase Agreement for 6,741,500 Shares   Exhibit 99.1 of Form 8-K dated December 14,
               of Common Stock (No Par Value) by and     2000 (File No. 1-10042)
               among Merrill Lynch & Co., Merrill
               Lynch, Pierce, Fenner & Smith
               Incorporated, UBS Warburg L.L.C., A.G.
               Edwards & Sons, Inc, Edward D. Jones &
               Co., L.P. and Atmos Energy Corporation
               dated December 14, 2000
 10.8(a)       364-Day Revolving Credit Agreement,       Exhibit 10.2 of Form 10-Q for quarter ended
               dated as of July 31, 2002, among Atmos    June 30, 2002 (File No. 1-10042)
               Energy Corporation, Bank One, NA,
               Wachovia Bank, National Association,
               Suntrust Bank, CoBank ACB and Societe
               Generale, New York Branch
 10.8(b)       Uncommitted Amended and Restated Credit   Exhibit 10.1 of Form 10-Q for quarter ended
               Agreement, dated to be effective July 1,  June 30, 2002 (File No. 1-10042)
               2002, among Woodward Marketing, L.L.C.,
               Fortis Capital Corp., BNP Paribas and
               the other financial institutions which
               may become parties hereto
 10.8(c)       Bridge Credit Agreement, dated as of
               October 7, 2002, among Atmos Energy
               Corporation, Bank One, NA, Wachovia
               Bank, National Association, Suntrust
               Bank and Societe Generale, New York
               Branch
               Gas Supply Contracts
 10.9(a)       Firm Gas Transportation Agreement No.     Exhibit 10.10(a) of Form 10-K for fiscal
               123535 dated November 1, 1998 between     year ended September 30, 1999 (File No.
               Greeley Gas Company and Public Service    1-10042)
               Company of Colorado
 10.9(b)       Transportation Storage Service Agreement  Exhibit 10.6(b) of Form 10-K for fiscal year
               No. TA-0544 between Greeley Gas Company   ended September 30, 1994 (File No. 1-10042)
               and Williams Natural Gas Company dated
               October 1, 1993, as amended to extend to
               October 1, 2003
 10.9(c)       Firm Transportation Service Agreement     Exhibit 10.9(c) of Form 10-K for fiscal year
               No. 33182000C, Rate Schedule TF-1,        ended September 30, 2001 (File No. 1-10042)
               between Colorado Interstate Gas Company
               and Greeley Gas Company dated October 1,
               2001
 10.9(d)       No-Notice Storage and Transportation      Exhibit 10.9(d) of Form 10-K for fiscal year
               Delivery Service Agreement No. 31044000,  ended September 30, 2001 (File No. 1-10042)
               Rate Schedule NNT-1, between Colorado
               Interstate Gas Company and Greeley Gas
               Company dated October 1, 2001
</Table>

                                        95
<PAGE>

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
 10.9(e)       Transportation-Storage Contract No.       Exhibit 10.6 of Form 10-Q for quarter ended
               TA-0614 (Request 0180) between Greeley    March 31, 1998 (File No. 1-10042)
               Gas Company (transferred from United
               Cities Gas Company effective January 1,
               2000) and Williams Natural Gas Company
               dated October 1, 1993, as amended to
               extend to October 1, 2005
 10.9(f)       Transportation-Storage Contract No.       Exhibit 10.7 of Form 10-Q for quarter ended
               TA-0611 (Request 0002) between Greeley    March 31, 1998 (File No. 1-10042)
               Gas Company (transferred from United
               Cities Gas Company effective January 1,
               2000) and Williams Natural Gas Company
               dated October 1, 1993, as amended to
               extend to October 1, 2003
 10.10(a)      Agreement for Firm Intrastate             Exhibit 10.1 of Form 10-Q for quarter ended
               Transportation of Natural Gas in the      March 31, 1998 (File No. 1-10042)
               State of Louisiana between Trans La (now
               known as Atmos Energy Louisiana) and
               Louisiana Intrastate Gas Company L.L.C.
               (LIG) dated December 22, 1997 and
               effective July 1, 1997, as amended to
               extend to July 1, 2005 and for
               successive 1 year terms
 10.10(b)      Agreement for Firm 311(a)(2)              Exhibit 10.2 of Form 10-Q for quarter ended
               Transportation of Natural Gas in the      March 31, 1998 (File No. 1-10042)
               State of Louisiana between Trans La (now
               known as Atmos Energy Louisiana) and
               Louisiana Intrastate Gas Company L.L.C.
               (LIG) dated December 22, 1997 and
               effective July 1, 1997, as amended to
               extend to July 1, 2005 and for
               successive 1 year terms
 10.11(a)      Gas Transportation Agreement between      Exhibit 10.3 of Form 10-Q for quarter ended
               Texas Gas and Western Kentucky Gas dated  December 31, 1993 (File No. 1-10042)
               November 1, 1993 (Contract No. T3355,
               zone 3), as amended to extend to
               November 1, 2004
 10.11(b)      Gas Transportation Agreement between      Exhibit 10.4 of Form 10-Q for quarter ended
               Texas Gas and Western Kentucky Gas dated  December 31, 1993 (File No. 1-10042)
               November 1, 1993 (Contract No. T3819,
               zone 4), as amended to extend to
               November 1, 2004
 10.11(c)      Gas Transportation Agreement between      Exhibit 10.5 of Form 10-Q for quarter ended
               Texas Gas and Western Kentucky Gas dated  December 31, 1993 (File No. 1-10042)
               November 1, 1993 (Contract No. N0210,
               Zone 2, Contract No. N0340, Zone 3,
               Contract No. N0435, Zone 4), as amended
               to extend to November 1, 2004
 10.12(a)      Gas Transportation Agreement, Contract    Exhibit 10.17(a) of Form 10-K for fiscal
               No. 2550, dated September 1, 1993,        year ended September 30, 1993 (File No.
               between Tennessee Gas Pipeline Company,   1-10042)
               a division of Tenneco, Inc. ("Tennessee
               Gas"), and Western Kentucky,
               Campbellsville Service Area, as amended
               to extend to November 1, 2007
 10.12(b)      Gas Transportation Agreement, Contract    Exhibit 10.17(b) of Form 10-K for fiscal
               No. 2546, dated September 1, 1993,        year ended September 30, 1993 (File No.
               between Tennessee Gas and Western         1-10042)
               Kentucky, Danville Service Area, as
               amended to extend to November 1, 2007
</Table>

                                        96
<PAGE>

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
 10.12(c)      Gas Transportation Agreement, Contract    Exhibit 10.17(c) of Form 10-K for fiscal
               No. 2385, dated September 1, 1993,        year ended September 30, 1993 (File No.
               between Tennessee Gas and Western         1-10042)
               Kentucky, Greensburg et al Service Area,
               as amended to extend to November 1, 2007
 10.12(d)      Gas Transportation Agreement, Contract    Exhibit 10.17(d) of Form 10-K for fiscal
               No. 2551, dated September 1, 1993,        year ended September 30, 1993 (File No.
               between Tennessee Gas and Western         1-10042)
               Kentucky, Harrodsburg Service Area, as
               amended to extend to November 1, 2007
 10.12(e)      Gas Transportation Agreement, Contract    Exhibit 10.17(e) of Form 10-K for fiscal
               No. 2548, dated September 1, 1993,        year ended September 30, 1993 (File No.
               between Tennessee Gas and Western         1-10042)
               Kentucky, Lebanon Service Area, as
               amended to extend to November 1, 2007
 10.13         Transportation Service Agreement between
               Energas Company and ONEOK WesTex
               Transmission, L.P. dated January 1, 2002
 10.14         Amarillo Supply Agreement dated January   Exhibit 10.7(a) of Form 10-K for fiscal year
               2, 1993 between Energas and Pioneer       ended September 30, 1994 (File No. 1-10042)
               Natural Resources, USA, Inc. (formerly
               Mesa Operating Company)
 10.15(a)      Gas Transportation Agreement No. 30774,   Exhibit 10.1 of Form 10-Q for quarter ended
               Rate Schedules FT-A and FT-GS, between    December 31, 1999 (File No. 1-10042)
               United Cities Gas Company and East
               Tennessee Natural Gas Company dated
               October 1, 1999
 10.15(b)      Gas Transportation Agreement No. 27311    Exhibit 10.20(c) of Form 10-K for fiscal
               between United Cities Gas Company and     year ended September 30, 2000 (File No.
               Tennessee Gas Pipeline Company dated      1-10042)
               November 1, 2000
 10.15(c)      Service Agreement No. 867760, under Rate  Exhibit 10.8 of Form 10-Q for quarter ended
               Schedule FT, between United Cities Gas    March 31, 1998 (File No. 1-10042)
               Company and Southern Natural Gas Company
               dated November 1, 1993, as amended to
               extend to November 1, 2005
 10.15(d)      Service Agreement No. 867761 under Rate   Exhibit 10.9 of Form 10-Q for quarter ended
               Schedule FT-NN between United Cities Gas  March 31, 1998 (File No. 1-10042)
               Company and Southern Natural Gas Company
               dated November 1, 1993, as amended to
               extend to November 1, 2005
 10.15(e)      FTS-1 Service Agreement No. 59572         Exhibit 10.20(f) of Form 10-K for fiscal
               between United Cities Gas Company and     year ended September 30, 2000 (File No.
               Columbia Gulf Transmission Company dated  1-10042)
               November 1, 1998
 10.15(f)      Gas Transportation Agreement No. 34538    Exhibit 10.20(g) of Form 10-K for fiscal
               (Rocky Top Expansion) between United      year ended September 30, 2000 (File No.
               Cities Gas Company and East Tennessee     1-10042)
               Natural Gas Company dated November 1,
               2000
</Table>

                                        97
<PAGE>

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
 10.16         Precedent Agreement, Cornerstone
               Expansion Project, between United Cities
               Gas Company and Transcontinental
               Pipeline Corporation dated April 16,
               2002
 10.17         Transportation Service Agreement under
               Rate Schedule FTS or ITS between Ozark
               Gas Transmission LLC and United Cities
               Gas Company (successor to Associated
               Natural Gas Company) dated May 20, 1992
 10.18         Service Agreement #400227 for Rate
               Schedule SS-1 between United Cities Gas
               Company and Texas Eastern Transmission
               Corporation dated May 31, 2000
               Asset Purchase Agreements
 10.19         Asset Sale and Purchase Agreement by and  Exhibit 99.2 of Form 8-K dated May 31, 2000
               among Southwestern Energy Company,        (File No. 1-10042)
               Arkansas Western Gas Company and Atmos
               Energy Corporation dated as of October
               15, 1999
 10.20         Asset Purchase Agreement by and among     Exhibit 10.1 to Registration Statement on
               Atmos Energy Corporation, Atmos Energy    Form S-3/A filed November 6, 2000 (File No.
               Marketing, L.L.C., Woodward Marketing,    333-93705)
               Inc., JD and Linda Woodward and James
               and Rita B. Kifer dated as of August 7,
               2000
               Executive Compensation Plans and
               Arrangements
 10.21(a)*     Form of Atmos Energy Corporation Change   Exhibit 10.21(b) of Form 10-K for fiscal
               in Control Severance Agreement -- Tier I  year ended September 30, 1998 (File No.
                                                         1-10042)
 10.21(b)*     Form of Atmos Energy Corporation Change   Exhibit 10.21(c) of Form 10-K for fiscal
               in Control Severance Agreement -- Tier    year ended September 30, 1998 (File No.
               II                                        1-10042)
 10.22*        Atmos Energy Corporation Long-Term Stock  Exhibit 99.1 of Form S-8 filed July 29, 1997
               Plan for the United Cities Gas Company    (File No. 333-32343)
               Division
 10.23(a)*     Atmos Energy Corporation Executive        Exhibit 10.31 of Form 10-K for fiscal year
               Retiree Life Plan                         ended September 30, 1997 (File No. 1-10042)
 10.23(b)*     Amendment No. 1 to the Atmos Energy Cor-  Exhibit 10.31(a) of Form 10-K for fiscal
               poration Executive Retiree Life Plan      year ended September 30, 1997 (File No.
                                                         1-10042)
 10.24(a)*     Description of Financial and Estate       Exhibit 10.25(b) of Form 10-K for fiscal
               Planning Program                          year ended September 30, 1997 (File No.
                                                         1-10042)
 10.24(b)*     Description of Sporting Events Program    Exhibit 10.26(c) of Form 10-K for fiscal
                                                         year ended September 30, 1993 (File No.
                                                         1-10042)
 10.25(a)*     Atmos Energy Corporation Supplemental     Exhibit 10.26 of Form 10-K for fiscal year
               Executive Benefits Plan, Amended and      ended September 30, 1998 (File No. 1-10042)
               Restated in its Entirety: August 12,
               1998
 10.25(b)*     Atmos Energy Corporation                  Exhibit 10.32 of Form 10-K for fiscal year
               Performance-Based Supplemental Executive  ended September 30, 1998 (File No. 1-10042)
               Benefits Plan, Effective Date: August
               12, 1998
 10.25(c)*     Amendment Number One to the Atmos En-     Exhibit 10.2 of Form 10-Q for quarter ended
               ergy Corporation Performance-Based        December 31, 2000 (File No. 1-10042)
               Supplemental Executive Benefits Plan,
               Effective Date: January 1, 1999
</Table>

                                        98
<PAGE>

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
 10.25(d)*     Atmos Energy Corporation                  Exhibit 10.1 of Form 10-Q for quarter ended
               Performance-Based Supplemental Executive  December 31, 2000 (File No. 1-10042)
               Benefits Plan Trust Agreement, Effective
               Date December 1, 2000
 10.25(e)*     Form of Individual Trust Agreement for    Exhibit 10.3 of Form 10-Q for quarter ended
               the Supplemental Executive Benefits Plan  December 31, 2000 (File No. 1-10042)
 10.26*        Atmos Energy Corporation Restricted       Exhibit 99.1 of Form S-8 filed February 13,
               Stock Grant Plan (Amended and Restated    1998 (File No. 333-46337)
               as of February 12, 1998)
 10.27*        Atmos Energy Corporation Executive Non-   Exhibit 10.33 of Form 10-K for fiscal year
               qualified Deferred Compensation Plan      ended September 30, 1998 (File No. 1-10042)
 10.28(a)*     Consulting Agreement between the Company  Exhibit 10.2 of Form 10-Q for quarter ended
               and Charles K. Vaughan, effective         June 30, 1997 (File No. 1-10042)
               October 1, 1994
 10.28(b)*     Amendment No. 1 to Consulting Agreement   Exhibit 10.3 of Form 10-Q for quarter ended
               between the Company and Charles K.        June 30, 1997 (File No. 1-10042)
               Vaughan, dated May 14, 1997
 10.28(c)*     Amendment No. 2 to Consulting Agreement   Exhibit 10.30(c) of Form 10-K for fiscal
               between the Company and Charles K.        year ended September 30, 1998 (File No.
               Vaughan, dated August 12, 1998            1-10042)
 10.28(d)*     Amendment No. 3 to Consulting Agreement   Exhibit 10.30(d) of Form 10-K for fiscal
               between the Company and Charles K.        year ended September 30, 1999 (File No.
               Vaughan, dated November 10, 1999          1-10042)
 10.28(e)*     Amendment No. 4 to Consulting Agreement   Exhibit 10.32(e) of Form 10-K for fiscal
               between the Company and Charles K.        year ended September 30, 2000 (File No.
               Vaughan, dated November 9, 2000           1-10042)
 10.28(f)*     Mini-Med/Dental Benefit Extension Agree-  Exhibit 10.28(f) of Form 10-K for fiscal
               ment dated October 1, 1994                year ended September 30, 2001 (File No.
                                                         1-10042)
 10.28(g)*     Amendment No. 1 to Mini-Med/Dental Bene-  Exhibit 10.28(g) of Form 10-K for fiscal
               fit Extension Agreement dated August 14,  year ended September 30, 2001 (File No.
               2001                                      1-10042)
 10.29*        Atmos Energy Corporation Equity           Exhibit C of Definitive Proxy Statement on
               Incentive and Deferred Compensation Plan  Schedule 14A filed December 30, 1998 (File
               for Non-Employee Directors                No. 1-10042)
 10.30(a)*     Atmos Energy Corporation Retirement Plan  Exhibit 10(y) of Form 10-K for fiscal year
               for Outside Directors                     ended September 30, 1992 (File No. 1-10042)
 10.30(b)*     Amendment No. 1 to the Atmos Energy Cor-  Exhibit 10.2 of Form 10-Q for quarter ended
               poration Retirement Plan for Outside      December 31, 1996 (File No. 1-10042)
               Directors
 10.31*        Atmos Energy Corporation Outside          Exhibit 10.28 of Form 10-K for fiscal year
               Directors Stock-for-Fee Plan (Amended     ended September 30, 1997 (File No. 1-10042)
               and Restated as of November 12, 1997)
 10.32(a)*     Atmos Energy Corporation 1998 Long-Term   Exhibit 10.1 of Form 10-Q for quarter ended
               Incentive Plan (as amended and restated   March 31, 2002 (File No. 1-10042)
               February 14, 2002)
 10.32(b)*     Atmos Energy Corporation Annual           Exhibit 10.2 of Form 10-Q for quarter ended
               Incentive Plan for Management (as         March 31, 2002 (File No. 1-10042)
               amended and restated February 14, 2002)
 11            Not applicable
 12            Computation of ratio of earnings to
               fixed charges
 13            Not applicable
</Table>

                                        99
<PAGE>

<Table>
<Caption>
  EXHIBIT
   NUMBER                    DESCRIPTION                 PAGE NUMBER OR INCORPORATION BY REFERENCE TO
  -------                    -----------                 --------------------------------------------
<C>            <S>                                       <C>
 16            Not applicable
 18            Not applicable
               Other Exhibits, as indicated
 21            Subsidiaries of the registrant
 22            Not applicable
 23            Consent of independent auditor, Ernst &
               Young LLP
 24            Power of Attorney                         Signature page of Form 10-K for fiscal year
                                                         ended September 30, 2002
 99.1          Certification Pursuant to 18 U.S.C. Sec-
               tion 1350 as Adopted Pursuant to Section
               906 of the Sarbanes-Oxley Act of 2002 by
               the Company's Chief Executive Officer**
 99.2          Certification Pursuant to 18 U.S.C Sec-
               tion 1350 as Adopted Pursuant to Section
               906 of the Sarbanes-Oxley Act of 2002 by
               the Company's Chief Financial Officer**
</Table>

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

 * This exhibit constitutes a "management contract or compensatory plan,
   contract, or arrangement."

** These certifications pursuant to 18 U.S.C. Section 1350 by the Company's
   Chief Executive Officer and Chief Financial Officer, furnished as Exhibits
   99.1 and 99.2, respectively, to this Annual Report on Form 10-K, will not be
   deemed to be filed with the Commission or incorporated by reference into any
   filing by the Company under the Securities Act of 1933 or the Securities
   Exchange Act of 1934, except to the extent that the Company specifically
   incorporates such certifications by reference.

                                       100

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8(C)
<SEQUENCE>3
<FILENAME>d01510exv10w8xcy.txt
<DESCRIPTION>BRIDGE CREDIT AGREEMENT
<TEXT>
<PAGE>

                                                                 EXHIBIT 10.8(c)



                                                                  EXECUTION COPY



                             BRIDGE CREDIT AGREEMENT

                                      among

                            ATMOS ENERGY CORPORATION
                                  as Borrower,

                         THE LENDERS IDENTIFIED HEREIN,

                                       AND

                                  BANK ONE, NA
                             as Administrative Agent

                                       AND

                       WACHOVIA BANK, NATIONAL ASSOCIATION

                              as Syndication Agent

                                       AND

                                  SUNTRUST BANK

                                       and

                        SOCIETE GENERALE, NEW YORK BRANCH

                           as Co-Documentation Agents



                           DATED AS OF OCTOBER 7, 2002





                         BANC ONE CAPITAL MARKETS, INC.
                   as Sole Lead Arranger and Sole Book Manager


<PAGE>

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                                PAGE
<S>      <C>      <C>                                                                                           <C>
SECTION 1.            DEFINITIONS AND ACCOUNTING TERMS...........................................................1

         1.1      Definitions....................................................................................1

         1.2      Computation of Time Periods...................................................................12

         1.3      Accounting Terms..............................................................................13

         1.4      Time..........................................................................................13

SECTION 2.            LOANS.....................................................................................13

         2.1      Bridge Loan Commitment........................................................................13

         2.2      Method of Borrowing for Bridge Loans..........................................................13

         2.3      Funding of Bridge Loans.......................................................................14

         2.4      Continuations and Conversions.................................................................14

         2.5      Minimum Amounts...............................................................................15

         2.6      Reductions of Bridge Loan Commitment..........................................................15

         2.7      Notes.........................................................................................16

SECTION 3.            PAYMENTS..................................................................................16

         3.1      Interest......................................................................................16

         3.2      Prepayments...................................................................................16

         3.3      Payment in full at Maturity...................................................................17

         3.4      Fees..........................................................................................17

         3.5      Place and Manner of Payments..................................................................18

         3.6      Pro Rata Treatment............................................................................18

         3.7      Computations of Interest and Fees.............................................................19

         3.8      Sharing of Payments...........................................................................19

         3.9      Evidence of Debt..............................................................................20

SECTION 4.            ADDITIONAL PROVISIONS REGARDING LOANS.....................................................21

         4.1      Eurodollar Loan Provisions....................................................................21

         4.2      Capital Adequacy..............................................................................22

         4.3      Compensation..................................................................................23

         4.4      Taxes.........................................................................................23

SECTION 5.            CONDITIONS PRECEDENT......................................................................25

         5.1      Closing Conditions............................................................................25
</Table>


                                       -i-
<PAGE>

                                TABLE OF CONTENTS
                                  (continued)

<Table>
<Caption>
                                                                                                                PAGE
<S>      <C>      <C>                                                                                           <C>
         5.2      Conditions to Loans...........................................................................27

SECTION 6.            REPRESENTATIONS AND WARRANTIES............................................................28

         6.1      Organization and Good Standing................................................................28

         6.2      Due Authorization.............................................................................28

         6.3      No Conflicts..................................................................................28

         6.4      Consents......................................................................................28

         6.5      Enforceable Obligations.......................................................................28

         6.6      Financial Condition...........................................................................29

         6.7      No Material Change............................................................................29

         6.8      No Default....................................................................................29

         6.9      Litigation....................................................................................29

         6.10     Taxes.........................................................................................29

         6.11     Compliance with Law...........................................................................30

         6.12     Material Agreements...........................................................................30

         6.13     ERISA.........................................................................................30

         6.14     Use of Proceeds...............................................................................31

         6.15     Government Regulation.........................................................................31

         6.16     Disclosure....................................................................................32

         6.17     Environmental Matters.........................................................................32

         6.18     Insurance.....................................................................................32

         6.19     Franchises, Licenses, Etc.....................................................................32

         6.20     Secured Indebtedness..........................................................................32

         6.21     Subsidiaries..................................................................................33

SECTION 7.            AFFIRMATIVE COVENANTS.....................................................................33

         7.1      Information Covenants.........................................................................33

         7.2      Debt to Capitalization Ratio..................................................................35

         7.3      Preservation of Existence, Franchises and Assets..............................................35

         7.4      Books and Records.............................................................................35

         7.5      Compliance with Law...........................................................................35

         7.6      Payment of Taxes and Other Indebtedness.......................................................35
</Table>


                                      -ii-
<PAGE>

                                TABLE OF CONTENTS
                                  (continued)

<Table>
<Caption>
                                                                                                                PAGE
<S>      <C>      <C>                                                                                           <C>
         7.7      Insurance.....................................................................................36

         7.8      Use of Proceeds...............................................................................36

         7.9      Audits/Inspections............................................................................36

SECTION 8.            NEGATIVE COVENANTS........................................................................36

         8.1      Nature of Business............................................................................36

         8.2      Consolidation and Merger......................................................................36

         8.3      Sale or Lease of Assets.......................................................................37

         8.4      Arm's-Length Transactions.....................................................................37

         8.5      Fiscal Year; Organizational Documents.........................................................37

         8.6      Liens.........................................................................................37

SECTION 9.            EVENTS OF DEFAULT.........................................................................38

         9.1      Events of Default.............................................................................38

         9.2      Acceleration; Remedies........................................................................42

         9.3      Allocation of Payments After Event of Default.................................................42

SECTION 10.           AGENCY PROVISIONS.........................................................................42

         10.1     Appointment...................................................................................42

         10.2     Delegation of Duties..........................................................................43

         10.3     Exculpatory Provisions........................................................................43

         10.4     Reliance on Communications....................................................................44

         10.5     Notice of Default.............................................................................44

         10.6     Non-Reliance on Administrative Agent and Other Lenders........................................44

         10.7     Indemnification...............................................................................45

         10.8     Administrative Agent in Its Individual Capacity...............................................45

         10.9     Successor Agent...............................................................................45

SECTION 11.           MISCELLANEOUS.............................................................................46

         11.1     Notices.......................................................................................46

         11.2     Right of Set-Off..............................................................................46

         11.3     Benefit of Agreement..........................................................................47

         11.4     No Waiver; Remedies Cumulative................................................................50

         11.5     Payment of Expenses, etc......................................................................50
</Table>


                                     -iii-
<PAGE>

                                TABLE OF CONTENTS
                                  (continued)

<Table>
<Caption>
                                                                                                                PAGE
<S>      <C>      <C>                                                                                           <C>
         11.6     Amendments, Waivers and Consents..............................................................50

         11.7     Counterparts/Telecopy.........................................................................51

         11.8     Headings......................................................................................52

         11.9     Defaulting Lender.............................................................................52

         11.10    Survival of Indemnification and Representations and Warranties................................52

         11.11    Governing Law; Venue..........................................................................52

         11.12    Waiver of Jury Trial..........................................................................53

         11.13    Severability..................................................................................53

         11.14    Further Assurances............................................................................53

         11.15    Entirety......................................................................................53

         11.16    Binding Effect; Continuing Agreement..........................................................53
</Table>

                                      -iv-

<PAGE>
                               TABLE OF CONTENTS


SCHEDULES
Schedule 1.1(a)            Commitment Percentages
Schedule 1.1(b)            Pricing Schedule
Schedule 6.20              Secured Indebtedness
Schedule 6.21              Subsidiaries
Schedule 11.1              Notices

EXHIBITS

Exhibit 2.2                Form of Notice of Borrowing
Exhibit 2.4                Form of Notice of Continuation/Conversion
Exhibit 2.7                Form of Bridge Loan Note
Exhibit 7.1(c)             Form of Officer's Certificate
Exhibit 11.3(b)            Form of Assignment Agreement


                                      -v-
<PAGE>
                             BRIDGE CREDIT AGREEMENT

         THIS BRIDGE CREDIT AGREEMENT (this "Credit Agreement"), dated as of
October 7, 2002, is entered into among ATMOS ENERGY CORPORATION, a Texas and
Virginia corporation (the "Borrower"), the Lenders (as defined herein) and BANK
ONE, NA as agent for the Lenders (in such capacity, the "Administrative Agent").

                                    RECITALS

         WHEREAS, the Borrower wishes, from time to time, to obtain loans in the
principal sum of up to $150,000,000 and the Lenders are willing to make such
loans to the Borrower, on the terms and conditions hereinafter set forth.

         NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

                                   SECTION 1.

                        DEFINITIONS AND ACCOUNTING TERMS

         1.1 DEFINITIONS.

         As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural the singular.

                  "Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
         Applicable Percentage for Eurodollar Loans.

                  "Administrative Agent" means Bank One, NA and any successors
         and assigns in such capacity.

                  "Affiliate" means, with respect to any Person, any other
         Person directly or indirectly controlling, controlled by or under
         direct or indirect common control with such Person. A Person shall be
         deemed to control another Person if such Person possesses, directly or
         indirectly, the power (a) to vote 10% or more of the securities having
         ordinary voting power for the election of directors of such other
         Person or (b) to direct or cause direction of the management and
         policies of such other Person, whether through the ownership of voting
         securities, by contract or otherwise.

                  "Agency Services Address" means 1 Bank One Plaza, 10th Floor,
         Chicago, IL 60670 or such other address as the Administrative Agent may
         designate in writing.

                  "Applicable Percentage" - See the Pricing Schedule.

                  "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
         United States Code, as amended, modified, succeeded or replaced from
         time to time.

<PAGE>

                  "Base Rate" means a fluctuating rate of interest equal to the
         higher of (a) the Prime Rate and (b) the sum of the Federal Funds Rate
         most recently determined by the Administrative Agent plus 1/2% per
         annum. If for any reason the Administrative Agent shall have determined
         (which determination shall be conclusive absent manifest error) that it
         is unable after due inquiry to ascertain the Federal Funds Rate for any
         reason, including the inability or failure of the Administrative Agent
         to obtain sufficient quotations in accordance with the terms hereof,
         the Base Rate shall be determined without regard to clause (a) of the
         first sentence of this definition until the circumstances giving rise
         to such inability no longer exist. Any change in the Base Rate due to a
         change in the Prime Rate or the Federal Funds Rate shall be effective
         on the effective date of such change in the Prime Rate or the Federal
         Funds Rate, respectively.

                  "Base Rate Loan" means a Loan which bears interest based on
         the Base Rate.

                  "Borrower" means Atmos Energy Corporation, a Texas and
         Virginia corporation.

                  "Borrower Obligations" means, without duplication, all of the
         obligations of the Borrower to the Lenders and the Administrative
         Agent, whenever arising, under this Credit Agreement, the Notes or any
         of the other Credit Documents.

                  "Bridge Loan" means a loan made by a Lender to the Borrower
         pursuant to Section 2.1(a).

                  "Bridge Loan Commitment" means one hundred fifty million
         Dollars ($150,000,000) as such amount may be otherwise reduced in
         accordance with Section 2.6.

                  "Bridge Loan Notes" means the promissory notes of the Borrower
         in favor of each Lender evidencing the Bridge Loans and substantially
         in the form of Exhibit 2.7, as such promissory notes may be amended,
         modified, supplemented or replaced from time to time.

                  "Business Day" means any day other than a Saturday, a Sunday,
         a legal holiday or a day on which banking institutions are authorized
         or required by law or other governmental action to close in Chicago,
         Illinois; provided that in the case of Eurodollar Loans, such day is
         also a day on which dealings between banks are carried on in U.S.
         dollar deposits in the London interbank market.

                  "Capital Stock" means (a) in the case of a corporation, all
         classes of capital stock of such corporation, (b) in the case of a
         partnership, partnership interests (whether general or limited), (c) in
         the case of a limited liability company, membership interests and (d)
         any other interest or participation that confers on a Person the right
         to receive a share of the profits and losses of, or distributions of
         assets of, the issuing Person.

                  "Change of Control" means either of the following events:

                           (a) any "person" or "group" (within the meaning of
                  Section 13(d) or 14(d) of the Exchange Act) has become,
                  directly or indirectly, the "beneficial


                                       2
<PAGE>

                  owner" (as defined in Rules 13d-3 (other than subsection (d)
                  thereof) and 13d-5 under the Exchange Act), by way of merger,
                  consolidation or otherwise of 40% or more of the voting power
                  of the Borrower on a fully-diluted basis, after giving effect
                  to the conversion and exercise of all outstanding warrants,
                  options and other securities of the Borrower convertible into
                  or exercisable for voting stock of the Borrower (whether or
                  not such securities are then currently convertible or
                  exercisable); or

                           (b) during any period of two consecutive calendar
                  years, individuals who at the beginning of such period
                  constituted the board of directors of the Borrower together
                  with any new members of such board of directors whose
                  elections by such board or board of directors or whose
                  nomination for election by the stockholders of the Borrower
                  was approved by a vote of a majority of the members of such
                  board of directors then still in office who either were
                  directors at the beginning of such period or whose election or
                  nomination for election was previously so approved cease for
                  any reason to constitute a majority of the directors of the
                  Borrower then in office.

                  "Closing Date" means the date hereof.

                  "Code" means the Internal Revenue Code of 1986, as amended
         from time to time, and the rules and regulations promulgated
         thereunder.

                  "Commitment Percentage" means, for each Lender, the percentage
         identified as its Commitment Percentage opposite such Lender's name on
         Schedule 1.1(a), as such percentage may be modified by assignment in
         accordance with the terms of this Credit Agreement.

                  "Commitments" means, collectively, each Lender's share of the
         Bridge Loan Commitment based upon such Lender's Commitment Percentage,
         as reflected on Schedule 1.1(a).

                  "Consolidated Capitalization" means, without duplication, the
         sum of (a) all of the shareholders' equity or net worth of the Borrower
         and its Subsidiaries on a consolidated basis, as determined in
         accordance with GAAP plus (b) the aggregate principal amount of
         Preferred Securities plus (c) the aggregate Minority Interests in
         Subsidiaries plus (d) Consolidated Funded Debt.

                  "Consolidated Funded Debt" means, without duplication, the sum
         of (a) all indebtedness of the Borrower and its Subsidiaries for
         borrowed money, (b) all purchase money indebtedness of the Borrower and
         its Subsidiaries, (c) the principal portion of all obligations of the
         Borrower and its Subsidiaries under capital leases, (d) all commercial
         letters of credit and the maximum amount of all performance and standby
         letters of credit issued or bankers' acceptance facilities created for
         the account of the Borrower or one of its Subsidiaries, including,
         without duplication, all unreimbursed draws thereunder, (e) all
         Guaranty Obligations of the Borrower and its Subsidiaries with respect
         to funded indebtedness of another Person; provided that neither the
         indebtedness of Woodward


                                       3
<PAGE>

         Marketing, LLC ("Woodward") incurred in connection with the purchase of
         gas by Woodward for resale to the Borrower nor the guaranty by the
         Borrower or one of its Subsidiaries of such indebtedness shall be
         included in this definition if such indebtedness has been outstanding
         for less than two months from the date of its incurrence by Woodward,
         (f) all indebtedness of another entity secured by a Lien on any
         property of the Borrower or any of its Subsidiaries whether or not such
         indebtedness has been assumed by the Borrower or any of its
         Subsidiaries, (g) all indebtedness of any partnership or unincorporated
         joint venture to the extent the Borrower or one of its Subsidiaries is
         legally obligated with respect thereto, net of any assets of such
         partnership or joint venture, (h) all obligations of the Borrower and
         its Subsidiaries to advance or provide funds or other support for the
         payment or purchase of funded indebtedness (including, without
         limitation, maintenance agreements, comfort letters or similar
         agreements or arrangements) (other than as may be given in respect of
         Woodward) and (i) the principal balance outstanding under any synthetic
         lease, tax retention operating lease, off-balance sheet loan or similar
         off-balance sheet financing product of the Borrower or one of its
         Material Subsidiaries where such transaction is considered borrowed
         money indebtedness for tax purposes but is classified as an operating
         lease in accordance with GAAP.

                  "Consolidated Net Property" means the Fixed Assets less,
         without duplication, the amount of accumulated depreciation and
         amortization attributable thereto.

                  "Credit Documents" means this Credit Agreement, the Notes, any
         Notice of Borrowing and all other related agreements and documents
         issued or delivered hereunder or thereunder or pursuant hereto or
         thereto.

                  "Debt to Capitalization Ratio" means the ratio of (a)
         Consolidated Funded Debt to (b) Consolidated Capitalization.

                  "Default" means any event, act or condition which with notice
         or lapse of time, or both, would constitute an Event of Default.

                  "Defaulting Lender" means, at any time, any Lender that, at
         such time (a) has failed to make a Loan required pursuant to the term
         of this Credit Agreement, (b) has failed to pay to the Administrative
         Agent or any Lender an amount owed by such Lender pursuant to the terms
         of this Credit Agreement or (c) has been deemed insolvent or has become
         subject to a bankruptcy or insolvency proceeding or to a receiver,
         trustee or similar official.

                  "Dollars" and "$" means dollars in lawful currency of the
         United States of America.

                  "Effective Date" means the date on which all of the conditions
         set forth in Section 5.1 shall have been fulfilled (or waived in the
         sole discretion of the Lenders).

                  "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a
         Lender; and (c) any other Person approved by the Administrative Agent
         and the Borrower (such approval not to be unreasonably withheld or
         delayed); provided that (i) the Borrower's consent is not required
         during the existence and continuation of a Default or an Event of
         Default,


                                       4
<PAGE>

         (ii) approval by the Borrower shall be deemed given if no objection is
         received by the Administrative Agent from the Borrower within five
         Business Days after notice of such proposed assignment has been
         received by the Borrower; and (iii) neither the Borrower nor an
         Affiliate of the Borrower shall qualify as an Eligible Assignee.

                  "Environmental Laws" means any current or future legal
         requirement of any Governmental Authority pertaining to (a) the
         protection of health, safety, and the indoor or outdoor environment,
         (b) the conservation, management, or use of natural resources and
         wildlife, (c) the protection or use of surface water and groundwater or
         (d) the management, manufacture, possession, presence, use, generation,
         transportation, treatment, storage, disposal, release, threatened
         release, abatement, removal, remediation or handling of, or exposure
         to, any hazardous or toxic substance or material or (e) pollution
         (including any release to land surface water and groundwater) and
         includes, without limitation, the Comprehensive Environmental Response,
         Compensation, and Liability Act of 1980, as amended by the Superfund
         Amendments and Reauthorization Act of 1986, 42 USC 9601 et seq., Solid
         Waste Disposal Act, as amended by the Resource Conservation and
         Recovery Act of 1976 and Hazardous and Solid Waste Amendment of 1984,
         42 USC 6901 et seq., Federal Water Pollution Control Act, as amended by
         the Clean Water Act of 1977, 33 USC 1251 et seq., Clean Air Act of
         1966, as amended, 42 USC 7401 et seq., Toxic Substances Control Act of
         1976, 15 USC 2601 et seq., Hazardous Materials Transportation Act, 49
         USC App. 1801 et seq., Occupational Safety and Health Act of 1970, as
         amended, 29 USC 651 et seq., Oil Pollution Act of 1990, 33 USC 2701 et
         seq., Emergency Planning and Community Right-to-Know Act of 1986, 42
         USC 11001 et seq., National Environmental Policy Act of 1969, 42 USC
         4321 et seq., Safe Drinking Water Act of 1974, as amended, 42 USC
         300(f) et seq., any analogous implementing or successor law, and any
         amendment, rule, regulation, order, or directive issued thereunder.

                  "ERISA" means the Employee Retirement Income Security Act of
         1974, as amended, and any successor statute thereto, as interpreted by
         the rules and regulations thereunder, all as the same may be in effect
         from time to time. References to sections of ERISA shall be construed
         also to refer to any successor sections.

                  "ERISA Affiliate" means an entity, whether or not
         incorporated, which is under common control with the Borrower or any of
         its Subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or
         is a member of a group which includes the Borrower or any of its
         Subsidiaries and which is treated as a single employer under Sections
         414(b), (c), (m), or (o) of the Code.

                  "Eurodollar Loan" means a Loan bearing interest at the
         Adjusted Eurodollar Rate.

                  "Eurodollar Rate" means, with respect to any Interest Period,
         the applicable London interbank offered rate for deposits in U.S.
         dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time)
         two Business Days prior to the first day of the applicable Interest
         Period, and having a maturity equal to such Interest Period, adjusted
         for Federal Reserve Board reserve requirements.


                                       5
<PAGE>

                  "Eurodollar Reserve Percentage" means, for any day, that
         percentage (expressed as a decimal) which is in effect from time to
         time under Regulation D, as the maximum reserve requirement (including,
         without limitation, any basic, supplemental, emergency, special, or
         marginal reserves) applicable with respect to Eurocurrency liabilities,
         as that term is defined in Regulation D (or against any other category
         of liabilities that includes deposits by reference to which the
         interest rate of Eurodollar Loans is determined), whether or not a
         Lender has any Eurocurrency liabilities subject to such reserve
         requirement at that time. Eurodollar Loans shall be deemed to
         constitute Eurocurrency liabilities and as such shall be deemed subject
         to reserve requirements without benefits of credits for proration,
         exceptions or offsets that may be available from time to time to a
         Lender. The Eurodollar Rate shall be adjusted automatically on and as
         of the effective date of any change in the Eurodollar Reserve
         Percentage.

                  "Event of Default" has the meaning specified in Section 9.1.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
         amended, and the rules and regulations promulgated thereunder.

                  "Federal Funds Rate" means, for any day, an interest rate per
         annum 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, as published for such day by the Federal
         Reserve Bank of New York, or if such rate is not so published for such
         day, the average of the quotations for such day on such transactions
         received by the Administrative Agent from three Federal funds brokers
         of recognized standing selected by it.

                  "Financial Officer" means any one of the chief financial
         officer, the controller or the treasurer of the Borrower.

                  "Fixed Assets" means the assets of the Borrower and its
         Subsidiaries constituting "net property, plant and equipment" on the
         consolidated balance sheet of the Borrower and its Subsidiaries.

                  "GAAP" means generally accepted accounting principles in the
         United States applied on a consistent basis and subject to Section 1.3.

                  "Governmental Authority" means any Federal, state, local or
         foreign court or governmental agency, authority, instrumentality or
         regulatory body.

                  "Guaranty Obligations" means, with respect to any Person,
         without duplication, any obligations (other than endorsements in the
         ordinary course of business of negotiable instruments for deposit or
         collection) guaranteeing any indebtedness for borrowed money of any
         other Person in any manner, whether direct or indirect, and including
         without limitation any obligation, whether or not contingent, (a) to
         purchase any such indebtedness or other obligation or any property
         constituting security therefor, (b) to lease or purchase property,
         securities or services primarily for the purpose of assuring the owner
         of such indebtedness or (c) to otherwise assure or hold harmless the
         owner of such indebtedness or obligation against loss in respect
         thereof. The amount of any Guaranty


                                       6
<PAGE>

         Obligation hereunder shall (subject to any limitations set forth
         therein) be deemed to be an amount equal to the outstanding principal
         amount of the indebtedness in respect of which such Guaranty Obligation
         is made.

                  "Interest Payment Date" means (a) as to Base Rate Loans, the
         last day of each fiscal quarter of the Borrower and the Maturity Date
         and (b) as to Eurodollar Loans, the last day of each applicable
         Interest Period and the Maturity Date.

                  "Interest Period" means, as to Eurodollar Loans, a period of
         one, two or three months' duration, as the Borrower may elect,
         commencing, in each case, on the date of the borrowing (including
         continuations and conversions of Eurodollar Loans); provided, however,
         (a) if any Interest Period would end on a day which is not a Business
         Day, such Interest Period shall be extended to the next succeeding
         Business Day (except that where the next succeeding Business Day falls
         in the next succeeding calendar month, then such Interest Period shall
         end on the next preceding Business Day), (b) no Interest Period shall
         extend beyond the Maturity Date and (c) with respect to Eurodollar
         Loans, where an Interest Period begins on a day for which there is no
         numerically corresponding day in the calendar month in which the
         Interest Period is to end, such Interest Period shall end on the last
         Business Day of such calendar month.

                  "Lender" means any of the Persons identified as a "Lender" on
         the signature pages hereto, and any Eligible Assignee which may become
         a Lender by way of assignment in accordance with the terms hereof,
         together with their successors and permitted assigns.

                  "LGS Purchase and Sale Agreement" means that certain Purchase
         and Sale Agreement, dated as of April 13, 2000, among Citizens
         Utilities Company, LGS Natural Gas Company and the Borrower.

                  "Lien" means any mortgage, pledge, hypothecation, assignment,
         deposit arrangement, security interest, encumbrance, lien (statutory or
         otherwise), preference, priority or charge of any kind (including any
         agreement to give any of the foregoing).

                  "Loans" means the Bridge Loans.

                  "Material Adverse Effect" means a material adverse effect on
         (a) the operations, business, assets, liabilities (actual or
         contingent), financial condition or prospects of the Borrower and its
         Subsidiaries, taken as a whole (taking into account the value of any
         indemnifications in favor of the Borrower pursuant to the LGS Purchase
         and Sale Agreement and the MVG Merger Agreement), (b) the ability of
         the Borrower to perform its obligations under this Credit Agreement or
         (c) the validity or enforceability of this Credit Agreement, any of the
         other Credit Documents, or the rights and remedies of the Lenders
         hereunder or thereunder.

                  "Material Subsidiary" means, at any date, a Subsidiary of the
         Borrower whose aggregate assets properly included under the category
         "property, plant and equipment" on the balance sheet of such
         Subsidiary, less the amount of depreciation and amortization
         attributable thereto, constitutes at least 10% of Consolidated Net
         Property as of such date;


                                       7
<PAGE>

         provided that if at any time the Borrower has Subsidiaries that are not
         Material Subsidiaries whose total aggregate assets under the category
         "property, plant and equipment" on the balance sheet of such
         Subsidiaries, less the amount of depreciation and amortization
         attributable thereto, constitutes more than 20% of Consolidated Net
         Property as of such date the Borrower shall designate one or more of
         such Subsidiaries as Material Subsidiaries for the purposes of this
         Credit Agreement in order that all Subsidiaries of the Borrower, other
         than Material Subsidiaries, own not more than 20% of Consolidated Net
         Property.

                  "Maturity Date" means January 31, 2003.

                  "Minority Interests" means interests owned by Persons (other
         than the Borrower or a Subsidiary of the Borrower) in a Subsidiary of
         the Borrower in which less than 100% of all classes of the voting
         securities are owned by the Borrower or its Subsidiaries.

                  "Moody's" means Moody's Investors Service, Inc., or any
         successor or assignee of the business of such company in the business
         of rating securities.

                  "Moody's Rating" - see the Pricing Schedule.

                  "Multiemployer Plan" means a Plan covered by Title IV of ERISA
         which is a multiemployer plan as defined in Section 3(37) or 4001(a)(3)
         of ERISA.

                  "Multiple Employer Plan" means a Plan covered by Title IV of
         ERISA, other than a Multiemployer Plan, which the Borrower or any ERISA
         Affiliate and at least one employer other than the Borrower or any
         ERISA Affiliate are contributing sponsors.

                  "MVG Acquisition" means the merger of Mississippi Valley Gas
         Company with and into the Borrower pursuant to the MVG Merger
         Agreement.

                  "MVG Merger Agreement" means the Agreement and Plan of Merger
         and Reorganization, dated as of September 21, 2001, by and among Atmos
         Energy Corporation, Mississippi Valley Gas Company and the Shareholders
         of the Mississippi Valley Gas Company.

                  "Net Cash Proceeds" means with respect to any public offering
         of common stock or any issuance of long-term indebtedness for borrowed
         money or any other long-term capital markets issuance, the aggregate
         cash proceeds received by the Borrower or any Subsidiary pursuant to
         such offering or issuance, net of the direct costs relating to such
         offering or issuance (including, without limitation, sales and
         underwriter's discounts and commissions and legal, accounting and
         investment banking fees).

                  "1957 Indenture" means, collectively, that certain Indenture
         of Mortgage, dated as of March 1, 1957, granted by Greeley Gas Company
         (predecessor in interest to the Borrower) to The Central Bank and Trust
         Company, as original Trustee, and all Supplemental Indentures thereto.


                                       8
<PAGE>

                  "1959 Indenture" means, collectively, that certain Indenture
         of Mortgage, dated as of July 15, 1959, granted by United Cities Gas
         Company (predecessor in interest to the Borrower) to City National Bank
         and Trust Company of Chicago and R. Emmett Hanley, as the original
         Trustees, and all Supplemental Indentures thereto, including, without
         limitation, that certain First Supplemental Indenture, dated as of
         November 1, 1960; that certain Second Supplemental Indenture, dated as
         of June 1, 1962; that certain Third Supplemental Indenture, dated as of
         February 1, 1963; that certain Fourth Supplemental Indenture, dated as
         of June 15, 1963; that certain Fifth Supplemental Indenture, dated as
         of November 15, 1964; that certain Sixth Supplemental Indenture, dated
         as of March 15, 1968; that certain Seventh Supplemental Indenture,
         dated as of August 1, 1970; that certain Eighth Supplemental Indenture,
         dated as of September 1, 1972; that certain Ninth Supplemental
         Indenture, dated as of January 1, 1974; that certain Tenth Supplemental
         Indenture, dated as of July 1, 1976; that certain Eleventh Supplemental
         Indenture, dated as of December 1, 1976; that certain Twelfth
         Supplemental Indenture, dated as of April 1, 1981; that certain
         Thirteenth Supplemental Indenture, dated as of May 1, 1982; that
         certain Fourteenth Supplemental Indenture, dated as of March 1, 1987;
         that certain Fifteenth Supplemental Indenture, dated as of October 1,
         1987; that certain Sixteenth Supplemental Indenture, dated as of
         December 1, 1989; that certain Seventeenth Supplemental Indenture,
         dated as of April 1, 1990; that certain Eighteenth Supplemental
         Indenture, dated as of June 1, 1991; that certain Nineteenth
         Supplemental Indenture, dated as of May 1, 1992; that certain Twentieth
         Supplemental Indenture, dated as of December 1, 1992; that certain
         Twenty-First Supplemental Indenture, dated as of February 5, 1997; and
         that certain Twenty-Second Supplemental Indenture, dated as of July 29,
         1997.

                  "1987 Note Purchase Agreements" means, collectively, those
         certain Note Purchase Agreements, dated as of December 21, 1987, by and
         between Energas Company (predecessor in interest to the Borrower) and
         (a) John Hancock Mutual Life Insurance Company, (b) John Hancock
         Charitable Trust I and (c) Mellon Bank, N.A., Trustee under the Master
         Trust of AT&T Corporation, and all Amendments thereto, including,
         without limitation, that certain Amendment to Note Purchase Agreements,
         amending each of the above-referenced Note Purchase Agreements, each
         dated as of (i) October 11, 1989, (ii) November 12, 1991, (iii)
         December 22, 1993, (iv) December 20, 1994 and July 29, 1997.

                  "1989 Note Purchase Agreement" means, collectively, that
         certain Note Purchase Agreement, dated as of October 11, 1989, by and
         between the Borrower and John Hancock Mutual Life Insurance Company,
         and all Amendments thereto, including, without limitation, those
         Amendments dated as of October 11, 1989, November 12, 1991, December
         22, 1993, December 20, 1994, and July 29, 1997.

                  "1991 Note Purchase Agreement" means, collectively, that
         certain Note Purchase Agreement, dated as of August 29, 1991, by and
         between the Borrower and The Variable Annuity Life Insurance Company,
         and all Amendments thereto, including, without limitation, those
         Amendments dated as of November 26, 1991, December 22, 1993, and July
         29, 1997.


                                       9
<PAGE>

                  "1992 Note Purchase Agreement" means, collectively, that
         certain Note Purchase Agreement, dated as of August 31, 1992, by and
         between the Borrower and The Variable Annuity Life Insurance Company,
         and all Amendments thereto, including, without limitation, those
         Amendments dated as of December 22, 1993, and July 29, 1997.

                  "1994 Note Purchase Agreement" means, collectively, that
         certain Note Purchase Agreement dated November 14, 1994, by and among
         the Borrower and New York Life Insurance Company, New York Life
         Insurance and Annuity Corporation, The Variable Annuity Life Insurance
         Company, American General Life Insurance Company, and Merit Life
         Insurance Company, and all Amendments thereto; including, without
         limitation, that Amendment dated as of July 29, 1997.

                  "1998 Indenture" means, collectively, that certain Indenture,
         dated as of July 15, 1998, granted by the Borrower to US Bank Trust
         National Association, as Trustee, and all Supplemental Indentures
         thereto.

                  "Notes" means the Bridge Loan Notes.

                  "Notice of Borrowing" means a request by the Borrower for a
         Bridge Loan in the form of Exhibit 2.2.

                  "Notice of Continuation/Conversion" means a request by the
         Borrower for the continuation or conversion of a Bridge Loan in the
         form of Exhibit 2.4.

                  "PBGC" means the Pension Benefit Guaranty Corporation
         established pursuant to Subtitle A of Title IV of ERISA and any
         successor thereto.

                  "Person" means any individual, partnership, joint venture,
         firm, corporation, association, trust, limited liability company or
         other enterprise (whether or not incorporated), or any government or
         political subdivision or any agency, department or instrumentality
         thereof.

                  "Plan" means any employee benefit plan (as defined in Section
         3(3) of ERISA) which is covered by ERISA and with respect to which the
         Borrower or any ERISA Affiliate is (or, if such plan were terminated at
         such time, would under Section 4069 of ERISA be deemed to be) an
         "employer" within the meaning of Section 3(5) of ERISA.

                  "Preferred Securities" means, at any date, any equity
         interests in the Borrower, in a Special Purpose Financing Subsidiary of
         the Borrower or in any other Subsidiary of the Borrower (such as those
         known as "TECONS", "MIPS" or "RHINOS"): (a) that are not (i) required
         to be redeemed or redeemable at the option of the holder thereof prior
         to the fifth anniversary of the Maturity Date or (ii) convertible into
         or exchangeable for (unless solely at the option of the Borrower or
         such Subsidiary of the Borrower) equity interests referred to in clause
         (i) above or indebtedness having a scheduled maturity, or requiring any
         repayments or prepayments of principal or any sinking fund or similar
         payments in respect of principal or providing for any such repayment,
         prepayment, sinking fund or other payment at the option of the holder
         thereof prior to the fifth anniversary of the Maturity Date and (b) as
         to which, at such date, the Borrower or such Subsidiary of the


                                       10
<PAGE>

         Borrower has the right to defer the payment of all dividends and other
         distributions in respect thereof for the period of at least 19
         consecutive quarters beginning at such date.

                  "Pricing Schedule" - See Schedule 1.1(b).

                  "Prime Rate" means a rate per annum equal to the prime rate of
         interest announced from time to time by Bank One, NA or its parent
         (which is not necessarily the lowest rate charged to any customer),
         changing when and as said prime rate changes.

                  "Register" has the meaning set forth in Section 11.3(c).

                  "Regulation A, D, O, T, U, or X" means Regulation A, D, O, T,
         U or X, respectively, of the Board of Governors of the Federal Reserve
         System (or any successor body) as from time to time in effect, any
         amendment thereto and any successor to all or a portion thereof.

                  "Reportable Event" means a "reportable event" as defined in
         Section 4043 of ERISA with respect to which the notice requirements to
         the PBGC have not been waived.

                  "Required Lenders" means Lenders whose aggregate Credit
         Exposure (as hereinafter defined) constitutes more than 51% of the
         aggregate Credit Exposure of all Lenders at such time; provided,
         however, that if any Lender shall be a Defaulting Lender at such time
         then there shall be excluded from the determination of Required Lenders
         the aggregate principal amount of Credit Exposure of such Lender at
         such time. For purposes of the preceding sentence, the term "Credit
         Exposure" as applied to each Lender shall mean (a) at any time prior to
         the termination of the Commitments, the Commitment Percentage of such
         Lender multiplied times the Bridge Loan Commitment and (b) at any time
         after the termination of the Commitments, the sum of the principal
         balance of the outstanding Bridge Loans of such Lender.

                  "S&P" means Standard & Poor's Ratings Services, a division of
         McGraw Hill, Inc., or any successor or assignee of the business of such
         division in the business of rating securities.

                  "S&P Rating" - see the Pricing Schedule.

                  "Securities Act" means the Securities Act of 1933, as amended,
         and the rules and regulations promulgated thereunder.

                  "Single Employer Plan" means any Plan which is covered by
         Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
         Employer Plan.

                  "Special Purpose Financing Subsidiary" means a Subsidiary of
         the Borrower that has no direct or indirect interest in the business of
         the Borrower and its other Subsidiaries and was formed solely for the
         purpose of issuing Preferred Securities.

                  "Subsidiary" means, as to any Person, (a) any corporation more
         than 50% of whose stock of any class or classes having by the terms
         thereof ordinary voting power to


                                       11
<PAGE>

         elect a majority of the directors of such corporation (irrespective of
         whether or not, at the time, any class or classes of such corporation
         shall have or might have voting power by reason of the happening of any
         contingency) is at the time owned by such Person directly or indirectly
         through Subsidiaries and (b) any partnership, association, joint
         venture, limited liability company or other entity in which such Person
         directly or indirectly through Subsidiaries has more than 50% equity
         interest at any time.

                  "Termination Event" means (a) with respect to any Single
         Employer Plan, the occurrence of a Reportable Event or the substantial
         cessation of operations (within the meaning of Section 4062(e) of
         ERISA), (b) the withdrawal of the Borrower or any ERISA Affiliate from
         a Multiple Employer Plan during a plan year in which it was a
         substantial employer (as such term is defined in Section 4001(a)(2) of
         ERISA), or the termination of a Multiple Employer Plan, (c) the
         distribution of a notice of intent to terminate or the actual
         termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA,
         (d) the institution of proceedings to terminate or the actual
         termination of a Plan by the PBGC under Section 4042 of ERISA, (e) any
         event or condition which might reasonably constitute grounds under
         Section 4042 of ERISA for the termination of, or the appointment of a
         trustee to administer, any Plan, or (f) the complete or partial
         withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer
         Plan.

                  "Total Assets" means all assets of the Borrower as shown on
         its most recent quarterly consolidated balance sheet, as determined in
         accordance with GAAP.

                  "2001 Indenture" means, collectively, that certain Indenture,
         dated as of May 22, 2001, granted by the Borrower to SunTrust Bank,
         Atlanta, as Trustee, and all Supplemental Indentures thereto.

                  "Unused Bridge Loan Commitment" means, for any period from the
         Effective Date to the Maturity Date, the amount by which (a) the then
         applicable Bridge Loan Commitment exceeds (b) the daily average sum for
         such period of the aggregate principal amount of all Bridge Loans
         outstanding.

                  "Unused Fees" has the meaning set forth in Section 3.4(a).

                  "Utilization Fees" has the meaning set forth in Section
         3.4(b).

                  "Woodward Acquisition" means the acquisition by the Borrower
         on April 1, 2001, of the remaining 55% ownership interest in Woodward
         Marketing LLC theretofore not owned by the Borrower, pursuant to that
         certain Asset Purchase Agreement, dated as of August 7, 2000, by and
         among the Borrower, Atmos Energy Marketing, LLC, a wholly-owned
         Subsidiary of the Borrower, Woodward Marketing, Inc. and the
         shareholders of Woodward Marketing, Inc.

         1.2 COMPUTATION OF TIME PERIODS.

         For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding." References in this Credit Agreement to "Articles", "Sections",
"Schedules" or "Exhibits" shall be to Articles,


                                       12
<PAGE>

Sections, Schedules or Exhibits of or to this Credit Agreement unless otherwise
specifically provided.

         1.3 ACCOUNTING TERMS.

         Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1 (or,
prior to the delivery of the first financial statements pursuant to Section 7.1,
consistent with the financial statements described in Section 5.1(d)); provided,
however, if (a) the Borrower shall object to determining such compliance on such
basis at the time of delivery of such financial statements due to any change in
GAAP or the rules promulgated with respect thereto or (b) the Administrative
Agent or the Required Lenders shall so object in writing within 30 days after
delivery of such financial statements, then such calculations shall be made on a
basis consistent with the most recent financial statements delivered by the
Borrower to the Lenders as to which no such objection shall have been made.

         1.4 TIME.

         All references to time herein shall be references to Central Standard
Time or Central Daylight time, as the case may be, unless specified otherwise.

                                   SECTION 2.

                                      LOANS

         2.1 BRIDGE LOAN COMMITMENT.

                  (a) Bridge Loans. Subject to the terms and conditions set
         forth herein, each Lender severally agrees to make loans to the
         Borrower in Dollars, at any time and from time to time, during the
         period from the Effective Date to the Maturity Date (each a "Bridge
         Loan" and collectively the "Bridge Loans"); provided, however, that (i)
         the aggregate amount of Bridge Loans outstanding shall not exceed the
         Bridge Loan Commitment and (ii) with respect to each individual Lender,
         the Lender's Commitment Percentage multiplied by the outstanding Bridge
         Loans shall not exceed such Lender's Commitment.

         2.2 METHOD OF BORROWING FOR BRIDGE LOANS.

         By no later than 11:00 a.m. (a) on the date of the requested borrowing
of Bridge Loans that will be Base Rate Loans or (b) three Business Days prior to
the date of the requested borrowing of Bridge Loans that will be Eurodollar
Loans, the Borrower shall telephone the Administrative Agent as well as submit a
written Notice of Borrowing in the form of Exhibit 2.2 to the Administrative
Agent setting forth (i) the amount requested, (ii) whether such Loans shall


                                       13
<PAGE>

accrue interest at the Base Rate or the Adjusted Eurodollar Rate, (iii) with
respect to Loans that will be Eurodollar Loans, the Interest Period applicable
thereto and (iv) certification that the Borrower has complied in all respects
with Section 5.2. There may be no more than five (5) Borrowings of Bridge Loans
under this Credit Agreement.

         2.3 FUNDING OF BRIDGE LOANS.

         Upon receipt of a Notice of Borrowing, the Administrative Agent shall
promptly inform the Lenders as to the terms thereof. Each such Lender shall make
its Commitment Percentage of the requested Bridge Loans available to the
Administrative Agent by 1:00 p.m. on the date specified in the Notice of
Borrowing by deposit, in Dollars, of immediately available funds at the Agency
Services Address. The amount of the requested Bridge Loans will then be made
available to the Borrower by the Administrative Agent by crediting the account
of the Borrower on the books of such office of the Administrative Agent, to the
extent the amount of such Bridge Loans are made available to the Administrative
Agent.

         No Lender shall be responsible for the failure or delay by any other
Lender in its obligation to make Bridge Loans hereunder; provided, however, that
the failure of any Lender to fulfill its obligations hereunder shall not relieve
any other Lender of its obligations hereunder. Unless the Administrative Agent
shall have been notified by any Lender prior to the date of any such Bridge Loan
that such Lender does not intend to make available to the Administrative Agent
its portion of the Bridge Loans to be made on such date, the Administrative
Agent may assume that such Lender has made such amount available to the
Administrative Agent on the date of such Bridge Loans, and the Administrative
Agent in reliance upon such assumption, may (in its sole discretion but without
any obligation to do so) make available to the Borrower a corresponding amount.
If such corresponding amount is not in fact made available to the Administrative
Agent, the Administrative Agent shall be able to recover such corresponding
amount from such Lender. If such Lender does not pay such corresponding amount
forthwith upon the Administrative Agent's demand therefor, the Administrative
Agent will promptly notify the Borrower, and the Borrower shall immediately pay
such corresponding amount to the Administrative Agent. The Administrative Agent
shall also be entitled to recover from the Lender or the Borrower, as the case
may be, interest on such corresponding amount in respect of each day from the
date such corresponding amount was made available by the Administrative Agent to
the Borrower to the date such corresponding amount is recovered by the
Administrative Agent at a per annum rate equal to (a) from the Borrower at the
applicable rate for such Bridge Loan pursuant to the Notice of Borrowing and (b)
from a Lender at the Federal Funds Rate.

         2.4 CONTINUATIONS AND CONVERSIONS.

         The Borrower shall have the option, on any Business Day, to continue
existing Eurodollar Loans for a subsequent Interest Period, to convert Base Rate
Loans into Eurodollar Loans or to convert Eurodollar Loans into Base Rate Loans;
provided, however, that (a) each such continuation or conversion must be
requested by the Borrower pursuant to a written Notice of
Continuation/Conversion, in the form of Exhibit 2.4, in compliance with the
terms set forth below, (b) except as provided in Section 4.1, Eurodollar Loans
may only be continued or converted into Base Rate Loans on the last day of the
Interest Period applicable thereto, (c) Eurodollar Loans may not be continued
nor may Base Rate Loans be converted into


                                       14
<PAGE>

Eurodollar Loans during the existence and continuation of a Default or Event of
Default and (d) any request to extend a Eurodollar Loan that fails to comply
with the terms hereof or any failure to request an extension of a Eurodollar
Loan at the end of an Interest Period shall constitute a conversion to a Base
Rate Loan on the last day of the applicable Interest Period. Each continuation
or conversion must be requested by the Borrower no later than 11:00 a.m. (i) on
the date for a requested conversion of a Eurodollar Loan to a Base Rate Loan or
(ii) three Business Days prior to the date for a requested continuation of a
Eurodollar Loan or conversion of a Base Rate Loan to a Eurodollar Loan, in each
case pursuant to a written Notice of Continuation/Conversion submitted to the
Administrative Agent which shall set forth (A) whether the Borrower wishes to
continue or convert such Loans and (B) if the request is to continue a
Eurodollar Loan or convert a Base Rate Loan to a Eurodollar Loan, the Interest
Period applicable thereto.

         2.5 MINIMUM AMOUNTS.

         Each request for a Loan or a conversion or continuation hereunder shall
be subject to the following requirements: (a) each Eurodollar Loan shall be in a
minimum of $5,000,000 (and in integral multiples of $1,000,000 in excess
thereof), (b) each Base Rate Loan shall be in a minimum amount of the lesser of
$5,000,000 (and in integral multiples of $1,000,000 in excess thereof) or the
remaining amount of the Bridge Loan Commitment available to be borrowed and (c)
no more than five Eurodollar Loans shall be outstanding hereunder at any one
time. For the purposes of this Section 2.5, all Eurodollar Loans with the same
Interest Periods that begin and end on the same date shall be considered as one
Eurodollar Loan, but Eurodollar Loans with different Interest Periods, even if
they begin on the same date, shall be considered separate Eurodollar Loans.

         2.6 REDUCTIONS OF BRIDGE LOAN COMMITMENT.

                  (a) Voluntary. Upon at least three Business Days' prior
         written notice, the Borrower shall have the right to permanently
         terminate or reduce the aggregate unused amount of the Bridge Loan
         Commitment at any time or from time to time; provided that (a) each
         partial reduction shall be in an aggregate amount at least equal to
         $5,000,000 and in integral multiples of $1,000,000 above such amount
         and (b) no reduction shall be made which would reduce the Bridge Loan
         Commitment to an amount less than the sum of the then outstanding
         Bridge Loans. Any reduction in (or termination of) the Bridge Loan
         Commitment shall be permanent and may not be reinstated.

                  (b) Mandatory. Concurrently with the receipt by the Borrower
         or any Subsidiary of any Net Cash Proceeds of any public offering of
         common stock or any issuance of long-term indebtedness for borrowed
         money or any other long-term capital markets issuance of the Borrower
         or any Subsidiary, the aggregate unused amount of the Bridge Loan
         Commitment shall be reduced by the amount of such Net Cash Proceeds not
         applied as a mandatory prepayment of Bridge Loans pursuant to Section
         3.2(b). Any reduction in the Bridge Loan Commitment shall be permanent
         and may not be reinstated.


                                       15
<PAGE>


         2.7 NOTES.

                  The Bridge Loans made by the Lenders shall be evidenced by a
         promissory note of the Borrower payable to each Lender in substantially
         the form of Exhibit 2.7 (the "Bridge Loan Notes").

         The date, amount, type, interest rate and duration of Interest Period
(if applicable) of each Loan made by each Lender to the Borrower, and each
payment made on account of the principal thereof, shall be recorded by such
Lender on its books; provided that the failure of such Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower to
make a payment when due of any amount owing hereunder or under any Note in
respect of the Loans to be evidenced by such Note, and each such recordation or
endorsement shall be conclusive and binding absent manifest error.


                                   SECTION 3.

                                    PAYMENTS

         3.1 INTEREST.

                  (a) Interest Rate.

                           (i) All Base Rate Loans shall accrue interest at the
                  Base Rate.

                           (ii) All Eurodollar Loans shall accrue interest at
                  the Adjusted Eurodollar Rate applicable to each Eurodollar
                  Loan.

                  (b) Default Rate of Interest. Upon the occurrence, and during
         the continuation, of an Event of Default, the principal of and, to the
         extent permitted by law, interest on the Loans and any other amounts
         owing hereunder or under the other Credit Documents shall bear
         interest, payable on demand, at a per annum rate equal to two percent
         (2%) plus the rate which would otherwise be applicable (or if no rate
         is applicable, then the rate for Bridge Loans that are Base Rate Loans
         plus two percent (2%) per annum).

                  (c) Interest Payments. Interest on Loans shall be due and
         payable in arrears on each Interest Payment Date.

         3.2 PREPAYMENTS.

                  (a) Voluntary Prepayments. The Borrower shall have the right
         to prepay Loans in whole or in part from time to time without premium
         or penalty; provided, however, that (i) Eurodollar Loans may only be
         prepaid on three Business Days' prior written notice to the
         Administrative Agent and any prepayment of Eurodollar Loans will be
         subject to Section 4.3; and (ii) each such partial prepayment of Loans
         shall be in the minimum principal amount of $5,000,000 and in integral
         multiples of $1,000,000 above


                                       16
<PAGE>

         such amount. Amounts prepaid hereunder shall be applied as the Borrower
         may elect; provided that if the Borrower fails to specify the
         application of a voluntary prepayment then such prepayment shall be
         applied first to Base Rate Loans and then to Eurodollar Loans in direct
         order of Interest Period maturities. Once prepaid, the amount of such
         Bridge Loans may not be re-borrowed.

                  (b) Mandatory Prepayments.

                           (i) If at any time the amount of Bridge Loans
                  outstanding exceeds the Bridge Loan Commitment, the Borrower
                  shall immediately make a principal payment to the
                  Administrative Agent in the manner and in an amount such that
                  the amount of Bridge Loans outstanding is less than or equal
                  to the Bridge Loan Commitment.

                           (ii) Concurrently with the receipt by the Borrower or
                  any Subsidiary of any Net Cash Proceeds of any public offering
                  of common stock or any issuance of long-term indebtedness for
                  borrowed money or any other long-term capital markets issuance
                  of the Borrower or any Subsidiary, the Borrower shall
                  immediately make a principal payment of Bridge Loans to the
                  Administrative Agent in an amount equal to 100% of such Net
                  Cash Proceeds.

                  Any payments made under this Section 3.2(b) shall be subject
         to Section 4.3 and shall be applied first to Base Rate Loans and then
         to Eurodollar Loans in direct order of Interest Period maturities. Once
         prepaid, the amount of such Bridge Loans may not be re-borrowed.

         3.3 PAYMENT IN FULL AT MATURITY.

         On the Maturity Date, the entire outstanding principal balance of all
Loans, together with accrued but unpaid interest and all other sums owing under
this Credit Agreement and the other Credit Documents, shall be due and payable
in full, unless accelerated sooner pursuant to Section 9.2.

         3.4 FEES.

                  (a) Unused Fees.

                           (i) In consideration of the Bridge Loan Commitment
                  being made available by the Lenders hereunder, the Borrower
                  agrees to pay to the Administrative Agent, for the pro rata
                  benefit of each Lender, a per annum fee equal to the
                  Applicable Percentage for Unused Fees (as set forth on the
                  Pricing Schedule) on the Unused Bridge Loan Commitment (the
                  "Unused Fees").

                           (ii) The accrued Unused Fees shall be due and payable
                  in arrears five Business Days after the end of each fiscal
                  quarter of the Borrower (as well as on the Maturity Date) for
                  the immediately preceding fiscal quarter (or portion thereof),
                  beginning with the first of such dates to occur after the date
                  of execution of this Credit Agreement.


                                       17
<PAGE>

                  (b) Utilization Fees. For each day that the principal amount
         of outstanding Loans hereunder shall exceed an amount equal to thirty
         three and one third percent (33 1/3%) of the Bridge Loan Commitment,
         the Borrower shall pay to the Administrative Agent, for the pro rata
         benefit of the Lenders, a per annum fee equal to the Applicable
         Percentage for Utilization Fees as set forth on the Pricing Schedule
         (the "Utilization Fees"). The Utilization Fees, if any, shall be due
         and payable in arrears five Business Days after the end of each fiscal
         quarter of the Borrower (as well as on the Maturity Date) for the
         immediately preceding fiscal quarter (or portion thereof), beginning
         with the first of such dates to occur after the Effective Date.

         3.5 PLACE AND MANNER OF PAYMENTS.

         All payments of principal, interest, fees, expenses and other amounts
to be made by the Borrower under this Credit Agreement shall be made
unconditionally and without setoff, deduction, defense, recoupment or
counterclaim and received not later than 2:00 p.m. on the date when due, in
Dollars and in immediately available funds, by the Administrative Agent at the
Agency Services Address. In the event any such payment shall be due on a day
that is not a Business Day, the applicable payment date shall be the next
succeeding Business Day, except, with respect to Eurodollar Loans, if the next
succeeding Business Day shall fall in the next succeeding calendar month, then
such payment shall be due on the next preceding Business Day. The Borrower
shall, at the time it makes any payment under this Credit Agreement, specify to
the Administrative Agent, the Loans, fees or other amounts payable by the
Borrower hereunder to which such payment is to be applied (and in the event that
it fails to specify, or if such application would be inconsistent with the terms
hereof, the Administrative Agent shall distribute such payment to the Lenders in
such manner as it reasonably determines in its sole discretion.)

         3.6 PRO RATA TREATMENT.

         Except to the extent otherwise provided herein, all Bridge Loans, each
payment or prepayment of principal of any Bridge Loan, each payment of interest
on the Bridge Loans, each payment of Unused Fees, each payment of Utilization
Fees, each reduction of the Bridge Loan Commitment, and each conversion or
continuation of any Bridge Loans, shall be allocated pro rata among the Lenders
in accordance with the respective Commitment Percentages; provided that, if any
Lender shall have failed to pay its applicable pro rata share of any Bridge
Loan, then any amount to which such Lender would otherwise be entitled pursuant
to this Section 3.6 shall instead be payable to the Administrative Agent until
the share of such Bridge Loan not funded by such Lender has been repaid and any
interest owed by such Lender as a result of such failure to fund has been paid;
and provided further, that in the event any amount paid to any Lender pursuant
to this Section 3.6 is rescinded or must otherwise be returned by the
Administrative Agent, each Lender shall, upon the request of the Administrative
Agent, repay to the Administrative Agent the amount so paid to such Lender, with
interest for the period commencing on the date such payment is returned by the
Administrative Agent until the date the Administrative Agent receives such
repayment at a rate per annum equal to, during the period to but excluding the
date two Business Days after such request, the Federal Funds Rate, and
thereafter, the Base Rate plus two percent (2%) per annum.


                                       18
<PAGE>

         3.7 COMPUTATIONS OF INTEREST AND FEES.

                  (a) Except for Base Rate Loans accruing interest at the Prime
         Rate, which interest shall be computed on the basis of a 365 or 366 day
         year as the case may be, all computations of interest and fees
         hereunder shall be made on the basis of the actual number of days
         elapsed over a year of 360 days. Interest shall accrue from the date a
         Loan is made until the date such Loan is repaid or continued or
         converted pursuant to Section 2.4.

                  (b) It is the intent of the Lenders and the Borrower to
         conform to and contract in strict compliance with applicable usury law
         from time to time in effect. All agreements between the Lenders and the
         Borrower are hereby limited by the provisions of this paragraph which
         shall override and control all such agreements, whether now existing or
         hereafter arising and whether written or oral. In no way, nor in any
         event or contingency (including but not limited to prepayment or
         acceleration of the maturity of any obligation), shall the interest
         taken, reserved, contracted for, charged, or received under this Credit
         Agreement, under the Notes or otherwise, exceed the maximum nonusurious
         amount permissible under applicable law. If, from any possible
         construction of any of the Credit Documents or any other document,
         interest would otherwise be payable in excess of the maximum
         nonusurious amount, any such construction shall be subject to the
         provisions of this paragraph and interest owing pursuant to such
         documents shall be automatically reduced to the maximum nonusurious
         amount permitted under applicable law, without the necessity of
         execution of any amendment or new document. If any Lender shall ever
         receive anything of value which is characterized as interest on the
         Loans under applicable law and which would, apart from this provision,
         be in excess of the maximum lawful amount, an amount equal to the
         amount which would have been excessive interest shall, without penalty,
         be applied to the reduction of the principal amount owing on the Loans
         and not to the payment of interest, or refunded to the Borrower or the
         other payor thereof if and to the extent such amount which would have
         been excessive exceeds such unpaid principal amount of the Loans. The
         right to demand payment of the Loans or any other indebtedness
         evidenced by any of the Credit Documents does not include the right to
         receive any interest which has not otherwise accrued on the date of
         such demand, and the Lenders do not intend to charge or receive any
         unearned interest in the event of such demand. All interest paid or
         agreed to be paid to the Lenders with respect to the Loans shall, to
         the extent permitted by applicable law, be amortized, prorated,
         allocated, and spread throughout the full stated term (including any
         renewal or extension) of the Loans so that the amount of interest on
         account of such indebtedness does not exceed the maximum nonusurious
         amount permitted by applicable law.

         3.8 SHARING OF PAYMENTS.

         Each Lender agrees that, in the event that any Lender shall obtain
payment in respect of any Loan or any other obligation owing to such Lender
under this Credit Agreement through the exercise of a right of set-off, banker's
lien, counterclaim or otherwise (including, but not limited to, pursuant to the
Bankruptcy Code) in excess of its pro rata share as provided for in this Credit
Agreement, such Lender shall promptly purchase from the other Lenders a
participation in such


                                       19
<PAGE>

Loans and other obligations, in such amounts and with such other adjustments
from time to time, as shall be equitable in order that all Lenders share such
payment in accordance with their respective ratable shares as provided for in
this Credit Agreement. Each Lender further agrees that if a payment to a Lender
(which is obtained by such Lender through the exercise of a right of set-off,
banker's lien, counterclaim or otherwise) shall be rescinded or must otherwise
be restored, each Lender which shall have shared the benefit of such payment
shall, by repurchase of a participation theretofore sold, return its share of
that benefit to each Lender whose payment shall have been rescinded or otherwise
restored. The Borrower agrees that any Lender so purchasing such a participation
may, to the fullest extent permitted by law, exercise all rights of payment,
including set-off, banker's lien or counterclaim, with respect to such
participation as fully as if such Lender were a holder of such Loan or other
obligation in the amount of such participation. Except as otherwise expressly
provided in this Credit Agreement, if any Lender shall fail to remit to the
Administrative Agent or any other Lender an amount payable by such Lender to the
Administrative Agent or such other Lender pursuant to this Credit Agreement on
the date when such amount is due, such payments shall accrue interest thereon,
for each day from the date such amount is due until the day such amount is paid
to the Administrative Agent or such other Lender, at a rate per annum equal to
the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section 3.8 applies, such Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders under this Section 3.8 to share in the benefits of any
recovery on such secured claim.

         3.9 EVIDENCE OF DEBT.

                  (a) Each Lender shall maintain an account or accounts
         evidencing each Loan made by such Lender to the Borrower from time to
         time, including the amounts of principal and interest payable and paid
         to such Lender from time to time under this Credit Agreement. Each
         Lender will make reasonable efforts to maintain the accuracy of its
         account or accounts and to promptly update its account or accounts from
         time to time, as necessary.

                  (b) The Administrative Agent shall maintain the Register
         pursuant to Section 11.3(c), and a subaccount for each Lender, in which
         Register and subaccounts (taken together) shall be recorded (i) the
         amount, type and Interest Period of each such Loan hereunder, (ii) the
         amount of any principal or interest due and payable or to become due
         and payable to each Lender hereunder and (iii) the amount of any sum
         received by the Administrative Agent hereunder from or for the account
         of the Borrower and each Lender's share thereof. The Administrative
         Agent will make reasonable efforts to maintain the accuracy of the
         subaccounts referred to in the preceding sentence and to promptly
         update such subaccounts from time to time, as necessary.

                  (c) The entries made in the accounts, Register and subaccounts
         maintained pursuant to subsection (b) of this Section 3.9 (and, if
         consistent with the entries of the Administrative Agent, subsection
         (a)) shall be prima facie evidence of the existence and amounts of the
         obligations of the Borrower therein recorded; provided, however, that
         the failure of any Lender or the Administrative Agent to maintain any
         such account, such Register or such subaccount, as applicable, or any
         error therein, shall not in any manner


                                       20
<PAGE>

         affect the obligation of the Borrower to repay the Loans made by such
         Lender in accordance with the terms hereof.

                                   SECTION 4.

                      ADDITIONAL PROVISIONS REGARDING LOANS

         4.1 EURODOLLAR LOAN PROVISIONS.

                  (a) Unavailability. In the event that the Administrative Agent
         shall have determined in good faith (i) that U.S. dollar deposits in
         the principal amounts requested with respect to a Eurodollar Loan are
         not generally available in the London interbank Eurodollar market or
         (ii) that reasonable means do not exist for ascertaining the Eurodollar
         Rate, the Administrative Agent shall, as soon as practicable
         thereafter, give notice of such determination to the Borrower and the
         Lenders. In the event of any such determination under clauses (i) or
         (ii) above, until the Administrative Agent shall have advised the
         Borrower and the Lenders that the circumstances giving rise to such
         notice no longer exist, (A) any request by the Borrower for Eurodollar
         Loans shall be deemed to be a request for Base Rate Loans, (B) any
         request by the Borrower for conversion into or continuation of
         Eurodollar Loans shall be deemed to be a request for conversion into or
         continuation of Base Rate Loans and (C) any Loans that were to be
         converted or continued as Eurodollar Loans on the first day of an
         Interest Period shall be converted to or continued as Base Rate Loans.

                  (b) Change in Legality.

                           (i) Notwithstanding any other provision herein, if
                  any change, after the date hereof, in any law, governmental
                  rule, regulation, guideline or order (including the
                  introduction of any new law, governmental rule, regulation,
                  guideline or order) or in the interpretation or administration
                  thereof by any Governmental Authority charged with the
                  interpretation or administration thereof shall make it
                  unlawful for any Lender to make or maintain any Eurodollar
                  Loan or to give effect to its obligations as contemplated
                  hereby with respect to any Eurodollar Loan, then, by written
                  notice to the Borrower and to the Administrative Agent, such
                  Lender may:

                                    (A) declare that Eurodollar Loans, and
                           conversions to or continuations of Eurodollar Loans,
                           will not thereafter be made by such Lender hereunder,
                           whereupon any request by the Borrower for, or for
                           conversion into or continuation of, Eurodollar Loans
                           shall, as to such Lender only, be deemed a request
                           for, or for conversion into or continuation of, Base
                           Rate Loans, unless such declaration shall be
                           subsequently withdrawn; and

                                    (B) require that all outstanding Eurodollar
                           Loans made by it be converted to Base Rate Loans in
                           which event all such Eurodollar Loans shall be
                           automatically converted to Base Rate Loans.


                                       21
<PAGE>

                  In the event any Lender shall exercise its rights under clause
         (A) or (B) above, all payments and prepayments of principal which would
         otherwise have been applied to repay the Eurodollar Loans that would
         have been made by such Lender or the converted Eurodollar Loans of such
         Lender shall instead be applied to repay the Base Rate Loans made by
         such Lender in lieu of, or resulting from the conversion of, such
         Eurodollar Loans.

                  (c) Requirements of Law. If at any time a Lender shall incur
         increased costs or reductions in the amounts received or receivable
         hereunder with respect to the making, the commitment to make or the
         maintaining of any Eurodollar Loan because of (i) any change after the
         date hereof, in any law, governmental rule, regulation, guideline or
         order (including the introduction of any new law, governmental rule,
         regulation, guideline or order) or in the interpretation or
         administration thereof by any Governmental Authority charged with the
         interpretation or administration thereof, including, without
         limitation, the imposition, modification or deemed applicability of any
         reserves, deposits or similar requirements (such as, for example, but
         not limited to, a change in official reserve requirements, but, in all
         events, excluding reserves required under Regulation D to the extent
         included in the computation of the Adjusted Eurodollar Rate) or (ii)
         other circumstances affecting the London interbank Eurodollar market;
         then (A) the Lender shall promptly notify the Administrative Agent and
         the Borrower and shall designate a different lending office of such
         Lender if such designation will avoid or reduce the amount of such
         increased costs, or reductions in amounts receivable and such
         designation will not, in such Lender's sole discretion, be otherwise
         disadvantageous to such Lender and (B) the Borrower shall promptly pay
         to such Lender such additional amounts (in the form of an increased
         rate of, or a different method of calculating, interest or otherwise as
         such Lender may determine in its sole discretion) as may be required to
         compensate such Lender for such increased costs or reductions in
         amounts receivable hereunder.

         Each determination and calculation made by a Lender under this Section
4.1 shall, absent manifest error, be binding and conclusive on the parties
hereto. Any conversions of Eurodollar Loans made pursuant to this Section 4.1
shall subject the Borrower to the payments required by Section 4.3. This Section
4.1 shall survive termination of this Credit Agreement and the other Credit
Documents and the payment of the Loans and all other amounts payable hereunder.

         4.2 CAPITAL ADEQUACY.

         If any Lender has determined in good faith that the adoption or
effectiveness, after the date hereof, of any applicable law, rule or regulation
regarding capital adequacy, or any change therein (after the date hereof), or
any change in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender (or its parent corporation)
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on such Lender's (or
parent corporation's) capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender (or its parent
corporation) could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Lender's (or parent corporation's)
policies with respect to capital


                                       22
<PAGE>

adequacy), then, upon notice from such Lender, the Borrower shall promptly pay
to such Lender such additional amount or amounts as will compensate such Lender
for such reduction. Each determination by any such Lender of amounts owing under
this Section 4.2 shall, absent manifest error, be conclusive and binding on the
parties hereto. This Section 4.2 shall survive termination of this Credit
Agreement and the other Credit Documents and the payment of the Loans and all
other amounts payable hereunder.

         4.3 COMPENSATION.

         The Borrower promises to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur as a
consequence of (a) default by the Borrower in the making of a borrowing of,
conversion into or continuation of a Eurodollar Loan after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Credit Agreement, (b) default by the Borrower in making any prepayment of a
Eurodollar Loan after the Borrower has given a notice thereof in accordance with
the provisions of this Credit Agreement, (c) the making of a prepayment of a
Eurodollar Loan on a day which is not the last day of an Interest Period with
respect thereto and (d) the payment, continuation or conversion of a Eurodollar
Loan on a day which is not the last day of the Interest Period applicable
thereto or the failure to repay a Eurodollar Loan when required by the terms of
this Credit Agreement. Each determination by any such Lender of amounts owing
under this Section 4.3 shall, absent manifest error, be conclusive and binding
on the parties hereto. This Section 4.3 shall survive the termination of this
Credit Agreement and the other Credit Documents and the payment of the Loans and
all other amounts payable hereunder.

         4.4 TAXES.

                  (a) Except as provided below in this Section 4.4, all payments
         made by the Borrower under this Credit Agreement and any Notes shall be
         made free and clear of, and without deduction or withholding for or on
         account of, any present or future income, stamp or other taxes, levies,
         imposts, duties, charges, fees, deductions or withholdings, now or
         hereafter imposed, levied, collected, withheld or assessed by any
         court, or governmental body, agency or other official, excluding taxes
         measured by or imposed upon the net income of any Lender or its
         applicable lending office, or any branch or affiliate thereof, and all
         franchise taxes, branch taxes, taxes on doing business or taxes on the
         capital or net worth of any Lender or its applicable lending office, or
         any branch or affiliate thereof, in each case imposed in lieu of net
         income taxes: (i) by the jurisdiction under the laws of which such
         Lender, applicable lending office, branch or affiliate is organized or
         is located, or in which its principal executive office is located, or
         any nation within which such jurisdiction is located or any political
         subdivision thereof; or (ii) by reason of any connection between the
         jurisdiction imposing such tax and such Lender, applicable lending
         office, branch or affiliate other than a connection arising solely from
         such Lender having executed, delivered or performed its obligations, or
         received payment under or enforced, this Credit Agreement or any Notes.
         If any such non-excluded taxes, levies, imposts, duties, charges, fees,
         deductions or withholdings ("Non-Excluded Taxes") are required to be
         withheld from any amounts payable to an Administrative Agent or any
         Lender hereunder or under any Notes, (A) the amounts so payable to the
         Administrative Agent or such Lender shall be increased to the extent
         necessary to yield to


                                       23
<PAGE>

         the Administrative Agent or such Lender (after payment of all
         Non-Excluded Taxes) interest or any such other amounts payable
         hereunder at the rates or in the amounts specified in this Credit
         Agreement and any Notes, provided, however, that the Borrower shall be
         entitled to deduct and withhold any Non-Excluded Taxes and shall not be
         required to increase any such amounts payable to any Lender that is not
         organized under the laws of the United States of America or a state
         thereof if such Lender fails to comply with the requirements of
         paragraph (b) of this Section 4.4 whenever any Non-Excluded Taxes are
         payable by the Borrower, and (B) as promptly as possible after
         requested, the Borrower shall send to the Administrative Agent for its
         own account or for the account of such Lender, as the case may be, a
         certified copy of an original official receipt received by the Borrower
         showing payment thereof. If the Borrower fails to pay any Non-Excluded
         Taxes when due to the appropriate taxing authority or fails to remit to
         the Administrative Agent the required receipts or other required
         documentary evidence, the Borrower shall indemnify the Administrative
         Agent and any Lender for any incremental Non-Excluded Taxes, interest
         or penalties that may become payable by the Administrative Agent or any
         Lender as a result of any such failure. The agreements in this Section
         4.4 shall survive the termination of this Credit Agreement and the
         payment of the Loans and all other amounts payable hereunder.

                  (b) Each Lender that is not incorporated under the laws of the
         United States of America or a state thereof shall:

                           (i) (A) on or before the date of any payment by the
                  Borrower under this Credit Agreement or the Notes to such
                  Lender, deliver to the Borrower and the Administrative Agent
                  (x) two duly completed copies of United States Internal
                  Revenue Service Form W8-BEN or W8-ECI, or successor applicable
                  form, as the case may be, certifying that it is entitled to
                  receive payments under this Credit Agreement and any Notes
                  without deduction or withholding of any United States federal
                  income taxes and (y) an Internal Revenue Service Form W-8 or
                  W-9, or successor applicable form, as the case may be,
                  certifying that it is entitled to an exemption from United
                  States backup withholding tax;

                                (B) deliver to the Borrower and the
                  Administrative Agent two further copies of any such form or
                  certification on or before the date that any such form or
                  certification expires or becomes obsolete and after the
                  occurrence of any event requiring a change in the most recent
                  form previously delivered by it to the Borrower; and

                                (C) obtain such extensions of time for filing
                  and complete such forms or certifications as may reasonably be
                  requested by the Borrower or the Administrative Agent; or

                           (ii) in the case of any such Lender that is not a
                  "bank" within the meaning of Section 881(c)(3)(A) of the
                  Internal Revenue Code, (A) represent to the Borrower (for the
                  benefit of the Borrower and the Administrative Agent) that it
                  is not a bank within the meaning of Section 881 (c)(3)(A) of
                  the Internal Revenue Code, (B) agree to furnish to the
                  Borrower, on or before the date of any


                                       24
<PAGE>

                  payment by the Borrower, with a copy to the Administrative
                  Agent, two accurate and complete original signed copies of
                  Internal Revenue Service Form W-8, or successor applicable
                  form certifying to such Lender's legal entitlement at the date
                  of such certificate to an exemption from U.S. withholding tax
                  under the provisions of Section 881(c) of the Internal Revenue
                  Code with respect to payments to be made under this Credit
                  Agreement and any Notes (and to deliver to the Borrower and
                  the Administrative Agent two further copies of such form on or
                  before the date it expires or becomes obsolete and after the
                  occurrence of any event requiring a change in the most
                  recently provided form and, if necessary, obtain any
                  extensions of time reasonably requested by the Borrower or the
                  Administrative Agent for filing and completing such forms),
                  and (C) agree, to the extent legally entitled to do so, upon
                  reasonable request by the Borrower, to provide to the Borrower
                  (for the benefit of the Borrower and the Administrative Agent)
                  such other forms as may be reasonably required in order to
                  establish the legal entitlement of such Lender to an exemption
                  from withholding with respect to payments under this Credit
                  Agreement and any Notes.

                           Notwithstanding the above, if any change in treaty,
                  law or regulation has occurred after the date such Person
                  becomes a Lender hereunder which renders all such forms
                  inapplicable or which would prevent such Lender from duly
                  completing and delivering any such form with respect to it and
                  such Lender so advises the Borrower and the Administrative
                  Agent, then such Lender shall be exempt from such
                  requirements. Each Person that shall become a Lender or a
                  participant of a Lender pursuant to Section 11.3 shall, upon
                  the effectiveness of the related transfer, be required to
                  provide all of the forms, certifications and statements
                  required pursuant to this subsection (b); provided that in the
                  case of a participant of a Lender, the obligations of such
                  participant of a Lender pursuant to this subsection (b) shall
                  be determined as if the participant of a Lender were a Lender
                  except that such participant of a Lender shall furnish all
                  such required forms, certifications and statements to the
                  Lender from which the related participation shall have been
                  purchased.

                                   SECTION 5.

                              CONDITIONS PRECEDENT

         5.1 CLOSING CONDITIONS.

         The obligation of the Lenders to enter into this Credit Agreement is
subject to satisfaction (or waiver) of the following conditions:

                  (a) Executed Credit Documents. Receipt by the Administrative
         Agent of duly executed copies of (i) this Credit Agreement, (ii) the
         Notes and (iii) all other Credit Documents, each in form and substance
         acceptable to the Lenders.

                  (b) Corporate Documents. Receipt by the Administrative Agent
         of the following:


                                       25
<PAGE>

                           (i) Charter Documents. Copies of the articles of
                  incorporation or other charter documents of the Borrower
                  certified to be true and complete as of a recent date by the
                  appropriate Governmental Authorities of the states or other
                  jurisdictions of its incorporation and certified by a
                  secretary or assistant secretary of the Borrower to be true
                  and correct as of the Closing Date.

                           (ii) Bylaws. A copy of the bylaws of the Borrower
                  certified by a secretary or assistant secretary of the
                  Borrower to be true and correct as of the Closing Date.

                           (iii) Resolutions. Copies of resolutions of the Board
                  of Directors of the Borrower approving and adopting the Credit
                  Documents to which it is a party, the transactions
                  contemplated therein and authorizing execution and delivery
                  thereof, certified by a secretary or assistant secretary of
                  the Borrower to be true and correct and in full force and
                  effect as of the Closing Date.

                           (iv) Good Standing. Copies of certificates of good
                  standing, existence or its equivalent with respect to the
                  Borrower certified as of a recent date by the appropriate
                  Governmental Authorities of the states or other jurisdictions
                  of incorporation and each other jurisdiction in which the
                  failure to so qualify and be in good standing would have a
                  Material Adverse Effect.

                           (v) Incumbency. An incumbency certificate of the
                  Borrower certified by a secretary or assistant secretary of
                  the Borrower to be true and correct as of the Closing Date.

                  (c) Opinion of Counsel. Receipt by the Administrative Agent of
         an opinion, or opinions, from legal counsel to the Borrower addressed
         to the Administrative Agent on behalf of the Lenders and dated as of
         the Effective Date, in each case satisfactory in form and substance to
         the Administrative Agent.

                  (d) Financial Statements. Receipt by the Lenders of the
         consolidated audited financial statements of the Borrower and its
         Subsidiaries dated as of September 30, 2000 and September 30, 2001, and
         the unaudited financial statements for the quarters ending December 31,
         2001, March 31, 2002 and June 30, 2002, including balance sheets and
         income and cash flow statements, in each case audited (except for the
         quarterly financial statements) by independent public accountants of
         recognized standing and prepared in accordance with GAAP.

                  (e) Fees and Expenses. Payment by the Borrower of all fees and
         expenses owed by it to the Lenders and the Administrative Agent.

                  (f) Material Adverse Effect. No event or condition shall have
         occurred since June 30, 2002 that has had or would be reasonably
         expected to have a Material Adverse Effect.

                  (g) Officer's Certificates. The Administrative Agent shall
         have received a certificate or certificates executed by a Financial
         Officer of the Borrower as of the


                                       26
<PAGE>

         Effective Date stating that (i) the Borrower and its Subsidiaries are
         in compliance with all existing material financial obligations, (ii) no
         action, suit, investigation or legal, equitable, arbitration or
         administrative proceeding is pending or, to such officer's knowledge,
         threatened in any court or before any arbitrator or Governmental
         Authority that would have or be reasonably expected to have a Material
         Adverse Effect, (iii) the financial statements and information
         delivered to the Administrative Agent on or before the Effective Date
         were prepared in good faith and in accordance with GAAP and (iv)
         immediately after giving effect to this Credit Agreement, the other
         Credit Documents and all the transactions contemplated herein and
         therein to occur on such date, (A) no Default or Event of Default
         exists, (B) all representations and warranties contained herein and in
         the other Credit Documents are true and correct in all material
         respects on and as of the date made and (C) the Borrower is in
         compliance with the financial covenant set forth in Section 7.2.

                  (h) Other. Receipt by the Lenders of such other documents,
         instruments, agreements or information as reasonably requested by any
         Lender.

         5.2 CONDITIONS TO LOANS.

         In addition to the conditions precedent stated elsewhere herein, the
Lenders shall not be obligated to make new Loans unless:

                  (a) Request. The Borrower shall have timely delivered a duly
         executed and completed Notice of Borrowing in conformance with all the
         terms and conditions of this Credit Agreement.

                  (b) Representations and Warranties. The representations and
         warranties made by the Borrower are true and correct in all material
         respects at and as if made as of the date of the funding of the
         requested Loans.

                  (c) No Default. No Default or Event of Default shall exist or
         be continuing either prior to or after giving effect thereto.

                  (d) Availability. Immediately after giving effect to the
         making of a Loan (and the application of the proceeds thereof) the sum
         of the amount of Bridge Loans outstanding shall not exceed the Bridge
         Loan Commitment.

The delivery of each Notice of Borrowing shall constitute a representation and
warranty by the Borrower of the correctness of the matters specified in
subsections (b) through (d) above.

                                   SECTION 6.

                         REPRESENTATIONS AND WARRANTIES

         The Borrower hereby represents and warrants to each Lender that:


                                       27
<PAGE>


         6.1 ORGANIZATION AND GOOD STANDING.

         The Borrower (a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdictions of its incorporation, (b)
is duly qualified and in good standing as a foreign corporation authorized to do
business in every jurisdiction where the failure to so qualify would have or
would reasonably be expected to have a Material Adverse Effect and (c) has the
requisite corporate power and authority to own its properties and to carry on
its business as now conducted and as proposed to be conducted.

         6.2 DUE AUTHORIZATION.

         The Borrower (a) has the requisite corporate power and authority to
execute, deliver and perform this Credit Agreement and the other Credit
Documents and to incur the obligations herein and therein provided for and (b)
has been authorized by all necessary corporate action, to execute, deliver and
perform this Credit Agreement and the other Credit Documents.

         6.3 NO CONFLICTS.

         Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by the Borrower will in any
material respect (a) violate or conflict with any provision of its articles of
incorporation or bylaws, (b) violate, contravene or conflict with any law
(including without limitation, the Public Utility Holding Company Act of 1935,
as amended), regulation (including without limitation, Regulation U, Regulation
X or any regulation promulgated by the Federal Energy Regulatory Commission),
order, writ, judgment, injunction, decree or permit applicable to it, (c)
violate, contravene or conflict with contractual provisions of, or cause an
event of default under, any indenture, loan agreement, mortgage, deed of trust,
contract or other agreement or instrument to which it is a party or by which it
or its properties may be bound, or (d) result in or require the creation of any
Lien upon or with respect to its properties.

         6.4 CONSENTS.

         No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or Governmental Authority or third
party is required in connection with the execution, delivery or performance of
this Credit Agreement or any of the other Credit Documents.

         6.5 ENFORCEABLE OBLIGATIONS.

         This Credit Agreement and the other Credit Documents have been duly
executed and delivered and constitute legal, valid and binding obligations of
the Borrower enforceable against the Borrower in accordance with their
respective terms, except as may be limited by bankruptcy or insolvency laws or
similar laws affecting creditors' rights generally or by general equitable
principles.


                                       28
<PAGE>

         6.6 FINANCIAL CONDITION.

                  (a) The financial statements delivered to the Lenders pursuant
         to Section 5.1(d) and pursuant to Section 7.1(a) and (b): (i) have been
         prepared in accordance with GAAP (subject to the provisions of Section
         1.3) and (ii) present fairly in all material respects the financial
         condition, results of operations, and cash flows of the Borrower and
         its Subsidiaries as of such date and for such periods.

                  (b) Other than the MVG Acquisition, since June 30, 2002, there
         has been no sale, transfer or other disposition by the Borrower of any
         material part of the business or property of the Borrower, and no
         purchase or other acquisition by the Borrower of any business or
         property (including any Capital Stock of any other Person) material in
         relation to the financial condition of the Borrower, in each case which
         is not (i) reflected in the most recent financial statements delivered
         to the Lenders pursuant to Section 5.1(d) or 7.1 or in the notes
         thereto or (ii) otherwise permitted by the terms of this Credit
         Agreement and communicated to the Administrative Agent.

         6.7 NO MATERIAL CHANGE.

         Since June 30, 2002, there has been no development or event relating to
or affecting the Borrower or any of its Subsidiaries that has had or would be
reasonably expected to have a Material Adverse Effect, it being understood that
the consummation of the MVG Acquisition, in and of itself, does not constitute a
Material Adverse Effect.

         6.8 NO DEFAULT.

         No Default or Event of Default presently exists and is continuing.

         6.9 LITIGATION.

         There are no actions, suits, investigations or legal, equitable,
arbitration or administrative proceedings pending or, to the knowledge of the
Borrower, threatened against the Borrower, any of its Subsidiaries or any of its
properties which could have or be reasonably expected to have a Material Adverse
Effect.

         6.10 TAXES.

         The Borrower and its Subsidiaries have filed, or caused to be filed,
all tax returns (federal, state, local and foreign) required to be filed and
paid all amounts of taxes shown thereon to be due (including interest and
penalties) and has paid all other taxes, fees, assessments and other
governmental charges (including mortgage recording taxes, documentary stamp
taxes and intangibles taxes) owing by it, except for such taxes which are not
yet delinquent or that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP.


                                       29
<PAGE>

         6.11 COMPLIANCE WITH LAW.

         The Borrower and each of its Subsidiaries is in compliance with all
laws, rules, regulations, orders and decrees applicable to it or to its
properties, except where the failure to be in compliance would not have or would
not reasonably be expected to have a Material Adverse Effect.

         6.12 MATERIAL AGREEMENTS.

         Neither the Borrower nor any of its Subsidiaries is in default in any
respect under any contract, lease, loan agreement, indenture, mortgage, security
agreement or other agreement or obligation to which it is a party or by which
any of its properties is bound which default has had or would be reasonably
expected to have a Material Adverse Effect.

         6.13 ERISA.

         Except as would not result or be reasonably expected to result in a
Material Adverse Effect:

                  (a) During the five-year period prior to the date on which
         this representation is made or deemed made: (i) no Termination Event
         has occurred, and, to the best knowledge of the Borrower, no event or
         condition has occurred or exists as a result of which any Termination
         Event is reasonably expected to occur, with respect to any Plan; (ii)
         no "accumulated funding deficiency," as such term is defined in Section
         302 of ERISA and Section 412 of the Code, whether or not waived, has
         occurred with respect to any Plan; (iii) each Plan has been maintained,
         operated, and funded in material compliance with its own terms and in
         material compliance with the provisions of ERISA, the Code, and any
         other applicable federal or state laws; and (iv) no Lien in favor or
         the PBGC or a Plan has arisen or is reasonably expected to arise on
         account of any Plan.

                  (b) No liability has been or is reasonably expected by the
         Borrower to be incurred under Sections 4062, 4063 or 4064 of ERISA with
         respect to any Single Employer Plan by the Borrower or any of its
         Subsidiaries which has or would reasonably be expected to have a
         Material Adverse Effect.

                  (c) The actuarial present value of all "benefit liabilities"
         under each Single Employer Plan (determined within the meaning of
         Section 401(a)(2) of the Code, utilizing the actuarial assumptions used
         to fund such Plans), whether or not vested, did not, as of the last
         annual valuation date prior to the date on which this representation is
         made or deemed made, exceed the current value of the assets of such
         Plan allocable to such accrued liabilities, except as disclosed in the
         Borrower's financial statements.

                  (d) Neither the Borrower nor any ERISA Affiliate has incurred,
         or, to the best knowledge of the Borrower, is reasonably expected to
         incur, any withdrawal liability under ERISA to any Multiemployer Plan
         or Multiple Employer Plan. Neither the Borrower nor any ERISA Affiliate
         has received any notification that any Multiemployer Plan is in
         reorganization (within the meaning of Section 4241 of ERISA), is
         insolvent (within the meaning of Section 4245 of ERISA), or has been
         terminated (within the


                                       30
<PAGE>

         meaning of Title IV of ERISA), and no Multiemployer Plan is, to the
         best knowledge of the Borrower, reasonably expected to be in
         reorganization, insolvent, or terminated.

                  (e) No prohibited transaction (within the meaning of Section
         406 of ERISA or Section 4975 of the Code) or breach of fiduciary
         responsibility has occurred with respect to a Plan which has subjected
         or is reasonably likely to subject the Borrower or any ERISA Affiliate
         to any liability under Sections 406, 407, 409, 502(i), or 502(l) of
         ERISA or Section 4975 of the Code, or under any agreement or other
         instrument pursuant to which the Borrower or any ERISA Affiliate has
         agreed or is required to indemnify any person against any such
         liability.

                  (f) The present value (determined using actuarial and other
         assumptions which are reasonable with respect to the benefits provided
         and the employees participating) of the liability of the Borrower and
         each ERISA Affiliate for post-retirement welfare benefits to be
         provided to their current and former employees under Plans which are
         welfare benefit plans (as defined in Section 3(1) of ERISA), net of all
         assets under all such Plans allocable to such benefits, are reflected
         on the financial statements referenced in Section 7.1 in accordance
         with FASB 106.

                  (g) Each Plan which is a welfare plan (as defined in Section
         3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of
         the Code apply has been administered in compliance in all material
         respects with such sections.

         6.14 USE OF PROCEEDS.

         The proceeds of the Loans hereunder will be used solely for the
purposes specified in Section 7.8.

         6.15 GOVERNMENT REGULATION.

                  (a) No proceeds of the Loans will be used, directly or
         indirectly, for the purpose of purchasing or carrying any "margin
         stock" within the meaning of Regulation U, or for the purpose of
         purchasing or carrying or trading in any securities. If requested by
         any Lender or the Administrative Agent, the Borrower will furnish to
         the Administrative Agent and each Lender a statement to the foregoing
         effect in conformity with the requirements of FR Form U-1 referred to
         in Regulation U. No indebtedness being reduced or retired out of the
         proceeds of the Loans was or will be incurred for the purpose of
         purchasing or carrying any margin stock within the meaning of
         Regulation U or any "margin security" within the meaning of Regulation
         T. "Margin stock" within the meaning of Regulation U does not
         constitute more than 25% of the value of the consolidated assets of the
         Borrower and its Subsidiaries. None of the transactions contemplated by
         the Credit Documents (including, without limitation, the direct or
         indirect use of the proceeds of the Loans) will violate or result in a
         violation of the Securities Act or the Exchange Act.

                  (b) Neither the Borrower nor any of its Subsidiaries is (i) an
         "investment company" registered or required to be registered under the
         Investment Company Act of 1940, as amended, and is not controlled by an
         "investment company", or (ii) a "holding


                                       31
<PAGE>

         company", or a "subsidiary company" of a "holding company", or an
         "affiliate" of a "holding company" or of a "subsidiary" of a "holding
         company", within the meaning of the Public Utility Holding Company Act
         of 1935, as amended.

                  (c) No director, executive officer or principal shareholder of
         the Borrower or any of its Subsidiaries is a director, executive
         officer or principal shareholder of any Lender. For the purposes hereof
         the terms "director", "executive officer" and "principal shareholder"
         (when used with reference to any Lender) have the respective meanings
         assigned thereto in Regulation O.

         6.16 DISCLOSURE.

         Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of the Borrower in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein, taken as a whole, not misleading.

         6.17 ENVIRONMENTAL MATTERS.

         Except as would not result or be reasonably expected to result in a
Material Adverse Effect: (a) each of the properties of the Borrower and its
Subsidiaries (the "Properties") and all operations at the Properties are in
compliance in all material respects with all applicable Environmental Laws, (b)
there is no violation of any Environmental Law with respect to the Properties or
the businesses operated by the Borrower or its Subsidiaries (the "Businesses"),
and (c) there are no conditions relating to the Businesses or Properties that
would reasonably be expected to give rise to a material liability under any
applicable Environmental Laws.

         6.18 INSURANCE.

         The Borrower and its Subsidiaries maintain insurance with responsible
and reputable insurance companies or associations in such amounts and covering
such risks as is usually carried by companies engaged in similar business and
owning similar properties in the same general areas in which the Borrower and
its Subsidiaries operate.

         6.19 FRANCHISES, LICENSES, ETC.

         The Borrower and its Subsidiaries possess (a) good title to, or the
legal right to use, all material properties and assets and (b) all material
franchises, certificates, licenses, permits and other authorizations, in each
case as are necessary for the operation of their respective businesses.

         6.20 SECURED INDEBTEDNESS.

         All of the secured indebtedness of the Borrower is set forth on
Schedule 6.20 or permitted by Section 8.6.


                                       32
<PAGE>

         6.21 SUBSIDIARIES.

         All Subsidiaries of the Borrower and the designation as to which such
Subsidiaries are Material Subsidiaries are set forth on Schedule 6.21. Schedule
6.21 may be updated from time to time by the Borrower.

                                   SECTION 7.

                              AFFIRMATIVE COVENANTS

         The Borrower hereby covenants and agrees that so long as this Credit
Agreement is in effect and until the Loans, together with interest, fees and
other obligations hereunder, have been paid in full and the Commitments shall
have terminated:

         7.1 INFORMATION COVENANTS.

         The Borrower will furnish, or cause to be furnished, to the
Administrative Agent (who shall forward copies thereof to each Lender):

                  (a) Annual Financial Statements. As soon as available, and in
         any event within 120 days after the close of each fiscal year of the
         Borrower, a consolidated balance sheet and income statement of the
         Borrower and its Subsidiaries, as of the end of such fiscal year,
         together with retained earnings and a consolidated statement of cash
         flows for such fiscal year setting forth in comparative form figures
         for the preceding fiscal year, all such financial information described
         above to be in reasonable form and detail and audited by independent
         certified public accountants of recognized national standing reasonably
         acceptable to the Administrative Agent and whose opinion shall be
         furnished to the Administrative Agent, shall be to the effect that such
         financial statements have been prepared in accordance with GAAP (except
         for changes with which such accountants concur) and shall not be
         limited as to the scope of the audit or qualified in any respect.

                  (b) Quarterly Financial Statements. As soon as available, and
         in any event within 65 days after the close of each fiscal quarter of
         the Borrower (other than the fourth fiscal quarter, in which case 120
         days after the end thereof) a consolidated balance sheet and income
         statement of the Borrower and its Subsidiaries, as of the end of such
         fiscal quarter, together with a related consolidated statement of cash
         flows for such fiscal quarter in each case setting forth in comparative
         form figures for the corresponding period of the preceding fiscal year,
         all such financial information described above to be in reasonable form
         and detail and reasonably acceptable to the Administrative Agent, and
         accompanied by a certificate of a Financial Officer of the Borrower to
         the effect that such quarterly financial statements fairly present in
         all material respects the financial condition of the Borrower and have
         been prepared in accordance with GAAP, subject to changes resulting
         from audit and normal year-end audit adjustments.

                  (c) Officer's Certificate. At the time of delivery of the
         financial statements provided for in Sections 7.1(a) and 7.1(b) above,
         a certificate of a Financial Officer of the Borrower, substantially in
         the form of Exhibit 7.1(c), (i) demonstrating compliance with


                                       33
<PAGE>

         Section 7.2 by calculation thereof as of the end of each such fiscal
         period and (ii) stating that no Default or Event of Default exists, or
         if any Default or Event of Default does exist, specifying the nature
         and extent thereof and what action the Borrower proposes to take with
         respect thereto.

                  (d) Reports. Promptly upon transmission or receipt thereof,
         copies of any filings and registrations with, and reports to or from,
         any Governmental Authority, including, without limitation, the
         Securities and Exchange Commission or any successor agency and any
         utility regulatory body.

                  (e) Notices. Upon the Borrower obtaining knowledge thereof,
         the Borrower will give written notice to the Administrative Agent
         immediately of (i) the occurrence of a Default or Event of Default,
         specifying the nature and existence thereof and what action the
         Borrower proposes to take with respect thereto and (ii) the occurrence
         of any of the following with respect to the Borrower or any Subsidiary:
         (A) the pendency or commencement of any litigation, arbitration or
         governmental proceeding against the Borrower or such Subsidiary which,
         if adversely determined, would have or would be reasonably expected to
         have a Material Adverse Effect or (B) the institution of any
         proceedings against the Borrower or such Subsidiary with respect to, or
         the receipt of notice by such Person of potential liability or
         responsibility for violation or alleged violation of, any federal,
         state or local law, rule or regulation (including, without limitation,
         any Environmental Law), the violation of which would have or would be
         reasonably expected to have a Material Adverse Effect.

                  (f) ERISA. Upon the Borrower or any ERISA Affiliate obtaining
         knowledge thereof, the Borrower will give written notice to the
         Administrative Agent and each of the Lenders promptly (and in any event
         within five Business Days) of: (i) any event or condition, including,
         but not limited to, any Reportable Event, that constitutes, or would be
         reasonably expected to lead to, a Termination Event; (ii) any
         communication from the PBGC stating its intention to terminate any Plan
         or to have a trustee appointed to administer any Plan together with a
         statement of the amount of liability, if any, incurred or expected to
         be incurred by the Borrower or any Subsidiary in connection therewith;
         (iii) with respect to any Multiemployer Plan, the receipt of notice as
         prescribed in ERISA or otherwise of any withdrawal liability assessed
         against the Borrower or any ERISA Affiliate, or of a determination that
         any Multiemployer Plan is in reorganization or insolvent (both within
         the meaning of Title IV of ERISA); (iv) the failure to make full
         payment on or before the due date (including extensions) thereof of all
         amounts which the Borrower or any of its Subsidiaries or ERISA
         Affiliates is required to contribute to each Plan pursuant to its terms
         and as required to meet the minimum funding standard set forth in ERISA
         and the Code with respect thereto; or (v) any change in the funding
         status of any Plan that would have or would be reasonably expected to
         have a Material Adverse Effect; together, with a description of any
         such event or condition or a copy of any such notice and a statement by
         a officer of the Borrower briefly setting forth the details regarding
         such event, condition, or notice, and the action, if any, which has
         been or is being taken or is proposed to be taken by the Borrower with
         respect thereto. Promptly upon request, the Borrower shall furnish the
         Administrative Agent and each of the Lenders with such additional
         information concerning any Plan as may be reasonably


                                       34
<PAGE>

         requested, including, but not limited to, copies of each annual
         report/return (Form 5500 series), as well as all schedules and
         attachments thereto required to be filed with the Department of Labor
         and/or the Internal Revenue Service pursuant to ERISA and the Code,
         respectively, for each "plan year" (within the meaning of Section 3(39)
         of ERISA).

                  (g) Other Information. With reasonable promptness upon any
         such request, such other information regarding the business, properties
         or financial condition of the Borrower as the Administrative Agent or
         the Required Lenders may reasonably request.

         7.2 DEBT TO CAPITALIZATION RATIO.

         At all times, the Debt to Capitalization Ratio shall be less than or
equal to 0.70 to 1.0.

         7.3 PRESERVATION OF EXISTENCE, FRANCHISES AND ASSETS.

         The Borrower will, and will cause its Subsidiaries to, do all things
necessary to preserve and keep in full force and effect its existence, rights,
franchises and authority, except where failure to do so would not or would not
reasonably be expected to have a Material Adverse Effect. The Borrower will, and
will cause its Subsidiaries to, generally maintain its properties, real and
personal, in good condition, and the Borrower and its Subsidiaries shall not
waste or otherwise permit such properties to deteriorate, reasonable wear and
tear excepted, except where failure to do so would not or would not reasonably
be expected to have a Material Adverse Effect.

         7.4 BOOKS AND RECORDS.

         The Borrower will, and will cause its Subsidiaries to, keep complete
and accurate books and records of its transactions in accordance with good
accounting practices on the basis of GAAP (including the establishment and
maintenance of appropriate reserves).

         7.5 COMPLIANCE WITH LAW.

         The Borrower will, and will cause its Subsidiaries to, comply with, and
obtain all permits and licenses required by, all laws (including, without
limitation, all Environmental Laws and ERISA laws), rules, regulations and
orders, and all applicable restrictions imposed by all Governmental Authorities,
applicable to it and its property, if the failure to comply would have or would
be reasonably expected to have a Material Adverse Effect.

         7.6 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.

         The Borrower will, and will cause its Subsidiaries to, pay, settle or
discharge (a) all taxes, assessments and governmental charges or levies imposed
upon it, or upon its income or profits, or upon any of its properties, before
they shall become delinquent, (b) all lawful claims (including claims for labor,
materials and supplies) which, if unpaid, might give rise to a Lien upon any of
its properties, and (c) all of its other indebtedness as it shall become due (to
the extent such repayment is not otherwise prohibited by this Credit Agreement);
provided, however, that the Borrower shall not be required to pay any such tax,
assessment, charge, levy, claim or indebtedness which is being contested in good
faith by appropriate action and as to which


                                       35
<PAGE>

adequate reserves therefor, if required, have been established in accordance
with GAAP, unless the failure to make any such payment (i) would give rise to an
immediate right to foreclose or collect on a Lien securing such amounts or (ii)
would have or would reasonably be expected to have a Material Adverse Effect.

         7.7 INSURANCE.

         The Borrower will, and will cause its Subsidiaries to, at all times
maintain in full force and effect insurance (including worker's compensation
insurance, liability insurance, casualty insurance and business interruption
insurance) with responsible and reputable insurance companies in such amounts,
covering such risks and liabilities and with such deductibles or self-insurance
retentions as are in accordance with normal industry practice.

         7.8 USE OF PROCEEDS.

         The proceeds of the Loans will be used solely for the closing of the
MVG Acquisition and expenditures related thereto.

         7.9 AUDITS/INSPECTIONS.

         Upon reasonable prior notice and during normal business hours, the
Borrower will permit representatives appointed by the Administrative Agent,
including, without limitation, independent accountants, agents, attorneys, and
appraisers to visit and inspect the Borrower's and its Subsidiaries' property,
including their books and records, their accounts receivable and inventory, the
Borrower's and its Subsidiaries' facilities and their other business assets, and
to make photocopies or photographs thereof and to write down and record any
information such representative obtains and shall permit the Administrative
Agent or its representatives to investigate and verify the accuracy of
information provided to the Lenders and to discuss all such matters with the
officers, employees and representatives of the Borrower and its Subsidiaries.

                                   SECTION 8.

                               NEGATIVE COVENANTS

         The Borrower hereby covenants and agrees that so long as this Credit
Agreement is in effect and until the Loans, together with interest, fees and
other obligations hereunder, have been paid in full and the Commitments shall
have terminated:

         8.1 NATURE OF BUSINESS.

         The Borrower will not materially alter the character of its business
from that conducted as of the Closing Date.

         8.2 CONSOLIDATION AND MERGER.

         The Borrower will not (a) enter into any transaction of merger, other
than the closing of the MVG Acquisition, or (b) consolidate, liquidate, wind up
or dissolve itself (or suffer any liquidation or dissolution); provided that, so
long as no Default or Event of Default shall exist or


                                       36
<PAGE>

be caused thereby, a Person may be merged or consolidated with or into the
Borrower so long as the Borrower shall be the continuing or surviving
corporation.

         8.3 SALE OR LEASE OF ASSETS.

         Within any twelve month period, the Borrower will not, nor will it
permit any Subsidiary to, convey, sell, lease, transfer or otherwise dispose of
assets, business or operations with a net book value in excess of 25% of Total
Assets as calculated as of the end of the most recent fiscal quarter.

         8.4 ARM'S-LENGTH TRANSACTIONS.

         The Borrower will not, nor will it permit its Subsidiaries to, enter
into any transaction or series of transactions, whether or not in the ordinary
course of business, with any officer, director or Affiliate other than on terms
and conditions substantially as favorable as would be obtainable in a comparable
arm's-length transaction with a Person other than an officer, director or
Affiliate.

         8.5 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.

         The Borrower will not (a) change its fiscal year or (b) in any manner
that would reasonably be expected to materially adversely affect the rights of
the Lenders, change its organizational documents or its bylaws; it being
understood that the Borrower's shareholders may approve an amendment to the
Borrower's Articles of Incorporation to permit the issuance of Preferred
Securities.

         8.6 LIENS.

         The Borrower will not, nor will it permit any of its Material
Subsidiaries to, contract, create, incur, assume or permit to exist any Lien
with respect to any of its property or assets of any kind (whether real or
personal, tangible or intangible), whether now owned or after acquired, except
for the following: (a) Liens securing Borrower Obligations, (b) Liens for taxes
not yet due or Liens for taxes being contested in good faith by appropriate
action and for which adequate reserves, if required, determined in accordance
with GAAP have been established (and as to which the property subject to any
such Lien is not yet subject to foreclosure, sale or loss on account thereof),
(c) Liens in respect of property imposed by law arising in the ordinary course
of business such as materialmen's, mechanics', warehousemen's, carrier's,
landlords' and other nonconsensual statutory Liens which are not yet due and
payable, which have been in existence less than 90 days or which are being
contested in good faith by appropriate action and for which adequate reserves,
if required, determined in accordance with GAAP have been established (and as to
which the property subject to any such Lien is not yet subject to foreclosure,
sale or loss on account thereof), (d) pledges or deposits made in the ordinary
course of business to secure payment of worker's compensation insurance,
unemployment insurance, pensions or social security programs, (e) Liens arising
from good faith deposits in connection with or to secure performance of tenders,
bids, leases, government contracts, performance and return-of-money bonds and
other similar obligations incurred in the ordinary course of business (other
than obligations in respect of the payment of borrowed money), (f) Liens arising
from good faith deposits in connection with or to secure performance of
statutory obligations and surety and


                                       37
<PAGE>

appeal bonds, (g) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other similar
charges or encumbrances not, in any material respect, impairing the use of the
encumbered property for its intended purposes, (h) judgment Liens that would not
constitute an Event of Default, (i) Liens arising by virtue of any statutory or
common law provision relating to banker's liens, rights of setoff or similar
rights as to deposit accounts or other funds maintained with a creditor
depository institution, (j) any Lien on any assets securing indebtedness
incurred or assumed for the purpose of financing all or any part of the cost of
acquiring such assets; provided that such Lien attaches to such asset
concurrently with or within 90 days after the acquisition thereof, (k) any Lien
on any asset of any Person existing at the time such Person is merged or
consolidated with or into the Borrower or one of its Subsidiaries and not
created in contemplation of such event, (l) any Lien existing on any asset prior
to the acquisition thereof by the Borrower or one of its Subsidiaries and not
created in contemplation of such acquisition, (m) any Lien (whether such Lien
applies to current assets or after-acquired property, or both) on any assets of
the Borrower or such Material Subsidiary created pursuant to the 1957 Indenture
or the 1959 Indenture; provided that any Lien on any assets of the Borrower or
such Material Subsidiary that are specifically excluded as collateral under such
Indentures shall not be deemed to be a Permitted Lien hereunder, (n) any Lien
(whether such Lien applies to current assets or after-acquired property, or
both) on any Fixed Assets of the Borrower or such Material Subsidiaries created
or arising at any time pursuant to or under (i) Section 4.08 of each of the 1987
Note Purchase Agreements and the 1989 Note Purchase Agreement, (ii) Section 4.8
of each of the 1991 Note Purchase Agreement, the 1992 Note Purchase Agreement
and the 1994 Note Purchase Agreement or (iii) any similar provision utilizing
the same or a similar cash flow-to-debt test, contained in any other loan
agreement that the Borrower may enter into after the Effective Date, which
agreement grants a loan or extends credit to the Borrower with a maturity date
in excess of one year, (o) any Lien on the assets of the Borrower pursuant to
Section 803 of the 1998 Indenture or Section 803 of the 2001 Indenture, if
placed on the property of the Borrower on a pro rata basis only with other Liens
that may be placed on the properties of the Borrower in the future, (p) Liens on
Fixed Assets not otherwise permitted by this Credit Agreement securing
indebtedness in the aggregate (at the time such Liens are created) not in excess
of five percent (5%) of Consolidated Net Property, and (q) any extension,
renewal or replacement (or successive extensions, renewals or replacements), as
a whole or in part, of any Liens referred to in the foregoing clauses (a)
through (p) for amounts not exceeding the principal amount of the indebtedness
secured by the Lien so extended, renewed or replaced; provided that such
extension, renewal or replacement Lien is limited to all or a part of the same
property or assets that were covered by the Lien extended, renewed or replaced
(plus improvements on such property or assets).

                                   SECTION 9.

                                EVENTS OF DEFAULT

         9.1 EVENTS OF DEFAULT.

         An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):


                                       38
<PAGE>

                  (a) Payment. The Borrower shall default in the payment (i)
         when due of any principal of any of the Loans or (ii) within one
         Business Day of when due of any interest on the Loans or of any fees or
         other amounts owing hereunder, under any of the other Credit Documents
         or in connection herewith.

                  (b) Representations. Any representation, warranty or statement
         made or deemed to be made by the Borrower herein, in any of the other
         Credit Documents, or in any statement or certificate delivered or
         required to be delivered pursuant hereto or thereto shall prove untrue
         in any material respect on the date as of which it was deemed to have
         been made.

                  (c) Covenants. The Borrower shall:

                           (i) default in the due performance or observance of
                  any term, covenant or agreement contained in Sections 7.2,
                  7.3, 7.4, 7.5, 7.9 or 8.1 through 8.6 inclusive; or

                           (ii) default in the due performance or observance by
                  it of any term, covenant or agreement contained in Section 7.1
                  and such default shall continue unremedied for a period of
                  five Business Days after the earlier of the Borrower becoming
                  aware of such default or notice thereof given by the
                  Administrative Agent; or

                           (iii) default in the due performance or observance by
                  it of any term, covenant or agreement (other than those
                  referred to in subsections (a), (b), (c)(i), or (c)(ii) of
                  this Section 9.1) contained in this Credit Agreement or any
                  other Credit Document and such default shall continue
                  unremedied for a period of at least 30 days after the earlier
                  of the Borrower becoming aware of such default or notice
                  thereof given by the Administrative Agent.

                  (d) Credit Documents. The Borrower shall default in the due
         performance or observance of any term, covenant or agreement in any of
         the other Credit Documents and such default shall continue unremedied
         for a period of at least 30 days after the earlier of the Borrower
         becoming aware of such default or notice thereof given by the
         Administrative Agent or (ii) any Credit Document shall fail to be in
         full force and effect or the Borrower shall so assert or any Credit
         Document shall fail to give the Administrative Agent and/or the Lenders
         the rights, powers and privileges purported to be created thereby.

                  (e) Bankruptcy, etc. The occurrence of any of the following
         with respect to the Borrower or any of its Material Subsidiaries: (i) a
         court or governmental agency having jurisdiction in the premises shall
         enter a decree or order for relief in respect of the Borrower or any of
         its Material Subsidiaries in an involuntary case under any applicable
         bankruptcy, insolvency or other similar law now or hereafter in effect,
         or appoint a receiver, liquidator, assignee, custodian, trustee,
         sequestrator or similar official of the Borrower or any of its Material
         Subsidiaries or for any substantial part of its property or order the
         winding up or liquidation of its affairs; or (ii) an involuntary case
         under any


                                       39
<PAGE>

         applicable bankruptcy, insolvency or other similar law now or hereafter
         in effect is commenced against the Borrower or any of its Material
         Subsidiaries and such petition remains unstayed and in effect for a
         period of 60 consecutive days; or (iii) the Borrower or any of its
         Material Subsidiaries shall commence a voluntary case under any
         applicable bankruptcy, insolvency or other similar law now or hereafter
         in effect, or consent to the entry of an order for relief in an
         involuntary case under any such law, or consent to the appointment or
         taking possession by a receiver, liquidator, assignee, custodian,
         trustee, sequestrator or similar official of such Person or any
         substantial part of its property or make any general assignment for the
         benefit of creditors; or (iv) the Borrower or any of its Material
         Subsidiaries shall admit in writing its inability to pay its debts
         generally as they become due or any action shall be taken by such
         Person in furtherance of any of the aforesaid purposes.

                  (f) Defaults under Other Agreements. With respect to (x) any
         secured indebtedness of the Borrower or (y) any other indebtedness in
         excess of $20,000,000 (other than indebtedness outstanding under this
         Credit Agreement) of the Borrower (A) the Borrower shall (1) default in
         any payment (beyond the applicable grace period with respect thereto,
         if any) with respect to any such indebtedness, or (2) default (after
         giving effect to any applicable grace period) in the observance or
         performance of any covenant or agreement relating to such indebtedness
         or contained in any instrument or agreement evidencing, securing or
         relating thereto, or any other event or condition shall occur or
         condition exist, the effect of which default or other event or
         condition is to cause, or permit, the holder of the holders of such
         indebtedness (or trustee or agent on behalf of such holders) to cause
         (determined without regard to whether any notice or lapse of time is
         required) any such indebtedness to become due prior to its stated
         maturity; or (B) any such indebtedness shall be declared due and
         payable, or required to be prepaid other than by a regularly scheduled
         required prepayment prior to the stated maturity thereof; or (C) any
         such indebtedness shall mature and remain unpaid.

                  (g) Judgments. One or more judgments, orders, or decrees shall
         be entered against the Borrower involving a liability of $20,000,000 or
         more, in the aggregate, (to the extent not paid or covered by insurance
         provided by a carrier who has acknowledged coverage) and such
         judgments, orders or decrees shall continue unsatisfied, undischarged
         and unstayed for a period ending on the first to occur of (i) the last
         day on which such judgment, order or decree becomes final and
         unappealable and, where applicable, with the status of a judicial lien
         or (ii) 60 days; provided that if such judgment, order or decree
         provides for periodic payments over time then the Borrower shall have a
         grace period of 30 days with respect to each such periodic payment.

                  (h) ERISA. The occurrence of any of the following events or
         conditions if any of the same would be reasonably expected to result in
         a liability of an amount greater than or equal to $20,000,000: (A) any
         "accumulated funding deficiency," as such term is defined in Section
         302 of ERISA and Section 412 of the Code, whether or not waived, shall
         exist with respect to any Plan, or any lien shall arise on the assets
         of the Borrower or any ERISA Affiliate in favor of the PBGC or a Plan;
         (B) a Termination Event shall occur with respect to a Single Employer
         Plan, which is, in the reasonable opinion of the Administrative Agent,
         likely to result in the termination of such Plan for purposes of Title


                                       40
<PAGE>

         IV of ERISA; (C) a Termination Event shall occur with respect to a
         Multiemployer Plan or Multiple Employer Plan, which is, in the
         reasonable opinion of the Administrative Agent, likely to result in (i)
         the termination of such Plan for purposes of Title IV of ERISA, or (ii)
         the Borrower or any ERISA Affiliate incurring any liability in
         connection with a withdrawal from, reorganization of (within the
         meaning of Section 4241 of ERISA), or insolvency (within the meaning of
         Section 4245 of ERISA) of such Plan; or (D) any prohibited transaction
         (within the meaning of Section 406 of ERISA or Section 4975 of the
         Code) or breach of fiduciary responsibility shall occur which would be
         reasonably expected to subject the Borrower or any ERISA Affiliate to
         any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
         Section 4975 of the Code, or under any agreement or other instrument
         pursuant to which the Borrower or any ERISA Affiliate has agreed or is
         required to indemnify any person against any such liability.

                           (i) Change of Control. The occurrence of any Change
                  of Control.

         9.2 ACCELERATION; REMEDIES.

         Upon the occurrence and during the continuation of an Event of Default,
the Administrative Agent may, with the consent of the Required Lenders, and
shall, upon the request and direction of the Required Lenders, by written notice
to the Borrower take any of the following actions without prejudice to the
rights of the Administrative Agent or any Lender to enforce its claims against
the Borrower, except as otherwise specifically provided for herein:

                           (i) Termination of Commitments. Declare the
                  Commitments terminated whereupon the Commitments shall be
                  immediately terminated.

                           (ii) Acceleration of Loans. Declare the unpaid amount
                  of all Borrower Obligations to be due whereupon the same shall
                  be immediately due and payable without presentment, demand,
                  protest or other notice of any kind, all of which are hereby
                  waived by the Borrower.

                           (iii) Enforcement of Rights. Enforce any and all
                  rights and interests created and existing under the Credit
                  Documents, including, without limitation, all rights of
                  set-off.

Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(e) shall occur, then the Commitments shall automatically terminate and all
Loans, all accrued interest in respect thereof, all accrued and unpaid fees and
other indebtedness or obligations owing to the Lenders and the Administrative
Agent hereunder shall immediately become due and payable without the giving of
any notice or other action by the Administrative Agent or the Lenders.

Notwithstanding the fact that enforcement powers reside primarily with the
Administrative Agent, each Lender has, to the extent permitted by law, a
separate right of payment and shall be considered a separate "creditor" holding
a separate "claim" within the meaning of Section 101(5) of the Bankruptcy Code
or any other insolvency statute.


                                       41
<PAGE>

         9.3 ALLOCATION OF PAYMENTS AFTER EVENT OF DEFAULT.

         Notwithstanding any other provisions of this Credit Agreement, after
the occurrence of an Event of Default, all amounts collected or received by the
Administrative Agent or any Lender on account of amounts outstanding under any
of the Credit Documents shall be paid over or delivered as follows:

                  FIRST, to the payment of all reasonable out-of-pocket costs
         and expenses (including without limitation reasonable attorneys' fees)
         of the Administrative Agent or any of the Lenders in connection with
         enforcing the rights of the Lenders under the Credit Documents, pro
         rata as set forth below;

                  SECOND, to payment of any fees owed to the Administrative
         Agent, or any Lender, pro rata as set forth below;

                  THIRD, to the payment of all accrued interest payable to the
         Lenders hereunder, pro rata as set forth below;

                  FOURTH, to the payment of the outstanding principal amount of
         the Loans, pro rata as set forth below;

                  FIFTH, to all other obligations which shall have become due
         and payable under the Credit Documents and not repaid pursuant to
         clauses "FIRST" through "FOURTH" above; and

                  SIXTH, to the payment of the surplus, if any, to whoever may
         be lawfully entitled to receive such surplus.

In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category and (b) each of the Lenders shall receive an amount equal to
its pro rata share (based on the proportion that the then outstanding Loans held
by such Lender bears to the aggregate then outstanding Loans) of amounts
available to be applied.

                                   SECTION 10.

                                AGENCY PROVISIONS

         10.1 APPOINTMENT.

         Each Lender hereby designates and appoints Bank One, NA as agent of
such Lender to act as specified herein and the other Credit Documents, and each
such Lender hereby authorizes the Administrative Agent, as the agent for such
Lender, to take such action on its behalf under the provisions of this Credit
Agreement and the other Credit Documents and to exercise such powers and perform
such duties as are expressly delegated by the terms hereof and of the other
Credit Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere herein and in
the other Credit Documents, the Administrative Agent shall not have any duties
or responsibilities, except those


                                       42
<PAGE>

expressly set forth herein and therein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Credit Agreement or any of
the other Credit Documents, or shall otherwise exist against the Administrative
Agent. The provisions of this Section 10.1 are solely for the benefit of the
Administrative Agent and the Lenders and the Borrower shall not have any rights
as a third party beneficiary of the provisions hereof. In performing its
functions and duties under this Credit Agreement and the other Credit Documents,
the Administrative Agent shall act solely as agent of the Lenders and does not
assume and shall not be deemed to have assumed any obligation or relationship of
agency or trust with or for the Borrower. Any agent named herein (other than the
Administrative Agent) shall have no duties or obligations whatsoever under this
Credit Agreement or the other Credit Documents.

         10.2 DELEGATION OF DUTIES.

         The Administrative Agent may execute any of its duties hereunder or
under the other Credit Documents by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. The Administrative Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.

         10.3 EXCULPATORY PROVISIONS.

         Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be liable to any Lender
for any action lawfully taken or omitted to be taken by it or such Person under
or in connection herewith or in connection with any of the other Credit
Documents (except for its or such Person's own gross negligence or willful
misconduct), or responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower
contained herein or in any of the other Credit Documents or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Administrative Agent under or in connection herewith or in connection
with the other Credit Documents, or enforceability or sufficiency therefor of
any of the other Credit Documents, or for any failure of the Borrower to perform
its obligations hereunder or thereunder. The Administrative Agent shall not be
responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Credit Agreement, or any
of the other Credit Documents or for any representations, warranties, recitals
or statements made herein or therein or made by the Borrower in any written or
oral statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Administrative Agent to the Lenders or by or on behalf
of the Borrower to the Administrative Agent or any Lender or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or of the existence or possible
existence of any Default or Event of Default or to inspect the properties, books
or records of the Borrower. The Administrative Agent is not a trustee for the
Lenders and owes no fiduciary duty to the Lenders.


                                       43
<PAGE>

         10.4 RELIANCE ON COMMUNICATIONS.

         The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it in
good faith to be genuine and correct and to have been signed, sent or made by
the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower, independent accountants
and other experts selected by the Administrative Agent with reasonable care).
The Administrative Agent may deem and treat the Lenders as the owner of its
interests hereunder for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Administrative
Agent in accordance with Section 11.3(b). The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Credit
Agreement or under any of the other Credit Documents unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder or under any of the other Credit Documents in accordance with a
request of the Required Lenders (or to the extent specifically provided in
Section 11.6, all the Lenders) and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Lenders (including their
successors and assigns).

         10.5 NOTICE OF DEFAULT.

         The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the
Administrative Agent has received notice from a Lender or the Borrower referring
to the Credit Document, describing such Default or Event of Default and stating
that such notice is a "notice of default." In the event that the Administrative
Agent receives such a notice, the Administrative Agent shall give prompt notice
thereof to the Lenders. The Administrative Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Lenders.

         10.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.

         Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates has made any representations or warranties to it and that no act
by the Administrative Agent or any affiliate thereof hereinafter taken,
including any review of the affairs of the Borrower, shall be deemed to
constitute any representation or warranty by the Administrative Agent to any
Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower and made its own decision to make its
Extensions of Credit hereunder and enter into this Credit Agreement. Each Lender
also represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis,


                                       44
<PAGE>

appraisals and decisions in taking or not taking action under this Credit
Agreement, and to make such investigation as it deems necessary to inform itself
as to the business, assets, operations, property, financial and other
conditions, prospects and creditworthiness of the Borrower. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Borrower which may come
into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.

         10.7 INDEMNIFICATION.

         Each Lender agrees to indemnify the Administrative Agent in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to its
Commitment Percentage at the time the indemnification request is made, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including without limitation at any time
following the payment in full of the Borrower Obligations) be imposed on,
incurred by or asserted against the Administrative Agent in its capacity as such
in any way relating to or arising out of this Credit Agreement or the other
Credit Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or willful misconduct of the Administrative Agent. If any indemnity
furnished to the Administrative Agent for any purpose shall, in the opinion of
the Administrative Agent, be insufficient or become impaired, the Administrative
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished. The
agreements in this Section 10.7 shall survive the payment of the Borrower
Obligations and all other amounts payable hereunder and under the other Credit
Documents and the termination of the Commitments.

         10.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.

         The Administrative Agent and its Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower as
though the Administrative Agent were not Administrative Agent hereunder. With
respect to the Loans made and all Borrower Obligations owing to it, the
Administrative Agent shall have the same rights and powers under this Credit
Agreement as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.

         10.9 SUCCESSOR AGENT.

         The Administrative Agent may, at any time, resign upon 20 days written
notice to the Lenders. Upon any such resignation, the Required Lenders shall
have the right to appoint a


                                       45
<PAGE>

successor Administrative Agent, which successor shall be reasonably acceptable
to the Borrower; provided that the Borrower shall have no right to approve such
successor during the existence and continuation of a Default or Event of
Default. If no successor Administrative Agent shall have been so appointed by
the Required Lenders, and shall have accepted such appointment, within 30 days
after the notice of resignation, then the retiring Administrative Agent shall
select a successor Administrative Agent; provided such successor is an Eligible
Assignee (or if no Eligible Assignee shall have been so appointed by the
retiring Administrative Agent and shall have accepted such appointment, then the
Lenders shall perform all obligations of the retiring Administrative Agent
hereunder until such time, if any, as a successor Administrative Agent shall
have been appointed and shall have accepted such appointment as provided for
above). Upon the acceptance of any appointment as an Administrative Agent
hereunder by a successor, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations as an Administrative Agent,
as appropriate, under this Credit Agreement and the other Credit Documents and
the provisions of this Section 10 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was an Administrative Agent under
this Credit Agreement.

                                  SECTION 11.

                                  MISCELLANEOUS

         11.1 NOTICES.

         Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device), (c)
the Business Day following the day on which the same has been delivered to a
reputable national overnight air courier service, or (d) the third Business Day
following the day on which the same is sent by certified or registered mail,
postage prepaid, in each case to the respective parties at the address or
telecopy numbers set forth on Schedule 11.1, or at such other address as such
party may specify by written notice to the other parties hereto.

         11.2 RIGHT OF SET-OFF.

         In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence and during the continuation of an Event of Default and the
commencement of remedies described in Section 9.2, each Lender is authorized at
any time and from time to time, without presentment, demand, protest or other
notice of any kind (all of which rights being hereby expressly waived), to
set-off and to appropriate and apply any and all deposits (general or special)
and any other indebtedness at any time held or owing by such Lender (including,
without limitation branches, agencies or Affiliates of such Lender wherever
located) to or for the credit or the account of the Borrower against obligations
and liabilities of the Borrower to the Lenders hereunder, under the Notes or the
other Credit Documents, irrespective of whether the Administrative Agent or the
Lenders shall have made any demand hereunder and although such obligations,
liabilities or claims, or any of them, may be contingent or unmatured, and any
such set-off shall be deemed to have been made


                                       46
<PAGE>

immediately upon the occurrence of an Event of Default even though such charge
is made or entered on the books of such Lender subsequent thereto. The Borrower
hereby agrees that any Person purchasing a participation in the Loans and
Commitments hereunder pursuant to Section 11.3(c) may exercise all rights of
set-off with respect to its participation interest as fully as if such Person
were a Lender hereunder.

         11.3 BENEFIT OF AGREEMENT.

                  (a) Generally. This Credit Agreement shall be binding upon and
         inure to the benefit of and be enforceable by the respective successors
         and assigns of the parties hereto; provided that the Borrower may not
         assign and transfer any of its interests without the prior written
         consent of the Lenders; and provided further that the rights of each
         Lender to transfer, assign or grant participations in its rights and/or
         obligations hereunder shall be limited as set forth below in this
         Section 11.3.

                  (b) Assignments. Each Lender may assign to one or more
         Eligible Assignees all or a portion of its rights and obligations under
         this Credit Agreement (including, without limitation, all or a portion
         of its Loans, its Notes, and its Commitment); provided, however, that:

                           (i) each such assignment shall be to an Eligible
                  Assignee;

                           (ii) except in the case of an assignment to another
                  Lender or an assignment of all of a Lender's rights and
                  obligations under this Credit Agreement, any such partial
                  assignment shall be in an amount at least equal to $3,000,000
                  (or, if less, the remaining amount of the Commitment being
                  assigned by such Lender) and an integral multiple of
                  $1,000,000 in excess thereof;

                           (iii) each such assignment by a Lender shall be of a
                  constant, and not varying, percentage of all of its rights and
                  obligations under this Credit Agreement and the Notes; and

                           (iv) the parties to such assignment shall execute and
                  deliver to the Administrative Agent for its acceptance an
                  Assignment Agreement in substantially the form of Exhibit
                  11.3(b), together with a processing fee from the assignor of
                  $5,000.

         Upon execution, delivery, and acceptance of such Assignment Agreement,
         the assignee thereunder shall be a party hereto and, to the extent of
         such assignment, have the obligations, rights, and benefits of a Lender
         hereunder and the assigning Lender shall, to the extent of such
         assignment, relinquish its rights and be released from its obligations
         under this Credit Agreement. Upon the consummation of any assignment
         pursuant to this Section 11.3(b), the assignor, the Administrative
         Agent and the Borrower shall make appropriate arrangements so that, if
         required, new Notes are issued to the assignor and the assignee. If the
         assignee is not incorporated under the laws of the United States of
         America or a state thereof; it shall deliver to the Borrower and the
         Administrative Agent certification as to exemption from deduction or
         withholding of taxes in accordance with Section 4.4.


                                       47
<PAGE>

                  By executing and delivering an assignment agreement in
         accordance with this Section 11.3(b), the assigning Lender thereunder
         and the assignee thereunder shall be deemed to confirm to and agree
         with each other and the other parties hereto as follows: (A) such
         assigning Lender warrants that it is the legal and beneficial owner of
         the interest being assigned thereby free and clear of any adverse claim
         created by such assigning Lender and the assignee warrants that it is
         an Eligible Assignee; (B) except as set forth in clause (A) above, such
         assigning Lender makes no representation or warranty and assumes no
         responsibility with respect to any statements, warranties or
         representations made in or in connection with this Credit Agreement,
         any of the other Credit Documents or any other instrument or document
         furnished pursuant hereto or thereto, or the execution, legality,
         validity, enforceability, genuineness, sufficiency or value of this
         Credit Agreement, any of the other Credit Documents or any other
         instrument or document furnished pursuant hereto or thereto or the
         financial condition of the Borrower or the performance or observance by
         the Borrower of any of its obligations under this Credit Agreement, any
         of the other Credit Documents or any other instrument or document
         furnished pursuant hereto or thereto; (C) such assignee represents and
         warrants that it is legally authorized to enter into such assignment
         agreement; (D) such assignee confirms that it has received a copy of
         this Credit Agreement, the other Credit Documents and such other
         documents and information as it has deemed appropriate to make its own
         credit analysis and decision to enter into such assignment agreement;
         (E) such assignee will independently and without reliance upon the
         Administrative Agent, such assigning Lender or any other Lender, and
         based on such documents and information as it shall deem appropriate at
         the time, continue to make its own credit decisions in taking or not
         taking action under this Credit Agreement and the other Credit
         Documents; (F) such assignee appoints and authorizes the Administrative
         Agent to take such action on its behalf and to exercise such powers
         under this Credit Agreement or any other Credit Document as are
         delegated to the Administrative Agent by the terms hereof or thereof,
         together with such powers as are reasonably incidental thereto; and (G)
         such assignee agrees that it will perform in accordance with their
         terms all the obligations which by the terms of this Credit Agreement
         and the other Credit Documents are required to be performed by it as a
         Lender.

                  (c) Register. The Administrative Agent shall maintain a copy
         of each Assignment Agreement delivered to and accepted by it and a
         register for the recordation of the names and addresses of the Lenders
         and the Commitment of, and principal amount of the Loans owing to, each
         Lender from time to time (the "Register"). The entries in the Register
         shall be conclusive and binding for all purposes, absent manifest
         error, and the Borrower, the Administrative Agent and the Lenders may
         treat each Person whose name is recorded in the Register as a Lender
         hereunder for all purposes of this Credit Agreement. The Register shall
         be available for inspection by the Borrower or any Lender at any
         reasonable time and from time to time upon reasonable prior notice.

                  (d) Acceptance. Upon its receipt of an Assignment Agreement
         executed by the parties thereto, together with any Note subject to such
         assignment and payment of the processing fee, the Administrative Agent
         shall, if such Assignment Agreement has been completed and is in
         substantially the form of Exhibit 11.3(b), (i) accept such Assignment


                                       48
<PAGE>

         Agreement, (ii) record the information contained therein in the
         Register and (iii) give prompt notice thereof to the parties thereto.

                  (e) Participations. Each Lender may sell participations to one
         or more Persons in all or a portion of its rights, obligations or
         rights and obligations under this Credit Agreement (including all or a
         portion of its Commitment, its Notes and its Loans); provided, however,
         that (i) such Lender's obligations under this Credit Agreement shall
         remain unchanged, (ii) such Lender shall remain solely responsible to
         the other parties hereto for the performance of such obligations, (iii)
         the participant shall be entitled to the benefit of the yield
         protection provisions contained in Sections 4.1 through 4.4, inclusive,
         and the right of set-off contained in Section 11.2, and (iv) the
         Borrower shall continue to deal solely and directly with such Lender in
         connection with such Lender's rights and obligations under this Credit
         Agreement, and such Lender shall retain the sole right to enforce the
         obligations of the Borrower relating to its Loans and its Notes and to
         approve any amendment, modification, or waiver of any provision of this
         Credit Agreement (other than amendments, modifications, or waivers
         decreasing the amount of principal of or the rate at which interest is
         payable on such Loans or Notes, extending any scheduled principal
         payment date or date fixed for the payment of interest on such Loans or
         Notes, or extending its Commitment).

                  (f) Nonrestricted Assignments. Notwithstanding any other
         provision set forth in this Credit Agreement, any Lender may at any
         time assign and pledge all or any portion of its Loans and its Notes to
         any Federal Reserve Bank as collateral security pursuant to Regulation
         A and any Operating Circular issued by such Federal Reserve Bank. No
         such assignment shall release the assigning Lender from its obligations
         hereunder.

                  (g) Information. Any Lender may furnish any information
         concerning the Borrower in the possession of such Lender from time to
         time to assignees and participants (including prospective assignees and
         participants).


                                       49
<PAGE>

         11.4 NO WAIVER; REMEDIES CUMULATIVE.

         No failure or delay on the part of the Administrative Agent or any
Lender in exercising any right, power or privilege hereunder or under any other
Credit Document and no course of dealing between the Borrower and the
Administrative Agent or any Lender shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege hereunder or
under any other Credit Document preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder or thereunder.
The rights and remedies provided herein are cumulative and not exclusive of any
rights or remedies which the Administrative Agent or any Lender would otherwise
have. No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Administrative Agent
or the Lenders to any other or further action in any circumstances without
notice or demand.

         11.5 PAYMENT OF EXPENSES, ETC.

         The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses of the Administrative Agent and Banc One Capital Markets, Inc. ("BOCM")
in connection with (A) the negotiation, preparation, execution and delivery and
administration of this Credit Agreement and the other Credit Documents and the
documents and instruments referred to therein (including, without limitation,
the reasonable fees and expenses of Mayer, Brown, Rowe & Maw, special counsel to
the Administrative Agent) and (B) any amendment, waiver or consent relating
hereto and thereto including, but not limited to, any such amendments, waivers
or consents resulting from or related to any work-out, renegotiation or
restructure relating to the performance by the Borrower under this Credit
Agreement, (ii) pay all reasonable out-of-pocket costs and expenses of the
Administrative Agent and the Lenders in connection with (A) enforcement of the
Credit Documents and the documents and instruments referred to therein
(including, without limitation, in connection with any such enforcement, the
reasonable fees and disbursements of counsel for the Administrative Agent and
each of the Lenders (including the allocated cost of internal counsel)) and (B)
any bankruptcy or insolvency proceeding of the Borrower and (iii) indemnify the
Administrative Agent, BOCM and each Lender, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses incurred by any of them as
a result of, or arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or not the Administrative
Agent, BOCM or any Lender is a party thereto) related to the entering into
and/or performance of any Credit Document or the use of proceeds of any Loans
(including other extensions of credit) hereunder or the consummation of any
other transactions contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel (including the
allocated cost of internal counsel) incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of
gross negligence or willful misconduct on the part of the Person to be
indemnified).

         11.6 AMENDMENTS, WAIVERS AND CONSENTS.

         Neither this Credit Agreement, nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such


                                       50
<PAGE>

amendment, change, waiver, discharge or termination is in writing and signed by
the Required Lenders and the Borrower; provided that no such amendment, change,
waiver, discharge or termination shall without the consent of each Lender
affected thereby:

                  (a) extend the Maturity Date, or postpone or extend the time
         for any payment or prepayment of principal;

                  (b) reduce the rate or extend the time of payment of interest
         (other than as a result of waiving the applicability of any
         post-default increase in interest rates) thereon or fees or other
         amounts payable hereunder;

                  (c) reduce or waive the principal amount of any Loan;

                  (d) increase or extend the Commitment of a Lender (it being
         understood and agreed that a waiver of any Default or Event of Default
         or a waiver of any mandatory reduction in the Commitments shall not
         constitute a change in the terms of any Commitment of any Lender);

                  (e) release the Borrower from its obligations under the Credit
         Documents;

                  (f) amend, modify or waive any provision of this Section 11.6
         or Section 3.6, 3.8, 9.1(a), 11.2, 11.3 or 11.5.

                  (g) reduce any percentage specified in, or otherwise modify,
         the definition of Required Lenders; or

                  (h) consent to the assignment or transfer by the Borrower of
         any of its rights and obligations under (or in respect of) the Credit
         Documents.

No provision of Section 10 may be amended or modified without the consent of the
Administrative Agent.

Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any reorganization plan that affects the Loans, and each
Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy
Code supersedes the unanimous consent provisions set forth herein and (y) the
Required Lenders may consent to allow the Borrower to use cash collateral in the
context of a bankruptcy or insolvency proceeding.

         11.7 COUNTERPARTS/TELECOPY.

         This Credit Agreement may be executed in any number of counterparts,
each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. Delivery of executed
counterparts by telecopy shall be as effective as an original and shall
constitute a representation that an original will be delivered.


                                       51
<PAGE>

         11.8 HEADINGS.

         The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.

         11.9 DEFAULTING LENDER.

         Each Lender understands and agrees that if such Lender is a Defaulting
Lender then it shall not be entitled to vote on any matter requiring the consent
of the Required Lenders or to object to any matter requiring the consent of all
the Lenders; provided, however, that all other benefits and obligations under
the Loan Documents shall apply to such Defaulting Lender.

         11.10 SURVIVAL OF INDEMNIFICATION AND REPRESENTATIONS AND WARRANTIES.

         All indemnities set forth herein and all representations and warranties
made herein shall survive the execution and delivery of this Credit Agreement,
the making of the Loans, and the repayment of the Loans and other obligations
and the termination of the Commitments hereunder.

         11.11 GOVERNING LAW; VENUE.

                  (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
         THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
         SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
         THE LAWS OF THE STATE OF NEW YORK.

                  (b) Any legal action or proceeding with respect to this Credit
         Agreement or any other Credit Document may be brought in the courts of
         the State of New York or of the United States for the Southern District
         of New York, and, by execution and delivery of this Credit Agreement,
         the Borrower hereby irrevocably accepts for itself and in respect of
         its property, generally and unconditionally, the jurisdiction of such
         courts. The Borrower further irrevocably consents to the service of
         process out of any of the aforementioned courts in any such action or
         proceeding by the mailing of copies thereof by registered or certified
         mail, postage prepaid, to it at the address for notices pursuant to
         Section 11.1, such service to become effective 10 days after such
         mailing. Nothing herein shall affect the right of a Lender to serve
         process in any other manner permitted by law or to commence legal
         proceedings or to otherwise proceed against the Borrower in any other
         jurisdiction. The Borrower agrees that a final judgment in any action
         or proceeding shall be conclusive and may be enforced in other
         jurisdictions by suit on the judgment or in any other manner provided
         by law; provided that nothing in this Section 11.11(b) is intended to
         impair the Borrower's right under applicable law to appeal or seek a
         stay of any judgment.

                  (c) The Borrower hereby irrevocably waives any objection which
         it may now or hereafter have to the laying of venue of any of the
         aforesaid actions or proceedings arising out of or in connection with
         this Credit Agreement or any other Credit Document


                                       52
<PAGE>

         in the courts referred to in subsection (a) hereof and hereby further
         irrevocably waives and agrees not to plead or claim in any such court
         that any such action or proceeding brought in any such court has been
         brought in an inconvenient forum.

         11.12 WAIVER OF JURY TRIAL.

         EACH OF THE PARTIES TO THIS CREDIT AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY.

         11.13 SEVERABILITY.

         If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.

         11.14 FURTHER ASSURANCES.

         The Borrower agrees, upon the request of the Administrative Agent, to
promptly take such actions, as reasonably requested, as are necessary to carry
out the intent of this Credit Agreement and the other Credit Documents.

         11.15 ENTIRETY.

         This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.

         11.16 BINDING EFFECT; CONTINUING AGREEMENT.

                  (a) This Credit Agreement shall become effective at such time
         when all of the conditions set forth in Section 5.1 have been satisfied
         or waived by the Lenders and it shall have been executed by the
         Borrower, the Administrative Agent and the Lenders, and thereafter this
         Credit Agreement shall be binding upon and inure to the benefit of the
         Borrower, the Administrative Agent and each Lender and their respective
         successors and assigns.

                  (b) This Credit Agreement shall be a continuing agreement and
         shall remain in full force and effect until all Loans, interest, fees
         and other Borrower Obligations have been paid in full and all
         Commitments have been terminated. Upon termination, the Borrower shall
         have no further obligations (other than the indemnification provisions
         that survive) under the Credit Documents; provided that should any
         payment, in whole or in part, of the Borrower Obligations be rescinded
         or otherwise required to be restored or returned by the Administrative
         Agent or any Lender, whether as a result of any


                                       53
<PAGE>

         proceedings in bankruptcy or reorganization or otherwise, then the
         Credit Documents shall automatically be reinstated and all amounts
         required to be restored or returned and all costs and expenses incurred
         by the Administrative Agent or any Lender in connection therewith shall
         be deemed included as part of the Borrower Obligations.

                  [Remainder of Page Intentionally Left Blank]


                                       54
<PAGE>

                   Signature Page to Atmos Energy Corporation
                             Bridge Credit Agreement



         Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.

BORROWER:                                ATMOS ENERGY CORPORATION, A Texas
                                         and Virginia corporation


                                         By:  /s/ LAURIE M. SHERWOOD
                                              ----------------------------------
                                         Name:  Laurie M. Sherwood
                                                --------------------------------
                                         Title: Vice President and Treasurer


<PAGE>

                   Signature Page to Atmos Energy Corporation
                             Bridge Credit Agreement


LENDERS:                               BANK ONE, NA
                                       individually in its capacity as a Lender
                                       and in its capacity as Administrative
                                       Agent


                                       By:  /s/ SHARON K. WEBB
                                            ------------------------------------
                                       Name:  Sharon K. Webb
                                              ----------------------------------
                                       Title:    Associate Director



<PAGE>

                   Signature Page to Atmos Energy Corporation
                             Bridge Credit Agreement


                                       WACHOVIA BANK, NATIONAL ASSOCIATION


                                       By:  /s/ C. REID HARDEN
                                            ------------------------------------
                                       Name:  C. Reid Harden
                                              ----------------------------------
                                       Title: Vice President



<PAGE>

                   Signature Page to Atmos Energy Corporation
                             Bridge Credit Agreement


                                       SUNTRUST BANK


                                       By:  /s/ DAVID H. EIDSON
                                            ------------------------------------
                                       Name:  David H. Eidson
                                              ----------------------------------
                                       Title: Senior Vice President



<PAGE>

                   Signature Page to Atmos Energy Corporation
                             Bridge Credit Agreement


                                       SOCIETE GENERALE, NEW YORK BRANCH


                                       By:  /s/ DAVID BIRD
                                            ------------------------------------
                                       Name:  David Bird
                                              ----------------------------------
                                       Title:    Vice President



<PAGE>

                   Signature Page to Atmos Energy Corporation
                             Bridge Credit Agreement


                                       KBC BANK N.V.


                                       By:  /s/ ROBERT SNAUFFER
                                            ------------------------------------
                                       Name:  Robert Snauffer
                                              ----------------------------------
                                       Title: First Vice President


                                       By:  /s/ ERIC RASKIN
                                            ------------------------------------
                                       Name:  Eric Raskin
                                              ----------------------------------
                                       Title: Vice President



<PAGE>

                   Signature Page to Atmos Energy Corporation
                             Bridge Credit Agreement


                                       THE BANK OF TOKYO-MITSUBISHI, LTD.


                                       By:  /s/ ICHIRO OTANI
                                            ------------------------------------
                                       Name:  Ichiro Otani
                                              ----------------------------------
                                       Title: Deputy General Manager


                                       By:  /s/ JAY FORT
                                            ------------------------------------
                                       Name:  Jay Fort
                                              ----------------------------------
                                       Title: Vice President



<PAGE>

                   Signature Page to Atmos Energy Corporation
                             Bridge Credit Agreement


                                       U.S. BANK NATIONAL ASSOCIATION


                                       By:  /s/ WARD C. WILSON
                                            ------------------------------------
                                       Name:  Ward C. Wilson
                                              ----------------------------------
                                       Title: Senior Vice President


<PAGE>

                   Signature Page to Atmos Energy Corporation
                             Bridge Credit Agreement


                                       BANK OF AMERICA, N.A.


                                       By:  /s/ MICHELLE A. SCHOENFELD
                                            ------------------------------------
                                       Name:  Michelle A. Schoenfeld
                                              ----------------------------------
                                       Title: Principal


<PAGE>

                   Signature Page to Atmos Energy Corporation
                             Bridge Credit Agreement


                                       HIBERNIA NATIONAL BANK


                                       By:  /s/ DONNA J. RICHARDSON
                                            ------------------------------------
                                       Name:  Donna J. Richardson
                                              ----------------------------------
                                       Title: Banking Officer


<PAGE>


                                 SCHEDULE 1.1(a)

                             COMMITMENT PERCENTAGES

<Table>
<Caption>
                                                                 COMMITMENT
             LENDERS                       COMMITMENT            PERCENTAGE
             -------                       ----------            ----------
<S>                                       <C>                 <C>
Bank One, NA                              $ 37,500,000        25.000000000000000%
Wachovia Bank, National Association       $ 22,500,000        15.000000000000000%
SunTrust Bank                             $ 22,500,000        15.000000000000000%
SOCIETE GENERALE, NEW YORK BRANCH         $ 22,500,000        15.000000000000000%
KBC BANK N.V.                             $ 10,000,000        6.6666666666666666%
THE BANK OF TOKYO-MITSUBISHI, LTD.        $ 10,000,000        6.6666666666666666%
U.S. BANK NATIONAL ASSOCIATION            $ 10,000,000        6.6666666666666666%
BANK OF AMERICA, N.A.                     $ 10,000,000        6.6666666666666666%
HIBERNIA NATIONAL BANK                    $  5,000,000        3.3333333333333333%
                                          ------------        ------------------
TOTAL                                     $150,000,000                       100%
</Table>


                                Schedule 1.1(a)-1
<PAGE>

                                 SCHEDULE 1.1(b)

                                PRICING SCHEDULE

<Table>
<Caption>
      Applicable            Level    Level II   Level III   Level IV   Level V    Level VI
      Percentage           Status     Status     Status      Status     Status     Status
      ----------           ------    --------   ---------   --------   -------    --------
<S>                        <C>       <C>        <C>         <C>        <C>        <C>
   Eurodollar Rate          0.50%     0.625%      0.75%       1.0%      1.25%      1.75%

      Base Rate              0.0%       0.0%       0.0%       0.0%       0.0%      0.25%
      Unused Fee           0.085%      0.10%     0.125%      0.15%      0.20%      0.30%

Utilization Fee (when
usage exceeds 33 1/3%)     0.125%     0.125%     0.125%     0.125%     0.125%      0.25%
</Table>

         "Level I Status" exists at any date if, on such date, the Borrower's
Moody's Rating is A2 or better or the Borrower's S&P Rating is A or better.

         "Level II Status" exists at any date if, on such date, (i) the Borrower
has not qualified for Level I Status and (ii) the Borrower's Moody's Rating is
A3 or better or the Borrower's S&P Rating is A- or better.

         "Level III Status" exists at any date if, on such date, (i) the
Borrower has not qualified for Level I Status or Level II Status and (ii) the
Borrower's Moody's Rating is Baa1 or better or the Borrower's S&P Rating is BBB+
or better.

         "Level IV Status" exists at any date if, on such date, (i) the Borrower
has not qualified for Level I Status, Level II Status or Level III Status and
(ii) the Borrower's Moody's Rating is Baa2 or better or the Borrower's S&P
Rating is BBB or better.

         "Level V Status" exists at any date if, on such date, (i) the Borrower
has not qualified for Level I Status, Level II Status, Level III Status or Level
IV Status and (ii) the Borrower's Moody's Rating is Baa3 or better or the
Borrower's S&P Rating is BBB- or better.

         "Level VI Status" exists at any date if, on such date, the Borrower has
not qualified for Level I Status, Level II Status, Level III Status, Level IV
Status or Level V Status.

         "Moody's Rating" means, at any time, the rating issued by Moody's
Investors Service, Inc. and then in effect with respect to the Borrower's senior
unsecured long-term non-credit enhanced debt securities.

         "S&P Rating" means, at any time, the rating issued by Standard and
Poor's Rating Services, a division of The McGraw Hill Companies, Inc., and then
in effect with respect to the Borrower's senior unsecured long-term non-credit
enhanced debt securities.

         "Status" means Level I Status, Level II Status, Level III Status, Level
IV Status, Level V Status or Level VI Status.

         The Applicable Percentage shall be determined in accordance with the
foregoing table based on the Borrower's Status as determined from its
then-current Moody's and S&P Ratings.


                                Schedule 1.1(b)-1
<PAGE>

The credit rating in effect on any date for the purposes of this Schedule is
that in effect at the close of business on such date. If at any time the
Borrower has no Moody's Rating or no S&P Rating, Level VI Status shall exist.

         If the Borrower is split-rated and the ratings differential is one
level, the better rating will apply. If the Borrower is split-rated and the
ratings differential is two levels or more, the applicable rating shall be one
level below the higher of the Moody's or S&P Rating.


                                Schedule 1.1(b)-2
<PAGE>


                                  SCHEDULE 6.20

                              SECURED INDEBTEDNESS

                    SECURED INDEBTEDNESS AS OF JUNE 30, 2002

<Table>
<Caption>
                                            INTEREST                                                          BALANCE AT
                                              RATE      MATURITY                                               6/30/02
FIRST MORTGAGE BONDS
<S>                                         <C>         <C>         <C>                                      <C>
FMB Series P                                 10.43%     due 2012    issued under 1959 Indenture              16,250,000.00
FMB Series Q                                  9.75%     due 2020    issued under 1959 Indenture              18,000,000.00
FMB Series R                                 11.32%     due 2004    issued under 1959 Indenture               4,300,000.00
FMB Series T                                  9.32%     due 2021    issued under 1959 Indenture              18,000,000.00
FMB Series U                                  8.77%     due 2022    issued under 1959 Indenture              20,000,000.00
FMB Series J                                  9.40%     due 2021    issued under 1957 Indenture              17,000,000.00
FMB Series V                                  7.50%     due 2007    issued under 1959 Indenture              10,000,000.00
                                                                                                            --------------
                                                                                                            103,550,000.00
                                                                                                            --------------

Rental Property fixed rate term note         7.90%        due 2013         due in installments                1,505,951.57
                                                                                                            --------------
Total Secured Indebtedness                                                                                  105,055,951.57
                                                                                                            ==============
</Table>


                                 Schedule 6.20-1
<PAGE>


                                  SCHEDULE 6.21

                                  SUBSIDIARIES



Atmos Energy Holdings, Inc.


         Atmos Energy Marketing, LLC
                  Woodward Marketing, L.L.C.
                  Trans Louisiana Industrial Gas Company, Inc.
                  Southern Resources, Inc.

         Atmos Energy Services, LLC
                  Energas Energy Services Trust
                  Trans Louisiana Energy Services, Inc.
                  United Cities Energy Services, Inc.
                  Greeley Energy Services, Inc.
                  WKG Energy Services, Inc.

         Enermart Energy Services Trust

         Egasco, LLC

         Atmos Power Systems, Inc.

         United Cities Propane Gas, Inc.

         Atmos Pipeline and Storage, LLC
                  UCG Storage, Inc.
                  WKG Storage, Inc.
                  Trans Louisiana Gas Storage, Inc.
                  Trans Louisiana Gas Pipeline, Inc.
                  Atmos Exploration & Production, Inc.


* Each of these subsidiaries is 100% owned by its parent.

** No Subsidiary of the Borrower currently qualifies as a Material Subsidiary as
that term is defined in the Credit Agreement.



                                 Schedule 6.21-1
<PAGE>


                                  SCHEDULE 11.1

                                     NOTICES

BANK ONE, NA                                BANC ONE CAPITAL MARKETS, INC.

Sharon Webb                                 William Banks
1 Bank One Plaza                            1 Bank One Plaza
Suite IL1-0363, 10th Floor                  Suite IL1-0429, 8th Floor
Chicago, IL 60670                           Chicago, IL 60670
Tel: 312-732-7437                           Tel: 312-732-9781
Fax: 312-732-3055                           Fax: 312-732-7455
E-mail: sharon_k_webb@bankone.com           E-mail: william_banks@bankone.com


SOCIETE GENERALE, NEW YORK BRANCH           WACHOVIA BANK, NATIONAL ASSOCIATION

David Bird                                  Reid Harden
1221 Avenue of the Americas, 11th Floor     999 Peachtree Street
New York, NY 10020                          Atlanta, GA  30309
Tel: 212-278-7429                           Tel: 404-332-1420
E-mail: david.bird@us.socgen.com            E-mail: reid.harden@wachovia.com

                                            Mitch Wilson
                                            Tel: 704-383-5642
                                            Email: mitch.wilson@wachoiva.com

KBC BANK N.V.                               THE BANK OF TOKYO-MITSUBISHI, LTD.

Filip Ferrante                              Damian Sullivan
245 Peachtree Center Avenue, Suite 2550     1100 Louisiana Street, Suite 2800
Atlanta, GA 30303                           Houston, TX 77002
Tel:  404-584-5466                          Tel:  713-655-3808
Fax: 404-584-5465                           Fax: 713-658-0116
E-Mail: filip.ferrante@kbc.be               E-Mail: dsullivan@btmna.com

                                            Jay Fort
                                            Tel: 713-655-3807
                                            Email: jfort@btmny.com


                                 Schedule 11.1-1

<PAGE>

<Table>
<S>                                         <C>
U.S. BANK NATIONAL ASSOCIATION              BANK OF AMERICA, N.A.

Ward Wilson                                 Shelly Schoenfeld
150 Fourth Avenue N, Third Floor            100 N. Tyron Street, 16th Floor
Nashville, TN 37219                         Charlotte, NC 28255
Tel: 615-251-9253                           Tel: 704-386-1432
Fax: 615-251-9245                           Fax: 704-386-1319
                                            E-Mail: michelle.a.schoenfeld@bankofamerica.com

HIBERNIA NATIONAL BANK                      SUNTRUST BANK

Donna Richardson                            Ryan Simmons
313 Carondelet Street                       303 Peachtree Street, 10th Floor
New Orleans, LA 70130                       Atlanta, GA  30308
Tel: 504-533-7813                           Tel: 404-724-3924
E-Mail: drichardson@hibernia.com            Fax: 404-827-6270
                                            E-mail: ryan.simmons@suntrust.com
</Table>


                                 Schedule 11.1-2
<PAGE>

                                                                     EXHIBIT 2.2

                           FORM OF NOTICE OF BORROWING



TO:      BANK ONE, NA, as Administrative Agent
         One Bank One Plaza
         Chicago, Illinois  60670

RE:      Bridge Credit Agreement dated as of October 7, 2002, among Atmos Energy
         Corporation (the "Borrower"), the Lenders named therein and Bank One,
         NA, as Administrative Agent for the Lenders (as the same may be
         amended, modified, extended or restated from time to time, the "Credit
         Agreement")

DATE:    ____________, 200__

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

1.       This Notice of Borrowing is made pursuant to the terms of the Credit
         Agreement. All capitalized terms used herein unless otherwise defined
         shall have the meanings set forth in the Credit Agreement.

2.       Please be advised that the Borrower is requesting Bridge Loans in the
         amount of $_________ to be funded on __________, 200__ at the interest
         rate option set forth in paragraph 3 below.

         Subsequent to the funding of the requested Bridge Loans, the amount of
         Bridge Loans outstanding will be $__________, which is less than or
         equal to the Bridge Loan Commitment.

3.       The interest rate option applicable to the requested Bridge Loans shall
         be:

         a.              the Base Rate
                 --------

         b.              the Adjusted Eurodollar Rate for an Interest Period of:
                 --------
                                      one month
                              --------
                                      two months
                              --------
                                      three months
                              --------

4.       As of the date on which funds are to be advanced, all representations
         and warranties contained in the Credit Agreement and in the other
         Credit Documents will be true and correct in all material respects.



                                 Exhibit 2.2-1
<PAGE>

5.       As of the date on which funds are to be advanced, no Default or Event
         of Default will exist or be continuing or will be caused by the making
         of Bridge Loans pursuant to this Notice of Borrowing.

                                           ATMOS ENERGY CORPORATION,
                                           a Texas and Virginia corporation

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------


                                 Exhibit 2.2-2
<PAGE>


                                                                     EXHIBIT 2.4

                    FORM OF NOTICE OF CONTINUATION/CONVERSION

TO:      BANK ONE, N.A., as Administrative Agent
         One Bank One Plaza
         Chicago, Illinois 60670

RE: Bridge Credit Agreement dated as of October 7, 2002 among Atmos Energy
Corporation (the "Borrower"), the Lenders named therein and Bank One, NA, as
Administrative Agent for the Lenders (as the same may be amended, modified,
extended or restated from time to time, the "Credit Agreement")

DATE:    _____________, 200___

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

1. This Notice of Continuation/Conversion is made pursuant to the terms of the
Credit Agreement. All capitalized terms used herein unless otherwise defined
shall have the meanings set forth in the Credit Agreement.

2. Please be advised that the Borrower is requesting that a portion of the
current outstanding Bridge Loans in the amount of $_________ currently accruing
interest at _____ be continued or converted as of ___________, 200__ at the
interest rate option set forth in paragraph 3 below.

3. The interest rate option applicable to the continuation or conversion of all
or part of the existing Bridge Loans (as set forth above) shall be:

         a.              the Base Rate
                --------
         b.              the adjusted Eurodollar Rate for an Interest Period of:
                --------
                                            one month
                                   --------
                                            two months
                                   --------
                                            three months
                                   --------


                                            ATMOS ENERGY CORPORATION,
                                            a Texas and Virginia corporation


                                            By:
                                                --------------------------------
                                            Name:
                                                  ------------------------------
                                            Title:
                                                   -----------------------------


                                 Exhibit 2.4-1
<PAGE>

                                                                     EXHIBIT 2.7

                                     FORM OF
                                BRIDGE LOAN NOTE


                                                             ___________, 200___


         FOR VALUE RECEIVED, ATMOS ENERGY CORPORATION, a Texas and Virginia
corporation (the "Borrower"), hereby promises to pay to the order of
______________ (the "Lender"), at the office of Bank One, NA (the
"Administrative Agent") as set forth in that certain Bridge Credit Agreement
dated as of October 7, 2002 among the Borrower, the Lenders named therein
(including the Lender) and the Administrative Agent (as the same may be amended,
modified, extended or restated from time to time, the "Credit Agreement") (or at
such other place or places as the holder of this Bridge Loan Note may
designate), the aggregate amount of all Bridge Loans made by the Lender under
the Credit Agreement (and not otherwise repaid), in lawful money and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount of
each Bridge Loan made by the Lender, at such office, in like money and funds,
for the period commencing on the date of each Bridge Loan until each Bridge Loan
shall be paid in full, at the rates per annum and on the dates provided in the
Credit Agreement.

         This Note is one of the Bridge Loan Notes referred to in the Credit
Agreement and evidences Bridge Loans made by the Lender thereunder. The Lender
shall be entitled to the benefits of the Credit Agreement. Capitalized terms
used in this Bridge Loan Note have the respective meanings assigned to them in
the Credit Agreement and the terms and conditions of the Credit Agreement are
expressly incorporated herein and made a part hereof.

         The Credit Agreement provides for the acceleration of the maturity of
the Bridge Loans evidenced by this Bridge Loan Note upon the occurrence of
certain events (and for payment of collection costs in connection therewith) and
for prepayments of Bridge Loans upon the terms and conditions specified therein.
In the event this Bridge Loan Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorney fees.

         Except as permitted by Section 11.3(b) of the Credit Agreement, this
Bridge Loan Note may not be assigned by the Lender to any other Person.

         THIS BRIDGE LOAN NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.


                                  Exhibit 2.7-1
<PAGE>


         IN WITNESS WHEREOF, the Borrower has caused this Bridge Loan Note to be
executed as of the date first above written.

                                            ATMOS ENERGY CORPORATION,
                                            a Texas and Virginia corporation


                                            By:
                                                --------------------------------
                                            Name:
                                                  ------------------------------
                                            Title:
                                                   -----------------------------



                                  Exhibit 2.7-2
<PAGE>

                                                                  EXHIBIT 7.1(c)


                          FORM OF OFFICER'S CERTIFICATE

TO:               BANK ONE, N.A., as Administrative Agent
                  One Bank One Plaza
                  Chicago, Illinois 60670

RE:               Bridge Credit Agreement dated as of October 7, 2002 among
                  Atmos Energy Corporation (the "Borrower"), the Lenders named
                  therein and Bank One, N.A., as Administrative Agent for the
                  Lenders (as the same may be amended, modified, extended or
                  restated from time to time, the "Credit Agreement")

DATE:             ________________, 200_

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

         Pursuant to the terms of the Credit Agreement, I,
_______________________________, ____________ of the Borrower, hereby certify on
behalf of the Borrower that, as of the quarter/year ending ____________, 200_,
the statements below are accurate and complete in all material respects (all
capitalized terms used herein unless defined shall have the meanings set forth
in the Credit Agreement):

                  a. Attached hereto as Schedule I are calculations
         demonstrating compliance by the Borrower with the financial covenant
         set forth in Section 7.2 of the Credit Agreement, as of the end of the
         fiscal period cited above.

                  b. No Default or Event of Default exists under the Credit
         Agreement, except as indicated on a separate page attached hereto,
         together with an explanation of the action taken or proposed to be
         taken by the Borrower with respect thereto.

                  c. The quarterly/annual financial statements for the fiscal
         period cited above which accompany this certificate are true and
         correct and have been prepared in accordance with GAAP (in the case of
         any quarterly financial statements, subject to changes resulting from
         audit and normal year-end audit adjustments).

                                            ATMOS ENERGY CORPORATION

                                            By:
                                                --------------------------------
                                            Name:
                                                  ------------------------------
                                            Title:
                                                   -----------------------------


                                Exhibit 7.1(c)-1
<PAGE>


                       SCHEDULE I TO OFFICER'S CERTIFICATE


            COMPLIANCE WITH SECTION 7.2: DEBT TO CAPITALIZATION RATIO

<Table>
<S>      <C>                                                          <C>
1.       Consolidated Funded Debt                                     $
                                                                       ----------
2        Consolidated Capitalization                                  $
                                                                       ----------
3.       Debt to Capitalization Ratio:  (Line 1 divided by Line 2)
                                                                      -----------
</Table>

         Maximum Allowed:  Line 3 shall be less than or equal to 0.70 to 1.0



                                Exhibit 7.1(c)-2
<PAGE>


                                                                 EXHIBIT 11.3(b)

                          FORM OF ASSIGNMENT AGREEMENT

         Reference is made to that certain Bridge Credit Agreement, dated as of
October 7, 2002, among Atmos Energy Corporation (the "Borrower"), the Lenders
party thereto and Bank One, NA, as Administrative Agent for the Lenders (as the
same may be amended, modified, extended or restated from time to time, the
"Credit Agreement"). Capitalized terms used herein shall have the meanings
ascribed thereto in the Credit Agreement.

         1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation and warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, without
recourse and without representation and warranty except as expressly set forth
herein, the interests set forth below (the "Assigned Interest") in the
Assignor's rights and obligations under the Credit Agreement, including, without
limitation, the interest set forth below in the Commitment Percentage of the
Assignor on the Effective Date (as defined below) and the Loans owing to the
Assignor in connection with the Assigned Interest which are outstanding on the
Effective Date. The purchase of the Assigned Interest shall be at par (unless
otherwise agreed to by the Assignor and the Assignee) and periodic payments made
with respect to the Assigned Interest which (a) accrued prior to the Effective
Date shall be remitted to the Assignor and (b) accrue from and after the
Effective Date shall be remitted to the Assignee.

         2. The Assignor (a) warrants to the Assignee that it is the legal and
beneficial owner of the Assigned Interest and that the Assigned Interest is free
and clear of any adverse claim created by the Assignor; (b) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Documents or any other document or instrument furnished pursuant thereto
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of Credit Documents or any document or instrument furnished pursuant
thereto; (c) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under the Credit Documents
or any document or instrument furnished pursuant thereto and (d) if the Assignor
is hereby assigning all of its Commitment, the Assignor attaches the Notes held
by the Assignor and requests that the Administrative Agent exchange such Notes
for new Notes in favor of the Assignee.

         3. The Assignee (a) confirms that it is legally authorized to enter
into this Assignment Agreement; (b) confirms that it has received a copy of the
Credit Agreement, the other Credit Documents and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter to this Assignment Agreement; (c) agrees that it will,
independently and without reliance upon the Administrative Agent, the Assignor
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement and the other Credit
Documents; (d) confirms that it is an Eligible Assignee; (e) appoints and
authorizes the Administrative Agent to take such action on its behalf and to
exercise such powers under the Credit Documents as are delegated to the
Administrative Agent


                                 Exhibit 11.3(b)-1

<PAGE>

by the terms thereof, together with such powers as are reasonably incidental
thereto; (f) agrees that it will perform in accordance with their terms all of
the obligations which by the terms of the Credit Agreement and the other Credit
Documents are required to be performed by it as a Lender; and (g) attaches any
U.S. Internal Revenue Service or other forms required under Section 4.4.

         4. Following the execution of this Assignment Agreement, it will be
delivered to the Administrative Agent, together with the transfer fee required
pursuant to Section 11.3(b) of the Credit Agreement, if any, for acceptance and
recording by the Administrative Agent. The effective date for this Assignment
Agreement (the "Effective Date") shall be the date of acceptance hereof by the
Administrative Agent and the Borrower, as applicable, unless otherwise specified
herein.

         5. Upon the consent of the Borrower and the Administrative Agent, as
applicable, as of the Effective Date, (a) the Assignment shall be a party to the
Credit Agreement and the other Credit Documents and, to the extent provided in
this Assignment Agreement, have the rights and obligations of a Lender
thereunder and (b) the Assignor shall, to the extent provided in this Assignment
Agreement, relinquish its rights and be released from its obligations under the
Credit Agreement and the other Credit Documents.

         6. This Assignment Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

         7. This Assignment Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

         8. Terms of Assignment

<Table>
<S>                 <C>                                                            <C>
            (a)     Date of Assignment:
                                                                                   -----------------
            (b)     Legal Name of Assignor:
                                                                                   -----------------
            (c)     Legal Name of Assignee:
                                                                                   -----------------
            (d)     Effective Date of Assignment:
                                                                                   -----------------
            (e)     Commitment Percentage Assigned:                                                %
                                                                                   ----------------
            (f)     Commitment Percentage of Assignor after
                    Assignment                                                                     %
                                                                                   ----------------
            (g)     Total Bridge Loans outstanding as of
                    Effective Date                                                 $
                                                                                    ----------------
</Table>


                                 Exhibit 11.3(b)-2
<PAGE>

<Table>
<S>                 <C>                                                            <C>
            (h)     Principal Amount of Bridge Loans assigned
                    on Effective Date (the amount set forth in
                    (g) multiplied by the percentage set forth
                    in (e))                                                        $
                                                                                    ----------------
            (i)     Bridge Loan Commitment                                         $
                                                                                    ----------------
            (j)     Principal Amount of Bridge Loan Commitment
                    Assigned on the Effective Date (the amount
                    set forth in (i) multiplied by the
                    percentage set forth in (e))                                   $
                                                                                    ----------------
</Table>


                                 Exhibit 11.3(b)-3
<PAGE>


The terms set forth above are hereby agreed to as of the date first above
written:


                             , as Assignor
-----------------------------


By:
    --------------------------------------
Name:
      ------------------------------------
Title:
       -----------------------------------

                             , as Assignee
-----------------------------


By:
    --------------------------------------
Name:
      ------------------------------------
Title:
       -----------------------------------

                                           CONSENTED TO (if applicable):

                                           ATMOS ENERGY CORPORATION

                                           By:
                                               --------------------------------
                                           Name:
                                                 ------------------------------
                                           Title:
                                                  -----------------------------

                                           BANK ONE, NA,
                                           as Administrative Agent

                                           By:
                                               --------------------------------
                                           Name:
                                                 ------------------------------
                                           Title:
                                                  -----------------------------



                                 Exhibit 11.3(b)-4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>4
<FILENAME>d01510exv10w13.txt
<DESCRIPTION>TRANSPORTATION SERVICE AGREEMENT
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.13


                        TRANSPORTATION SERVICE AGREEMENT

                                (FIRM INTRASTATE)

          THIS FIRM INTRASTATE TRANSPORTATION SERVICE AGREEMENT (hereinafter
referred to as "Service Agreement") made and entered into as of this 1st day of
January, 2002, by and between ONEOK WesTex Transmission, L.P., hereinafter
referred to as "Company" and ENERGAS Company, a division of Atmos Energy
Corporation, hereinafter referred to as "Customer."

          WHEREAS, Customer desires to establish a master Firm Intrastate
Transportation Service Agreement whereby Gas may be transported by Company on a
firm basis on behalf of Customer if Company and Customer mutually agree to the
terms and conditions of such transportation; and

          WHEREAS, Company desires to transport such Gas for Customer if such
terms and conditions can be agreed to.

          NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, Company and Customer hereby agree as follows:

                                   ARTICLE I.

                               GENERAL PROVISIONS

          1.1 The provisions of this Agreement as well as the General Terms and
Conditions herein, in the General and Exhibit A, attached hereto and by this
reference included herein as if set forth in full, are intended to be
incorporated into and become part of the Service Agreement between Customer and
Company relating to the transportation of Gas by Company. The Service Agreement
will consist of the provisions contained Terms and Conditions, in the Service
Orders A-1, A-2, A-3 and A-4 attached hereto and in





                                       1
<PAGE>

any new Gas transportation order ("Service Order") which sets forth the specific
terms and conditions of such transportation.

         1.2 The Service Orders A-1, A-2, A-3 and A-4 attached hereto are
incorporated herein by this reference and are jointly referred to as Service
Orders. Should Company and Customer from time to time after the Effective Date
come to a new understanding regarding the transportation of Gas for a particular
period of delivery, then Company shall communicate that understanding to
Customer by sending a completed new Service Order (a form which is attached
hereto as Exhibit A) to Customer. Upon acceptance of the Service Order by
Customer which must be provided and agreed to by Company prior to any delivery
of gas, the Service Order shall be effective as to both parties.

         1.3 All nominations, scheduling, transportation and priorities for
service shall be subject to the actions of the Point Operator at the applicable
Point(s) of Receipt or Point(s) of Delivery.

         1.4 The definitions applicable to transportation of gas are set forth
in the General Terms and Conditions attached hereto and by this reference
included herein.

                                   ARTICLE II.

                                 TRANSPORTATION

         2.1 Company hereby agrees to transport on behalf of Customer, up to,
but not in excess of, that amount shown on the applicable Service Orders and
each new Service Order effective between the Parties for each of the Point(s) of
Delivery. Company shall have no obligation to deliver such Gas unless such Gas
is being or has been received by Company at the Point(s) of Receipt as
identified on the applicable Service Orders and each new Service Order effective
between the Parties and in accordance with the General Terms and Conditions. To
the extent that Gas is not physically being transported for or on behalf of
Customer, Customer shall have no right, title or interest in the System, its
capacity or





                                       2
<PAGE>

any rights therein. Notwithstanding the above, Customer shall have the right at
all times, subject to the terms and conditions of this Agreement, to utilize the
capacity up to the Demand Quantity as set forth in the applicable Service Order.
Daily and Monthly thermal balancing of receipts and deliveries shall be
maintained by Customer to the maximum extent practicable.

          2.2 As payment for transportation of Gas hereunder Customer shall pay
the Company an amount equal to the charges set forth in this Service Agreement,
the Service Orders, each new Service Order effective between the Parties, and
the fees and charges described in the General Terms and Conditions. The parties
recognize and agree that there may be multiple Service Orders in existence at
any one time. From the gas delivered to Company by or for the account of
Customer, Company shall retain for its own account and without compensation to
Customer an amount of Gas equal to the Fuel and Use Quantity.

          2.3 "Metering Facility(ies)" means the equipment and facilities
located in the West Texas area (including but not limited to all pipe, valves,
fittings, meters and regulators) which are presently connected (or connected in
the future under Section 2.5 hereof) directly to Company's pipeline system(s) as
follows:

          (a)   OrificeMeters;

          (b)   Large Capacity Positive Displacement Meters ("Large Meters"),
                being Class IV or larger positive displacement, turbine, and
                rotary meters which includes those meters with a capacity equal
                to or greater than 1800 cubic feet per hour at 8 ounces of
                pressure and 2" differential pressure;

          (c)   Other Positive Displacement Meters ("Other Meters"), being those
                Class I through III meters which includes those meters with a
                capacity less than 1800 cubic feet per hour at 8 ounces of
                pressure and 2" differential pressure.

          (d)   New Facilities as described in Section 2.5(a) hereof.



                                       3
<PAGE>

Company shall own all Orifice Meters and Large Meters unless otherwise agreed by
the parties. Customer shall own, maintain, and operate all Other Meters
Additionally, all yard lines and service lines downstream of the Metering
Facility(ies) shall remain the property of Customer. Company shall own, operate
and maintain all taps, valves and regulators upstream of the Metering
Facilities, except that Customer shall own, operate and maintain its own
regulators upstream of Other Meters.

         2.4 Unless otherwise mutually agreed upon in writing, Company will be
the "Operating Party" for all Orifice Meters and Large Meters and Customer will
be the "Operating Party" for Other Meters. Any Orifice Meters and Large Meters
which are replaced with an Other Meters after the Effective Date, Customer shall
be the Operating Party at its sole cost and expense.

         2.5 (a) In the event Customer determines that a new Orifice Meter or
Large Meter ("New Facility") is required to provide service to Customer under
this Service Agreement, Customer shall submit a request to Company and Company
shall install, own, and operate, or cause to be installed and operated such New
Facility. Company shall have no obligation to provide transportation capacity or
any other rights to Customer in excess of that which were allowed by contract to
Customer prior to the installation of the New Facilities. Customer shall pay to
Company or Company's designee the actual cost of such installations (including
taxes on income, if any, for aid in construction reimbursements) plus an
overhead charge of fifteen percent of such actual cost. Customer shall pay such
costs within thirty (30) days of receipt of invoice. Customer at its cost, shall
provide location sites acceptable to Company for all such New Facilities.
Company shall designate the type of New Facilities that shall be utilized;
provided, if Company, after the installation of New Facilities pursuant to
Company's initial designation for any point hereunder, designates a different
type of New Facilities, the cost of such


                                       4
<PAGE>


different New Facilities shall be borne by Company. Company will install or
cause to be installed a New Facility only upon receipt of a completed "New
Facilities Request" form from Customer (example provided in attached Exhibit B).

         (b)   Customer shall not be responsible for costs associated with the
               replacement, rebuilding or repair of any Orifice Meters, Large
               Meters or New Facilities.

         (c)   For all Other Meters, unless otherwise agreed, Customer at its
               sole cost and expense shall install, own and operate or cause to
               be installed and operated all equipment determined by Customer to
               be necessary for the measurement of gas to be delivered under
               this Service Agreement. Unless otherwise agreed, Company will not
               be responsible for costs associated with the replacement,
               rebuilding or repair of all Other Meters. Customer shall not
               install, remove or change in any manner any Other Meters without
               written notice to the Company at least (1) day in advance
               thereof. Company shall have no obligation to provide
               transportation capacity or other rights to Customer in excess of
               that allowed by contract to Customer prior to the installation,
               removal or change of any Other Meters. Notices to install, remove
               or change any Other Meter shall be in the format attached as
               Exhibit C hereto and shall be submitted to:

                                          ONEOK WesTex Transmission, L.P.
                                          Measurement Supervisor,
                                          P.O. Box 5810
                                          Lubbock, Texas 79408
                                          or
                                          4002 MLK, Jr. Blvd.
                                          Lubbock, Texas 79404
                                          Tel. (806) 747-3037 or (806) 762-0560
                                          Fax (806) 765-6716.



                                       5
<PAGE>


          Emergency installations, removals and changes can be reported to the
phone numbers given above or can be made and then reported to the Company by
facsimile on the business day following such installation, removal or change. If
Customer fails to make such notices and reports as required, Company will charge
and Customer will pay a $50.00 late notice fee for each such failure.

(d)      All equipment installed by either Party will be in compliance with
         industry standard designs and operated in accordance with this Service
         Agreement. Either Party may install, maintain, and operate, at its sole
         cost and expense, check metering facilities or other related equipment
         including, but not limited to, separate metering facilities, and
         equipment which will give either party the right to share
         pressure/differential sensing lines and positive displacement meter
         pulse output; provided, however, that such equipment shall be installed
         in a manner that will not interfere with the operation of the other
         Party's metering facilities and/or telemetry equipment.

2.6      (a) Company shall cause all Orifice and Large Meters to be read once
         each Month on approximately the same day of the Month as close to the
         end of the month as reasonably practicable. Upon mutual agreement of
         the Parties, the reading of Large Meters may be delegated to Customer
         provided that such agreement provides at a minimum a list of Large
         Meters to be read, the time each Large Meter will be read each Month
         and the format and method in which Customer will communicate the
         monthly readings to Company.

(b)      Customer at its sole cost and expense shall cause all Other Meters to
         be read at least once each Month on approximately the same date each
         Month and report such information to Company in a format and within a
         time period specified by Company in its reasonable discretion.



                                       6
<PAGE>


         2.7 Company shall make all reasonable efforts to maintain a minimum of
one hundred fifty (150) psig at the inlet to all Town Border Stations (TBS's)
(as defined in Section 1 (k) of Schedule A-l attached to Exhibit A-l attached to
this Service Agreement), all other deliveries shall be made at the pressure
existing from time to time in Company's facilities. Notwithstanding the one
hundred fifty (150) psig requirement at the TBS's, neither Party shall be
required to install compression facilities in order to effect deliveries
hereunder at the Metering Facilities.

         2.8 At any Metering Facilities in which Company serves Customer at a
delivery pressure above 5.3 ounces, Company agrees to adjust the delivery
pressure, as soon as reasonably practicable, to a pressure within the limits of
service at that location as defined by Department of Transportation regulations
40 C.F.R. Part 192.

         2.9 Company shall inject Mercaptan into the natural gas prior to
delivery to Customer from Metering Facilities directly connected to pipeline
systems which Company owns as of the Effective Date at the rate of approximately
one-half pound per MMcf. Company shall construct, maintain and operate any
facilities required for the performance of this obligation. Customer shall be
responsible for odorization of the natural gas received by Customer from
pipelines that are not owned by Company or if odorization is required by law,
regulation or industry practice in excess of one-half pound of Mercaptan per
MMcf Customer shall be responsible for monitoring and performing all odorant
checks within its delivery systems and will notify Company immediately if
Customer determines that Company is injecting less than one-half pound of
Mercaptan per MMcf prior to delivery to Customer. Customer shall also be
responsible for any regulatory requirements associated with monitoring and
performing odorant checks on its delivery systems. Notwithstanding any other
provisions in this Service Agreement, Customer shall defend, indemnify and hold
Company harmless from any and all liability, claim, loss, penalty, fines, damage
or expense (including attorneys fees) which may arise out of Customer's failure
or alleged failure to




                                       7
<PAGE>

odorize gas Customer delivers to its customers.

          2.10 Unless mutually agreed to otherwise by Company and Customer, upon
issuance of an Operational Flow Order, Company shall advise Customer of the
volume of Gas that must be curtailed immediately pursuant to Section 4.8 of the
General Terms and Conditions. Within four (4) hours after receipt of such
notice, Customer shall advise Company of the Point(s) of Receipt and Point(s) of
Delivery that may be curtailed and the volume of Gas to be curtailed at each
such Point(s) of Receipt and Point(s) of Delivery. Company shall curtail
deliveries at such Point(s) of Receipt and Point(s) of Delivery within four (4)
hours of receipt of such notice from Customer. As long as such Operational Flow
Order is in effect Company and Customer shall implement further curtailments
that need to be made in the same manner and under the same time limitations.

          2.11 This Service Agreement shall be binding upon the parties upon its
execution by all parties hereto and will become effective on the date
hereinabove written (hereinafter referred to as Effective Date). The Service
Agreement shall extend for a term of one (1) year from and after such Effective
Date and month to month thereafter until terminated by either party upon thirty
(30) days written notice, but in no event shall this Service Agreement expire
(but shall be subject to termination as set forth in the General Terms and
Conditions) prior to the expiration of any applicable Service Order.
Upon expiration, all obligations of the parties hereto shall terminate, except
as to the reconciliation of accounts, adjustments for prior periods, balancing
of receipts and withdrawals of Gas hereunder and the payment of any amounts due.

          2.12 Any notice, request, statement, correspondence, or payment
provided for in this Service Agreement shall be given in writing, delivered in
person, by facsimile, by


                                       8
<PAGE>


private carrier or by United States mail, to the parties hereto at the addresses
shown below or at such other addresses as may be hereafter furnished by one
party to the other in writing:

For General Notices:

COMPANY:                                CUSTOMER:
ONEOK WesTex Transmission, L.P.         ENERGAS Company,
                                        A division of Atmos Energy Corporation
Attention: Contract Administration      Attention: Contract Administration
P.O. Box 22089                          P. O. Box 650205
Tulsa, OK 74121-2089                    Dallas, Texas 75265-0205
Facsimile: (918) 588-7616               Phone: (972) 855-3280
                                        Facsimile: (972) 855-3070

For Operational Notices:

ONEOK WesTex Transmission, L.P.         ENERGAS Company,
Attention: Contract Administration      A division of Atmos Energy Corporation
P.O. Box 22089                          Attention: Gas Supply
Tulsa, OK 74121-2089                    P.O. Box 650205
Facsimile: (918) 588-7616               Dallas, Texas 75265-0205
                                        Phone: (972) 855-3749
                                        Facsimile: (972) 855-3070



(Intentionally Left Blank)                For Local Technical or Operational
                                          Assistance:

                                          Energas Company,
                                          A division of Atmos Energy Corporation
                                          Attention: Technical Services
                                          5110 80th Street
                                          Lubbock, Texas 79424
                                          Phone: (806) 798-4446
                                          Facsimile: (806) 798-4495

After Hours Emergency Notification:

ONEOK WesTex Gas Control                  Atmos Gas Control
Phone: 800-562-5879                       Phone: (615) 535-7700 ext. 223
Facsimile: 918-588-7533                   Facsimile: (615) 790-9337

For Payments:                             For Invoices:

Remit by Wire Transfer or ACH to:         ENERGAS Company,
ONEOK Westex Transmission L.P.            a division of Atmos Energy Corporation
Bank One, Oklahoma, NA, Tulsa, OK         Attention: Gas Supply
ABA #103000648                            P.O. Box 650205
Account #: 632944989                      Dallas, TX 75265-0205



                                       9
<PAGE>

          2.13 Neither Customer nor its officers, directors, employees, agents
or representatives shall take, omit to take, or permit to be taken any action
which shall subject Company, its affiliates, their Systems or any of their other
facilities to the jurisdiction of the Federal Energy Regulatory Commission (or
any successor agency) pursuant to the Natural Gas Act of 1938, as amended, the
Natural Gas Policy Act of 1978, as amended, or any of the rules and regulations
adopted pursuant to those acts. If Customer breaches the foregoing provision,
then Customer agrees to defend (with counsel of Company's choosing to be made in
Company's sole discretion), indemnify and hold Company, its affiliates and their
officers, directors, employees, agents and representatives harmless from and
against any loss, damage, cost (including reasonable attorney's fees) and
expenses (including fines and penalties, consequential and exemplary damages)
arising out of any action, suit, proceeding, judgment, claim, allegation,
investigation and liability of any nature whatsoever relating to the foregoing
provision and the breach thereof. Further, Customer recognizes and agrees that
if Company determines that a violation of the first sentence of this Section
2.13 may have occurred, then Company may immediately take such action as it
deems necessary in its sole discretion to terminate such jurisdictional status.

          2.14 TO THE EXTENT THAT TEXAS LAW SHALL APPLY TO THE TRANSACTIONS
COVERED HEREBY, THE PARTIES CERTIFY THAT THEY ARE NOT "CONSUMERS" WITHIN THE
MEANING OF THE TEXAS DECEPTIVE TRADE PRACTICES CONSUMER PROTECTION ACT,
SUBCHAPTER E OF CHAPTER 17, SECTIONS 17.41, ET SEQ., OF THE TEXAS BUSINESS AND
COMMERCE CODE, AS AMENDED ("DTPA"). THE PARTIES COVENANT, FOR THEMSELVES AND FOR
AND ON BEHALF OF ANY SUCCESSOR OR ASSIGNEE, THAT, IF THE DTPA IS APPLICABLE TO
THIS AGREEMENT, (1) THE PARTIES ARE "BUSINESS CONSUMERS" AS THAT TERM IS DEFINED
IN THE DTPA AND (2) OTHER THAN SECTION 17.555 OF THE TEXAS BUSINESS AND COMMERCE
CODE, EACH PARTY HEREBY WAIVES AND RELEASES ALL OF ITS RIGHTS AND REMEDIES
THEREUNDER AS APPLICABLE TO THE OTHER PARTY AND ITS SUCCESSORS AND ASSIGNS.

          2.15 The Operating Agreement dated November 13, 1996, the LDC
Transport Agreement




                                       10
<PAGE>

dated January 1, 1996 and LVS Transportation Agreement dated January 1,1996,
(all three agreements jointly referred to as Terminated Contracts) all by and
between the parties hereto or their predecessors in interest are hereby
terminated and cancelled effective as of the Effective Date except that each of
the Parties reserves all of their rights with respect to: (1) the balancing of
gas receipts and deliveries; (2) the payment for services previously rendered;
(3) any and all debts, demands, claims, counter-claims, cross claims, causes of
action, duties to defend, defenses, obligations, liabilities, rights, and
damages of any kind whatsoever, asserted or unasserted, at law or in equity,
whether known or unknown arising under or in connection with such Terminated
Agreements.

          2.16 The General Terms and Conditions are incorporated herein by this
reference and the words and phrases contained herein shall have the same
meanings as set forth in the General Terms and Conditions.

          IN WITNESS WHEREOF, this Service Agreement is executed this (22nd) day
of (August, 2002).

ENERGAS Company,                     ONEOK WesTex Transmission, L.P.
a division of                        by ONEOK WesTex Gas Pipeline, Inc.
Atmos Energy Corporation             General Partner

By: /s/ Gordon J. Roy                By: /s/ John L. Sommer
Vice President                       Vice President




                                       11
<PAGE>


                                 ENERGAS COMPANY

                         ONEOK WESTEX TRANSMISSION, L.P.
                          GENERAL TERMS AND CONDITIONS

                                    ARTICLE 1
                                   DEFINITIONS

         1.1 "Affiliate" shall mean any person, entity, or business section, or
division that directly or through one or more intermediaries' controls, is
controlled by, or is under common control with the entity in question. Control
includes, the possession, directly or indirectly, and whether acting alone or in
conjunction with others, of the authority to direct a direction of the
management or policies of a person or entity. Control may be exercised through
management, ownership of voting securities or other right to vote, by contract
or otherwise. Affiliates of the Company shall not include Western Resources,
Inc.

         1.2 "Btu" shall mean British thermal unit. The definition of one Btu is
the quantity of heat that must be added to one pound (avoirdupois) of pure water
to raise its temperature from fifty eight and one-half degrees (58.5
degrees)Fahrenheit to fifty nine and one-half degrees (59.5 degrees)Fahrenheit
under standard pressure conditions. Btu shall be computed on a temperature base
of sixty degrees (60 degrees) Fahrenheit and a pressure base of fourteen and
seventy-three hundredths (14.73) psia and on a gross-real-dry basis and shall
not be corrected for real water vapor as obtained by means commonly acceptable
to the industry, and "MMBtu" shall mean one million (1,000,000) Btu.

         1.3 "Customer" shall mean the person or entity that has executed a
Service Agreement with the Company for the service rendered under such Service
Agreement or, as the context may require, any person or entity requesting
service hereunder.

         1.4 "Day" shall mean the consecutive 24-hour period commencing at 9:00
a.m. (Central Clock Time) on one calendar day and ending at 9:00 a.m. (Central
Clock Time) the following calendar day.

         1.5 "Dekatherm" or "Dth" shall mean one million Btu'

         1.6 "Effective Date" shall mean the date specified in the Service
Agreement.

         1.7 "Equivalent Quantity" shall mean those Dekatherms of natural Gas to
be made available during any period of time to or on behalf of the Customer at
one or more Point(s) of Delivery, which Dekatherms shall be the thermal
equivalent of the Input Quantity delivered to Company at the Point(s) of Receipt
by or on behalf of Customer during that period of time, less the applicable Fuel
and Use Quantity.

         1.8 "FERC" shall mean the Federal Energy Regulatory Commission or any
successor regulatory agency.

         1.9 "Finn Intrastate Transportation Service ("ETS") shall mean that
firm service which is available pursuant to an effective Gas Transportation
agreement.

         1.10 "Fuel and Use Factor" shall be the applicable percentage set forth
in the Service Order. as such may be revised from time to time by mutual
agreement.

         1.11 "Fuel and Use Quantity" shall be equal to the product of the
applicable Fuel and Use Factor and the Input Quantity.

         1.12 "Gas," "gas" or "natural gas" shall mean the effluent vapor stream
in its natural, gaseous state, including gas-well gas, casinghead gas, residue
gas resulting from processing both casinghead gas and gas-well gas, and all
other hydrocarbon and non-hydrocarbon components thereof

         1.13 "Hour" shall mean a one hour period commencing at the start of a
given hour within the Day and ending 60 minutes later within the Day.

         1.14 "Input Quantity" shall mean the quantity of Gas received at the
Point(s) of Receipt in Dekatherms of Gas which are actually received by the
Company at the Point(s) of Receipt by or on behalf of Customer.


<PAGE>


         1.15 "Intermptible Transportation Service ("ITS") shall mean that
intermptible service which is available to any Customer, subject to availability
of transportation capacity, as determined by Company, with an effective Gas
Transportation Agreement.

         1.16 "Interstate Points" shall mean interconnections between the System
and those of an interstate pipeline regulated as such hy the Federal Energy
Regulatory Commission pursuant to the Natural Gas Act, as amended.

         1.17 "Maximum Annual Delivery Quantity" shall mean the maximum amount
of Dekatherms of Gas that the System delivers to Customer in any Contract Year.

         1.18 "Maximum Annual Receipt Quantity" shall mean the maximum amount of
Dekatherms of Gas that the System receives from Customer for transportation in
any Contract Year.

         1.19 "Maximum Daily Delivery Quantity" shall mean the maximum amount of
Dekatherms of Gas that the System delivers to Customer in any one Day.

         1.20 "Maximum Daily Receipt Quantity" shall mean the maximum amount of
Dekatherms of Gas that the System receives from Customer in any one Day.

         1.21 "Maximum Hourly Delivery Quantity" shall mean the maximum amount
of Dekatherms of Gas that the System delivers to Customer in any one Hour.

         1.22 "Maximum Hourly Receipt Quantity" shall mean the maximum amount of
Dekatherms of Gas that the System receives from Customer in any one Hour.

         1.23 "Maximum Monthly Delivery Quantity" shall mean the maximum amount
of Dekatherms of Gas the System delivers to Customer in any Month.

         1.24 "Maximum Monthly Receipt Quantity" shall mean the maximum amount
of Dekatherms of Gas that the System receives from Customer for transportation
during any Month.

         1.25 "Mcf' shall mean one thousand (1,000) cubic feet of Gas.

         1.26 "Month" shall mean the period beginning at 9:00 a.m. Central clock
time on the first day of each calendar month and ending at 9:00 am. Central
clock time on the first day of the next succeeding calendar month.

         1.27 "Nomination" shall mean the request for services at a specified
time, date, quantity, rate and Rank Priority at the Point(s) of Receipt and
Delivery.

         1.28 "OFO Period" shall mean the period of time in which an OFO is in
effect.

         1.29 "Operational Flow Order ("OFO)" shall mean the issuance of notice
that physical flows at each Point of Receipt must balance the confirmed or
scheduled flows at each such Point of Receipt and the physical flows at each
Point of Delivery must balance the confirmed or scheduled flows at each such
Point of Delivery, via the telephone, ALTRA WEB, Nominations System, or
facsimile, which are intended to alleviate conditions which threaten the safe
operations or system integrity of the Company's Systems, or which are required
to maintain efficient and reliable service.

         1.30 "Party" or "party" shall mean Customer or Company and the term
"Parties" or "parties" shall mean Customer and Company.

         1.31 "Person" shall mean an individual, a corporation, voluntary
association, joint stock company, business trust, partnership or other entity.

         1.32 "Point(s) of Delivery" shall mean the point or points where Gas is
delivered from the System to or for the account of Customer and are shown on the
applicable Service Order. Each Point(s) of Delivery shall be treated separately
with respect to all rights and obligations and all actions to be taken pursuant
to the Service Agreement and the Exhibits attached thereto, including, without
limitation, where applicable, nominations, balancing, Gas quality, delivery
pressure and force majeure.

         1.33 "Point(s) of Receipt" shall mean the point or points where Company
shall receive Gas into the Systems from Customer, as described on the applicable
Service Order.
<PAGE>


         1.34 "Point Operator" shall mean the entity or entities that operate,
accept or provide Gas to the Point(s) of Receipt or Delivery.

         1.35 "Pro Rata Share" shall mean the ratio that the quantity of Gas
scheduled to be received or delivered, as appropriate, by the Company, from or
for the account of the Customer, bears to the total quantity of Gas scheduled to
be received or delivered, as appropriate, by the Company from or for the account
of all Customers for Service in the applicable System during any given time
period (day, month, year). Gas scheduled to be received shall be used at the
Point(s) of Receipt and Gas scheduled to be delivered shall be used at the
Point(s) of Delivery to determine the applicable Pro Rata Share.

         1.36 "Psia" shall mean pounds per square inch, absolute.

         1.37 "Psig" shall mean pounds per inch gauge.

         1.38 "Rank Priority" shall mean the priority in which quantities are to
be allocated at the Point(s) of Receipt and Point(s) of Delivery. With respect
to the Point(s) of Receipt, the priority shall be established by the person or
entity who operates the facilities delivering Gas to the Company. With respect
to the Point(s) of Delivery, the priority shall be established by the person or
entity operating the meter at such Point(s) of Delivery.

         1.39 "Service Agreement" shall mean the agreement to which the General
Terms and Conditions is attached.

         1.40 "Service Order" shall mean that supplemental agreement entered
into by the parties hereto from time to time which sets forth the specific data
relating to the transportation of Gas pursuant to the Agreement.

         1.41 "Shipper" shall mean any person for whom the transmission of
natural Gas is being performed.

         1.42 "Storage Agreement" shall mean that Storage Agreement dated
concurrently herewith between Customer and ONEOK Texas Gas Storage, L.P.

         1.43 "System or Systems" shall mean the various pipeline facilities and
related equipment located in the State of Texas owned by the Company as of the
date of this Service Agreement, including but not limited to the compressors,
regulators, meters and support facilities.

         1.44 "Transportation" shall mean the Gas, whether by exchange, backbaul
actual or constructive method or transmission of or any other movement.

         1.45 "Week" shall mean a period of seven (7) consecutive days beginning
at 9:00 a.m. Central Clock Time on each Monday and ending at the same time on
the next succeeding Monday.

         1.46 "Year" shall mean a period of three hundred sixty-five (365)
consecutive days, or three hundred sixty-six (366) consecutive days when such
period includes a February 29.

                                    ARTICLE 2
                              CONDITIONS TO SERVICE

         2.1 Firm Intrastate Transportation Service (FTS) and Interruptible
Intrastate Transportation Service (ITS) shall be subject to the following
conditions:

         (a) Gas is physically delivered to Company for transportation
             hereunder;

         (b) Customer has a Gas supply and appropriate upstream and/or
             downstream transportation for such Gas with the effect that
             Customer will be able to actually and efficiently utilize the
             transportation service;

         2.2 It is recognized that Company has authority to negotiate and vary
from customer to customer the terms and conditions and general provisions of the
Agreement, the Service Order(s), the rates and other charges, and each of the
General Terms and Conditions, including but not limited to the fees to be
charged thereunder, provided that similarly situated customers will be treated
in a comparable manner.
<PAGE>


                                    ARTICLE 3
                          RESTRICTIONS AND RESERVATIONS

         3.1 It is understood and agreed that Customer has only the right to the
service being rendered by the Company. All equipment, including (but not in any
way limited thereto) all pipe, valves, fittings, and meters, comprising the
Systems and all other property and capacity rights and interests, shall at all
times during the term of the Service Agreement remain the property of Company.
Customer agrees not to cause or permit any liens or encumbrances to be filed
with respect to the Systems or by reason of Customer's actions. Customer's Gas
shall at all times remain the property of Customer and Company shall have no
right or property interest therein, except as otherwise provided in a Service
Agreement or Service Order.

         3.2 Company reserves the right in its sole discretion to remove,
relocate, expand, or rebuild, without approval of Customer, any portion of the
Systems. Customer shall make no alterations, additions, or repairs to or on the
Systems, nor shall Customer bear any cost of any alterations, additions,
repairs, maintenance or replacements made to or on said Systems provided,
however, Customer shall be temporarily excused from its obligations hereunder
during any period of curtailment or suspension for the period of any such
suspension of deliveries, if service to Customer is curtailed or suspended for
more than twenty-four (24) consecutive hours. Notwithstanding the foregoing, the
Company agrees not to remove the service line to Customer and related tap added
to provide service to Customer.

         3.3 Customer agrees not to connect or cause the connection of any third
party to the Systems for any purpose without the express written approval and
consent of Company to be granted in Company's sole discretion. If this condition
is breached by Customer, Company shall have the right and option,
notwithstanding any other provision of the Service Agreement or the General
Terms and Conditions, to terminate the Service Agreement including the Exhibits
thereto immediately and without further obligation to Customer.

         3.4 Company presently is rendering service to third parties on the
Systems and shall have the right in the future to render additional service for
such purposes and to render service to additional third parties as it may
desire, and Company shall have the right to make additional connections to the
Systems as may be required to serve presently existing and new customers.

         3.5 Company shall own any and all liquids which are recovered from the
Systems and may use, sell or transfer all liquids without having to account in
any manner, or pay any monies or other consideration to Customer. Company agrees
to receive and deliver thermally equivalent volumes of natural Gas in connection
with such service less the applicable Fuel and Use Quantity.

                                    ARTICLE 4
                                   OPERATIONS

         4.1 Customer shall deliver its Gas or cause its Gas to be delivered
into the Systems at the Point(s) of Receipt described on the applicable Service
Order, as it now exists and as it may be amended. Customer shall have no right
to require Gas to be received at any particular Point(s) of Receipt and except
as provided in the following sentence Company may delete such points or modify
the capacity thereof from time to time and at any time in its reasonable
discretion with no further obligation to Customer with respect to such Point(s)
of Receipt. Notwithstanding the above, Company will not terminate Point(s) of
Receipt listed on Schedule A-1 List #4, Schedule A-1 List #6 and Schedule A-2
List #2 without Customer's mutual agreement. All supplies of Gas delivered to
the System must comply with the terms and conditions of the Service Agreement.
Customer recognizes and agrees that the use of any of the Interstate Point(s) to
transport Gas to Company for Customer's account may be terminated at any time by
Company's sole and absolute discretion upon thirty (30) days written notice to
Customer. Customer hereby waives and releases Company from any claim that may
arise in the future against Company by reason of or with respect to the
termination of the use of any of the Interstate Point(s). Customer recognizes
that the Gas which it causes to be received or delivered at the Interstate
Point(s) must be Gas which is not subject to regulation under the Natural Gas
Act, as amended (NGA) and is delivered to the Interstate Point(s) from the
wellhead pursuant to Section 3 11(a) of the Natural Gas Policy Act of 1978, as
amended (NGPA). In consideration of Company providing for use such Interstate
Point(s), Customer hereby warrants and represents that the Gas which it causes
to be received or delivered at the Interstate Points is not subject to
regulation under the NGA and is
<PAGE>

transported to the Interstate Points from the wellhead pursuant to Section
311(a) of the NGPA. In no event shall Company be required to expand, modify,
construct, rearrange, or change the operations of the System in order to receive
Gas from or on behalf of Customer at any existing Point(s) of Receipt or in
order to deliver Gas to Customer at any existing Point(s) of Delivery, provided,
however, Company shall own and operate necessary natural gas pipeline and
interconnection facilities to provide the transportation service identified in
its tariff and applicable Service Order. Additions or deletions may be made to
the Point(s) of Receipt or Point(s) of Delivery in the Service Agreement and
shall be considered to be new transactions.

         4.2 Customer shall advise (in a method and format applied by the
Company to its customers) Company with respect to each Day, Week and Month the
name of each supplier with whom it has a contract on Company's system (and the
name of the individual with such suppliers responsible for Customer's account),
which source of supply is delivering to Company, how much Gas is nominated to be
delivered to Company from each source of supply (i.e., each well, plant, or
other desired Point(s) of Receipt) and the anticipated deliveries at each
Point(s) of Delivery. Customer's nomination shall be in good faith and shall be
based on Customer's reasonable efforts to estimate usage for that next Day, Week
and Month. Customer shall not intentionally nominate more or less Gas than is
needed by Customer, except as may be needed for balancing purposes. If during a
Month, Customer's other supplies are renominated or reallocated, if Customer's
operations are modified in any manner or if it appears that the original
nomination was incorrect, the Customer shall immediately renominate to Company
during such Month, but in no event shall such renomination exceed any maximum
limitations established by the Parties. At intervals reasonably required by
Company, Customer shall be obligated to furnish Company with schedules showing
the daily Dekatherms of Gas Customer desires to deliver at each Point(s) of
Receipt. Company may, upon reasonable notice to Customer, from time to time
modify its nomination requirements and nomination deadlines as needed to meet
operational requirements or to conform to common industry practices and
procedures.

          4.3 (a) Receipt and Delivery nominations received from Customers shall
be made available to Point Operators for their confirmation to deliver or
receive such nominated Gas flow volumes. Point Operator may confirm and schedule
nominations at the lesser of the nominated volume or the volume of gas available
for delivery as determined by the Point Operator. If no communication is
received from the Point Operator, nominations stand as confirmed.

              (b)  Prior to the start of the flow day, for which nominations are
                   made by Customer, Company will confirm to Customer the amount
                   scheduled for delivery for such day.

              (c)  The standard nominations shall be made as follows: 11:45 a.m.
                   for nominations leaving control of the Customer; 11 .45 a.m.
                   for receipt of nominations by Company; 3:30 p.m. for receipt
                   of completed confirmations by Company from upstream and
                   downstream connected parties; 3:30 p.m. for receipt of
                   scheduled quantities by Customer and Point Operator (Central
                   Clock Time on the day prior to flow of the Gas so nominated).

              (d)  Intra-day nominations are those submitted after the
                   nominations deadline to be effective for either the same Gas
                   Day or for the next Gas Day and runs through the end of that
                   Gas Day. A Customer may submit an intra-day nomination up to
                   4 hours prior to Gas flow. Intra-.Day nominations shall be
                   scheduled after all timely nominations. Intra-Day nomination
                   shall not bump scheduled Gas for that Gas day unless the
                   upstream or downstream Point Operator requires a change in
                   scheduled Gas.

              (e)  Company and Customer shall comply with the forecasting
                   requirements and Customer's nominations shall conform to the
                   requirements set forth in Schedules A-1, A-2, A-3 and A-4
                   attached to Customer Service Order A1, A-2, A-3 and A-4
                   attached to the Agreement.

         4.4 Scheduling of Point(s) of Receipt or Point(s) of Delivery shall be
made by the party

<PAGE>


performing the measurement function. In the event Company is the measuring party
the following priority shall be applied:

         (a)  Firm Sales Services;

         (b)  Firm Intrastate Transportation Service;

         (c)  Interruptible transportation service under the terms of which gas
              is delivered to and received from ONEOK Texas Gas Storage, L.P.
              ("OTGS"), under the provision of a gas storage agreement by and
              between OTGS and Customer or by and between OTGS and a third
              party;

         (d)  Interruptible transportation services.

         4.5 Customer's Gas shall be delivered to Customer at the Point(s) of
Delivery. To the extent that Customer's acts or omissions cause Company to
incur, directly or indirectly, fees, charges, expenses, or penalties from a
supplier or a transporter of Gas to Company for failure to satisfy such
supplier's or transporter's balancing or nomination requirements, then Customer
agrees to reimburse Company for such fees, charges, expenses, or penalties, and
defend, indemnify, and hold Company harmless with respect thereto. To the extent
that Company's acts or omissions cause Customer to incur, directly or
indirectly, fees, charges, expenses, or penalties from a supplier or a
transporter of Gas to Customer for failure to satisfy such supplier's or
transporter's balancing or nomination requirements, then Company agrees to
reimburse Customer for such fees, charges, expenses, or penalties, and defend,
indemnify, and hold Customer harmless with respect thereto.

          4.6 The Point(s) of Receipt and Point(s) of Delivery may be, or may
later become points through which other quantities of Gas are being measured;
therefore, the measurement of Gas under the Service Agreement may involve the
allocation of Gas deliveries. In such event, each party hereto will furnish, or
cause to be furnished, to the extent the information is available, to the other
party all data required to accurately account for all Gas.

          4.7 Except as may be set forth on a Service Order, Company shall
receive and deliver Gas hereunder as nearly as practicable at uniform hourly and
daily rates of flow. It is recognized that it may be physically impracticable,
because of measurement, Gas control limitations and other operating conditions,
to stay in zero (0) imbalance each Hour and each Day; therefore, the daily and
hourly quantities received may, due to the aforementioned reasons, vary above or
below the daily and hourly quantities delivered. If the quantities received and
the quantities delivered hereunder should create an imbalance at the end of any
Hour, Day, Week, or Month, then Company and Customer shall adjust receipts
and/or deliveries such that the quantities received and delivered shall be kept
as near to zero (0) imbalance as practicable.

         4.8 (a) Company reserves the right to issue an Operational Flow Order
to alleviate conditions, inter alia, which threaten the safe operations or
system integrity of the Company's system or to maintain operations required to
provide efficient and reliable service.

         (b)  Curtailment and interruption of service may be ordered by the
              Company at any time if, in Company's reasonable judgment, capacity
              or operating conditions so require or it is desirable or necessary
              to make modifications, repairs or operating changes, the conduct
              of which will occasion interruption, upon such notice as is
              reasonable under the circumstances.

         (c)  Curtailment of service because of events of force rnajeure or
              described in the foregoing subparagraphs 4.8(a) or (b) shall be in
              the following order beginning with interruptible transportation
              under Subsection 4.8 (c)(4) and ending with firm intrastate sales
              under Subsection 4.8 (c)(I).:

                  (1) Firm intrastate sales.

                  (2) Firm intrastate transportation service. Should Firm
              Intrastate Transportation Service require curtailment, then FTS
              shall be curtailed in accordance with Section 2.10 of the
              Agreement.



<PAGE>

         (3) Interruptible transportation service under the terms of which gas
is delivered to and received from ONEOK Texas Gas Storage, L.P. ("OTGS"), under
the provision of a gas storage agreement by and between OTGS and Customer or hy
and between OTGS and a third party.

         (4) Intermptible transportation service. Within priority 4.,
interruption shall be administered so that service under the lowest valued
contract is interrupted first and service under the highest valued contract is
interrupted last.

(d)  Subject to the foregoing Sections 4.1 through 4.7, Customer shall exercise
     reasonable efforts to deliver to the applicable System the Dekatherms of
     Gas that Company is to deliver from the applicable System to Customer
     during any particular Hour, Day, Week and Month, including but not limited
     to volumes needed for peak day usage by Customer's customers.

(e)  In no event shall Company be required to accept a request for service for a
     quantity of Gas which Company cannot meter with reasonable accuracy at the
     Point(s) of Receipt or Delivery. If Customer's request for service involves
     a quantity which Company cannot meter with reasonable accuracy at the
     requested Point(s) of Receipt or Delivery, Company will promptly so inform
     Customer and advise Customer of the quantity that can be metered with
     reasonable accuracy at the proposed Point(s) of Receipt and Delivery.

(f)  Customer shall make all necessary arrangements with other parties at or
     upstream of the Point(s) of Receipt where natural Gas is delivered to
     Company by Customer or for Customer's account, and downstream of the
     Point(s) of Delivery where natural Gas is to be delivered by Company to or
     for the account of Customer, which arrangements shall be compatible with
     Company's system operations and coordinated with Company's Gas control
     department.

(g)  Company shall not be required to render service on behalf of Customer in
     the event that all facilities necessary to render such services do not
     exist at the time such service is scheduled to begin.

(h)  Company shall not be required to provide service if Company or any of its
     other customers will be required to purchase new quantities of Gas from any
     source or to increase purchases from existing suppliers in order to render
     such service.

(i)  Except as provided in Section 4.1 or as otherwise provided in the
     Agreement, hereof, Company shall not be required to acquire, construct,
     install, operate, modify, maintain, continue in existence or ownership of,
     or rearrange any facilities specifically applicable to an individual
     Customer in order to provide any service. Company may, in its reasonable
     discretion, and with the agreement of the Customer, agree to acquire,
     construct, install, operate, modify or rearrange any such necessary
     facilities, subject to the provisions hereof, in order to provide service.
     Company's determination as to the maintenance or continued maintenance,
     existence or ownership of any facility shall be made in Company's
     reasonable discretion. In the event Company agrees to acquire, construct,
     install, operate, modify or rearrange facilities, then Company shall have
     the right to condition its agreement to so acquire, construct, install,
     operate, modify or rearrange their facilities by requiring that Customers
     bear and/or pay Company for all or part of costs associated with the
     acquisition, installation, construction, modification, operation, and
     rearrangement of such facilities.

(j)  Should any litigation be commenced between the Company and Customer
     concerning any provision of the Service Agreement or the rights and duties



<PAGE>


     hereunder, the party prevailing in such litigation shall be entitled, in
     addition to such other relief as may be granted in such proceeding, to a
     reasonable sum as and for its attorney's fees in such litigation, which sum
     shall be determined in such litigation or in a separate action for such
     purpose.

        4.9 If, pursuant to the foregoing Article IV, Company curtails or
temporarily discontinues the receipt or delivery of Gas hereunder, Customer
agrees to hold Company harmless from any loss, claim, damage, or expense that
Customer may incur by reason of such curtailment or discontinuance. Company's
rendering of service hereunder shall not obligate Company in any manner beyond
the terms of the Service Agreement and the Exhibits attached thereto.

                                    ARTICLE 5
                           PRESSURE AND QUALITY OF GAS

          5.1 Customer shall deliver (or cause to be delivered) the Gas to the
Systems at the Point(s) of Receipt at a pressure sufficient to effect delivery
into the Systems at that point. If necessary, Customer shall provide additional
compression to make such deliveries hereunder, and Company shall not have any
cost or responsibility in that regard. Company shall not be obligated to accept
Gas at pressures greater than the maximum allowable operating pressure for the
System facilities into which such Gas is flowing.

          5.2 Subject to the provisions of Section 4.8 above, the Gas shall be
delivered to Customer from the System at the Point(s) of Delivery at pressures
sufficient to effect deliveries to Point Operator's facilities, but not to
exceed the pressure that is available at such Point(s) of Delivery. Company
shall not be required to compress Gas in order to make deliveries hereunder.

        5.3 Gas delivered by and to Customer shall be commercially free of dust,
gums, gum-forming constituents, gasoline, water, and any other substance that
may become separated from the Gas during the handling hereof. All Gas received
shall conform to the following additional specifications:

        (a)   Contain not more than one-quarter (1/4) grain of hydrogen sulfide
              per 100 cubic feet, as determined by a method generally acceptable
              for use in the Gas industry;

        (b)   Contain not more than two (2) grains of total sulfur per 100 cubic
              feet;

        (c)   Contain not more than two percent (2%) by volume of carbon
              dioxide;

        (d)   Contain not more than four percent (4%) by volume of total inerts,
              including carbon dioxide and nitrogen.

        (e)   Contain not more than ten parts per million by volume of oxygen;

        (f)   Contain a gross heating value equivalent to at least 950 British
              Thermal Units per cubic foot and not to exceed 1100 British
              Thermal Units per cubic foot;

        (g)   Have a temperature of not more than one hundred twenty degrees
              (120(0)) Fahrenheit nor less than forty degrees (40(0));

        (h)   Contain no water or hydrocarbons in liquid form; and

        (i)   Contain not more than 7 pounds of water in vapor stage per 1,000
              Mcf of Gas.

      5.4 Customer agrees to supply Company, at Company's request at any time
and from time to time, a sample of liquids removed from the Gas stream of the
facilities which deliver Gas to Company, which sample is to be taken from a
point upstream from the Point(s) of Receipt. Said sample shall not contain any
toxic, hazardous, or deleterious materials or any materials which Company, in
its sole discretion, deems in any way harmful to its facilities, personnel or
the environment, including, but not limited to, polychlorinated biphenyls
(PCBs), and substances or materials considered hazardous or other similar terms,
or requiring investigation, remediation or removal under any federal, state or
local statute, regulation, rule or ordinance or any amendments thereof, whether
now in effect or as may be in effect in the future. If such samples contain any
such



<PAGE>

materials or substances, Company shall have the right, in its sole discretion
and in addition to other remedies available to it, to immediately cease receipt
of Gas through the Point(s) of Receipt until such time as all such materials or
substances are eliminated from the Gas such that Company, in its sole
discretion, elects to again receive such Gas through the Point(s) of Receipt.
Should Customer fail or refuse to eliminate all such materials or substances
within a reasonable time, Company shall have the right, upon written notice, to
terminate the Service Agreement. Customer hereby expressly agrees to indemnify
and hold Company and Company's affiliates and personnel harmless from and
against any and all liabilities, losses, claims, damages, actions, costs, fines,
and expenses of whatever nature, including, but not limited to, court costs and
attorneys' fees arising out or in any manner relating to the presence of PCBs
and/or any other toxic, hazardous, deleterious, harmful, or unsafe materials as
described above in Gas delivered into Company's System.

        5.5(a) If the Gas offered for delivery to Company at the Point(s) of
Receipt or made available to or on behalf of Customer at the Point(s) of
Delivery has failed at any time to conform to any of the specifications set
forth in this Article 5, then the party receiving such Gas (the "receiving
party") shall notify the other party (the "tendering patty") of such deficiency
and thereupon the receiving party may at its option refuse to accept such Gas
pending correction by the tendering party. Upon the tendering party's failure
promptly to remedy any deficiency in quality as specified in this Article 5, the
receiving party may accept such Gas and may make changes necessary to bring such
Gas into conformity with such specifications, and the tendering party shall
reimburse the receiving party for any reasonable expense incurred by it in
effecting such changes. In no event shall the failure of any Gas offered for
delivery to Company by Customer or for Customer's account to conform to any of
the specifications set forth in this Article S relieve Customer of Customer's
obligation to pay any service charges incurred with respect to such Gas.

                                    ARTICLE 6
                           RATES, CHARGES AND PAYMENT

        6.1 If Firm Intrastate Transportation Service is provided pursuant to
the Service Agreement, the Customer shall pay the following to Company, as
mutually agreed to and set forth on the applicable Service Order:

        (a)   A Monthly Demand Rate which shall be the charge of the various
              components as identified on the Service Order. The Monthly Demand
              Rate shall be paid whether or not Customer nominates and/or
              accepts delivery of Gas from the System, except as may be provided
              in Section 10.2 hereof

        (b)   The Monthly Commodity Charge which shall be the product of (i) the
              actual Gas delivered to the Point(s) of Delivery, and (ii) the
              commodity fee as set forth on the Service Order.

        (c)   Other fees and charges set forth in the Agreement, Exhibits and
              Schedules.

        6.2 If Interruptible Transportation Service is provided pursuant to the
Service Agreement, Customer shall pay the following to Company, as mutually
agreed to and set forth on the applicable Service Order;

        (a)   The Commodity Fee which shall be the product of (i) the actual Gas
              delivered to the Point(s) of Delivery, and (ii) the commodity rate
              as set for on the Service Order.

        6.3 In addition to the amounts paid pursuant to Subsections 6.1 or 6.2
above, Customer shall also pay or deliver to Company the following:

        (a)   Any other provision or charge which may be agreed to between
              Company and Customer;

        (b)   Fuel and Use Quantity; and

        (c)   Except as provided below, Customer shall pay all applicable
              surcharges, fees, taxes, charges, and assessments imposed by or on
              behalf of any governmental entity in connection with the Service
              Agreement or in connection with the purchase, transportation and
              disposition of Gas by or on behalf of Customer pursuant to the
              Service Agreement including but not limited to

<PAGE>

              municipal and/or supplemental fees, franchise fees and any
              supplements thereto and taxes; provided that Company shall pay all
              ad valorem taxes and assessments levied on the System and all
              appurtenant facilities. Company shall file all returns required
              for the Systems and all appurtenant facilities. At the request of
              Company, Customer will furnish Company with any information
              available to Customer in connection with Company's obligations
              under this section.

          6.4 Customer agrees to pay any amounts due pursuant to the Service
Agreement and the General Terms and Conditions to Company within ten (10) days
after receipt of an invoice from Company such payment to be made by wire
transfer to the account designated by the Company in writing.

          6.5 Should Customer fail to pay any amount or deliver any Gas due
under any Service Agreement when such amount is due, interest on the unpaid
portion shall accrue at a rate (which in no event shall be higher than the
maximum rate permitted by applicable law) equal to one and one-half percent
(1-1/2%) per month from the due date until the date of payment. If such failure
to pay continues for thirty (30) days after payment or delivery is due, Company,
in addition to any other remedy it may have, may suspend further receipts and
deliveries of Gas until such amount is paid or delivered; provided, however,
that if Customer in good faith shall dispute in writing the amount of any such
bill or part thereof and shall pay and deliver to Company such amounts as
Customer concedes to be correct and, at any time thereafter within thirty (30)
days of the due date of such payment, shall furnish a good and sufficient surety
bond in an amount and with surety satisfactory to Company, guaranteeing payment
and delivery to Company of the amount ultimately found due upon such bills,
including interest thereon, after a final determination which may be reached
either by agreement or judgment of the courts, as may be the case, then Company
shall not be entitled to suspend further receipts and withdrawals of Gas unless
and until default be made in the conditions of such bond. As an alternative to
posting a bond, Customer may pay the portion of any amount in dispute without
waiving its rights to recoup any monies improperly billed. If the portion of any
amount in dispute is ultimately determined to be incorrect, such amount shall be
refunded by Company to Customer together with interest thereon at a rate (which
in no event shall be higher than the maximum allowed by law) equal to one and
one-half percent (1-1/2%) per Month for the period from the date of payment to
Company to the date of refund by Company.

                                    ARTICLE 7
                             STATEMENTS AND RECORDS

          7.1 On or before the twenty-fifth (25th) day of each calendar month
after commencement of Gas receipts and deliveries hereunder, Company shall
render to Customer a statement for the preceding Month showing the total
Dekatherms of Gas received and delivered and each Point(s) of Receipt and
Point(s) of Delivery, and any information needed to explain and support any
adjustment made by Company. Any such statement (and supporting documents) may
also be sent to Customer's suppliers of Gas. When information necessary for
statement purposes is in the possession of Customer and is requested by the
Company, Customer shall furnish such information to Company on or before the
tenth (10th) day of the Month in which the statement requiring such data is to
be rendered.

         7.2 Both parties hereto shall have the right at any and all reasonable
times to examine the books and records of the other to the extent necessary to
verify the accuracy of any statement, computation, or demand made hereunder.
Both parties shall preserve for a period of two (2) years all test data, charts
and other similar records If it shall be found at any time or times that
Customer has been overcharged or undercharged in any form whatsoever under the
provisions of the Service Agreement and Customer shall have actually paid the
bills containing such overcharge or undercharge, then within thirty (30) days
after the final determination thereof, Company shall refund the amount of any
such overcharge, or Customer shall pay the amount of any such undercharge,
provided, however, that interest calculated in accord with Section 6.5 shall
apply to any undercharge or overcharge not paid within thirty (30) days from the
date of notification to the party who owes payment of the amount of the
undercharge or overcharge. In the event an error is discovered in the amount
billed in any statement rendered by Company, such error shall be adjusted within
thirty (30) days of the final determination thereof provided


<PAGE>

that claim therefor shall have been made within sixty (60) days from the date of
discovery of such error but, in any event, within twenty-four (24) months from
the date of payment.

         7.3 Company shall establish and operate a website if required by state
statute or government regulation for Texas intrastate pipelines.

                                    ARTICLE 8
                             MEASUREMENT AND TESTS

          The measurement and tests for quality of Gas received and delivered by
Customer hereunder shall be governed as follows:

         8.1 The quantities of Gas received and delivered shall be measured by
means of meters of standard type which conform to the American Gas Association
Measurement Committee Reports and other industry standards as to construction
and installation.

         8.2 The unit of volume for purposes of measurement shall be one (1)
cubic foot of Gas at a temperature base of sixty degrees (60(0)) Fahrenheit and
at a pressure base of fourteen and seventy-three hundredths (14.73) pounds per
square inch absolute. The assumed atmospheric pressure shall be as nearly
correct as possible for all locations. The atmospheric pressure for individual
meters shall be calculated per the most recent AGA equation based upon actual
elevation when the actual elevation is available; if actual elevation for an
individual meter is not available, then the elevation for the closest town can
be utilized.

         8.3 Temperature shall be determined by a recording thermometer
continuously used and installed according to Paragraph 8.1.

         8.4 Specific gravity shall be determined with accuracy to the nearest
one thousandth (.001) by use of an instrument that conforms to industry
standards.

         8.5 Whenever the conditions of pressure and temperature differ from the
standards, conversion of the volumes from these conditions to the standard
conditions shall be in accordance with the Ideal Gas Laws corrected for
deviation from Boyle's Law, all to be in accordance with methods and tables set
out in the American Gas Association Measurement Committee Reports, or by other
accepted methods that may be used from time to time.

         8.6 The heating value of the Gas shall be determined by means of a
sampling method of general use in the Gas industry. The location of the sampling
equipment shall be determined by Company in its sole discretion but shall be at
a location where a representative sample of the Gas to which it applies may be
taken.

         8.7 Tests to determine total sulfur, hydrogen sulfide, oxygen, carbon
dioxide, total inerts and water vapor shall be made by approved standards
methods in general use by the Gas industry. Such tests shall be made at the
request of either party hereto. If a test is performed at Customer's request and
shows that the quality specifications as set forth in Section 5.3 hereof have
been satisfied, Customer shall pay all costs and expenses of Company related to
such test. In all other instances costs and expenses of Company related to such
tests shall be born by the Company.

         8.8 Except as otherwise provided, all measuring and testing equipment,
housing devices, and materials shall be standard manufacture and type and shall,
with all related equipment, appliances, and buildings, be owned, installed,
maintained and operated or caused to be installed, maintained and operated by
Company at the Point(s) of Receipt.

         8.9 Electronic Flow Measurement ("EFM")

         (a)  With respect to any Point(s) of Receipt or Point(s) of Delivery
              requested by Customer after June 1, 2002, where more than 500
              MMBtu of gas per day is delivered, the Company, at its sole
              discretion, may require to be installed an EFM device which
              transmits readings from the meter to the Company's facility via
              telephonic connection or other means.

         (b)  Company shall own the EFM device (and all rights to the data and
              information produced thereby) and neither Customer nor any other
              party shall have any right to repair, replace, modify, change or
              interconnect other


<PAGE>

              equipment or facilities with such devices or provide third parties
              with information or data therefrom, without Company's prior
              written consent.

         (c)  No meter fixtures or devices, nor any EFM reading device shall be
              installed on the Company's meter without the Company's prior
              written consent.

         (d)  Company shall not be liable or responsible for the consequences of
              any utilization by Customer or any other party of information or
              data obtained from the EFM device, including, without limitation,
              any liability for direct, indirect, consequential, punitive or
              special damages, in tort or in contract.

         8.10 The accuracy of the measuring and testing equipment shall be
verified according to Company's standard for the device being used and at other
reasonable times upon request of Customer or Company. Gas quality tests may be
made at times of equipment testing or at other reasonable times. Notice of the
time and nature of each test shall be given by Company to the Customer at least
five (5) days in advance of such test. If a test is requested by a Customer,
then Company shall give Customer notice sufficiently in advance to permit
Customer to have a representative present. Representatives of both Customer and
Company may be present to observe such tests. The results of any such tests
shall be considered accurate until the next tests are made. All tests of
measuring equipment shall be paid by the party owning such measuring equipment,
provided, however, if a test has been requested by the Party not owning the
metering equipment and the inaccuracy found is two percent (2%) or less, the
Party requesting such test shall bear the expense of such test.

         8.11 If, at any time, any of the measuring or testing equipment is
found to be out of service, or registering inaccurately of any percentage, it
shall be adjusted at once to read accurately within the limits prescribed by the
manufacturer. If such equipment is out of service or inaccurate by an amount
exceeding two percent (2%) at a reading corresponding to the average rate of
flow for the period since the last preceding test, the previous reading of such
equipment shall be disregarded for any period definitely known or agreed upon,
or if not so known or agreed upon, for a period of time equal to one-half of the
elapsed time since the last test. The volume of Gas delivered during such period
shall be estimated (i) by using the data recorded by any check measuring
equipment if installed and accurately registering, or if not installed or
registering accurately, (ii) by correcting the error if the percentage of error
is ascertainable by calibration, test, or mathematical calculation, or if
neither such method is feasible, (iii) by estimating the quantity or quality
delivered based upon deliveries under similar conditions during a period when
the equipment was registering accurately. No adjustment shall be made for
recorded inaccuracies of two percent (2%) or less.

         8.12 The parties hereto shall have the right to inspect equipment
installed or furnished by the other or third-party operators and the charts and
other measurement or testing data of all such parties at all times during
business hours; but the reading, calibration, and adjustment of such equipment
and changing of charts shall be done only by the party installing and furnishing
the same. The parties hereto shall preserve all original test data, charts and
other similar records in such party's possession for a period of at least
twenty-four (24) months.

         8.13 At every Point(s) of Receipt and every Point(s) of Delivery, the
party having control over such facility shall allow the other party immediate
access to the receipt and delivery information as it is generated by the party
having such control. With respect to all Point(s) of Receipt and Point(s) of
Delivery that have electronic flow measurement, both parties may have remote
telephone and electronic access to the receipt and delivery information
generated at such Point(s) of Receipt and Point(s) of Delivery.

                                    ARTICLE 9
                       TITLE TO AND RESPONSIBILITY FOR GAS

         9.1 Customer warrants title to all Gas delivered by it into the Systems
hereunder, and Customer warrants and represents that it has the right to deliver
the Gas hereunder, and that such Gas is free from liens and adverse claims of
every kind. Customer agrees to defend, indemnify and save Company harmless from
and against all loss, damage, claims, and expense of every character with
respect to Gas delivered by it on account of royalties, taxes, payments, liens,
or other charges or claims arising (1) before or created upon delivery of said
Gas into the

<PAGE>

Systems, and (2) upon and after delivery of said Gas from the Systems to or for
the account of Customer.

         9.2 As between the parties hereto, Customer or its supplier shall be
deemed to be in the exclusive control and possession of the Gas until such Gas
has been delivered to Company at the Point(s) of Receipt, and after its
withdrawal by or for the account of Customer at the Point(s) of Delivery. After
Customer's or Customer's suppliers' delivery of such Gas at the Point(s) of
Receipt, Company shall thereafter be deemed to be in the exclusive control and
possession of such Gas until its withdrawal by Customer at the Point(s) of
Delivery. The party which shall be in the exclusive control and possession of
such Gas shall be responsible for all injury or damage caused thereby and shall
be responsible for any loss of Gas while in its possession, except with regard
to injury, damage or loss caused by or arising out of the negligence of the
nonpossessory party.

         9.3 The Systems shall at all times remain the property of Company, and
Customer shall have no right or property interest therein but only the right for
the service to be rendered.

                                   ARTICLE 10
                           FORCE MAJEURE AND CASUALTY

         10.1 If either Company or Customer or Point Operator is rendered
unable, wholly or in part, by reason of force majeure or any other cause of any
kind not reasonably within its control, whether or not such force majeure event
or cause was foreseeable at the time the Service Agreement is entered into, to
perform or comply with their obligations hereunder, then such party's
obligations or conditions shall be suspended during the continuance of such
inability and such party shall be relieved of liability for failure to perform
the same during such period; provided, however, obligations to make payments
when due hereunder shall not be suspended. Any force majeure event (other than
labor disputes, strikes, or lockouts) shall be remedied so far as possible with
reasonable dispatch. Settlement of strikes, lockouts, and labor disputes shall
be wholly within the discretion of the party having the difficulty. The term
"force majeure" shall include, but is not limited to, the following: acts of God
and the public enemy; the elements; fire, tornadoes, freezing of pipelines,
accidents, breakdowns, strikes; any industrial, civil, or public disturbance;
inability to obtain or delay in obtaining rights-of-way, material, supplies,
permits, or labor; any act or omission by parties not subject to control by the
party hereunder having the difficulty; and any laws, orders, rules, regulations,
acts or restraints of any governmental body or authority, civil or military.

         10.2 If a portion of the System required to make the service available
is partially damaged by fire or other casualty, the damage may be repaired by
Company, at its option and in its sole discretion, as speedily as practicable,
due allowance being made for the time taken for the settlement of insurance
claims. In such event, Company shall notify Customer thereof as soon as
reasonably possible. Until such repairs are made, the payments shall be
apportioned in proportion to the portion of the capacity of the System which is
still available for the purposes hereof, such determination to be made in the
reasonable discretion of Company. If the damage is so extensive as to render the
System wholly unusable, in Company's reasonable opinion, the payments, if any,
shall cease until such time as the System is again useable. In case the damage
shall, in Company's reasonable opinion, amount substantially to a destruction of
the portion of the Systems available for the transportation of Gas and Company
shall elect not to repair the damage, then the Service Agreement shall terminate
at the time of such damage, and Company shall not be liable to Customer for any
liability, damage, or claim which arises out of any failure to make repairs.
Notwithstanding the above, if there is damage to a Company System that is the
sole source of service to Customer's human need customers (residential,
hospitals, schools, etc.) Company will use every commercially reasonable effort
to restore service as soon as reasonably possible.

                                   ARTICLE 11
               GOVERNMENTAL RULES, REGULATIONS, AND AUTHORIZATIONS

         11.1 The Service Agreement is subject to all valid orders, laws, rules,
and regulations of duly constituted State and Federal governmental authorities
and agencies having jurisdiction or control over the parties, their facilities
or Gas supplies, the Service Agreement, or any provision hereof. If at any time
during the term of the Service Agreement any such governmental authority shall
take any action as to any party whereby the delivery and receipt of Gas, as
contemplated herein, shall be proscribed or subjected to terms, conditions,
restraints, or regulations, including rate or price controls or

<PAGE>

ceilings, that are burdensome to that party, such determination to be made by
the affected party in its reasonable discretion, the Service Agreement shall be
modified to the minimum extent possible so as to comply with such orders, laws,
rules and regulations. Otherwise, the Service Agreement shall remain in full
force and effect. Neither party shall have the right thereafter to cancel or
terminate the Service Agreement by reason of such modification to the Service
Agreement.

                                   ARTICLE 12
                                CREDITWORTHINESS

         12.1 Company shall not be required to initiate service on behalf of any
Customer or provide service or to continue service for any Customer who is or
has become insolvent or who, at Company's request, fails within a commercially
reasonable time to demonstrate credit worthiness as determined by the Company in
its reasonable discretion, provided, however, Customer may receive service if
Customer furnishes good and sufficient security as determined by Company in the
exercise of reasonable discretion. For the purpose of this section, the
insolvency of a Customer shall be evidenced by the filing by Customer or any
parent entity thereof of a voluntary petition in bankruptcy or the entry of a
decree or order by a court having jurisdiction over the premises adjudging
Customer bankrupt or insolvent or approving, as properly filed, a petition
seeking reorganization, arrangement, adjustment or composition or in respect of
the Customer under the Federal Bankruptcy Act or any other applicable federal or
state law or appointing a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Customer or of any substantial part of its
property or the ordering of the winding-up or liquidation of its affairs, with
said order or decree continuing unstayed and in effect for a period of sixty
(60) consecutive days.

                                   ARTICLE 13
                                  MISCELLANEOUS

         13.1 Any modification of terms or amendment of any provisions hereof
shall become effective only by supplemental written agreement between the
parties.

         13.2 (a) Any of the following events or conditions shall constitute a
default of Customer under the Service Agreement:

                  (1) Default in the delivery of any payment or any sums
         hereunder for a period of thirty (30) days after the same becomes due,
         provided such sums are not disputed by Customer pursuant to and in
         accordance with Section 6.5 hereof,

                  (2) Any other breach of the material terms and conditions of
         the Service Agreement and the failure of Customer to cure such breach
         within thirty (30) days after written demand by Company or such longer
         period of time after such notice as may be reasonably required to cure
         such breach if the breach is not reasonably curable within such thirty
         (30) day period, provided that Customer shall have commenced such cure
         within such thirty (30) day period and thereafter diligently continues
         its efforts to cure such breach until such breach shall have been fully
         cured;

                  (3) Customer shall (i) apply for or consent to the appointment
         of or taking of possession by a receiver or liquidator of itself or
         substantially all of its property, (ii) make a general assignment for
         the benefit of its creditors, (iii) commence a voluntary case under the
         Federal Bankruptcy Code, or (iv) file a petition seeking to take
         advantage of any other law relating to bankruptcy, insolvency,
         reorganization, winding-up or composition or adjustment of debts of
         Customer;

                  (4) A proceeding or case shall be commenced, without the
         application or consent of the affected party, in any court of competent
         jurisdiction, seeking (i) liquidation, reorganization, dissolution,
         winding-up or composition or adjustment of debts of Customer (ii) the
         appointment of a trustee, receiver, liquidator or custodian of such
         party or of all or substantially all of its assets, or (iii) similar
         relief under any law relating to bankruptcy or insolvency, and such
         proceeding or case shall continue undismissed, or an order, judgment or


<PAGE>


         decree approving or ordering any of the foregoing shall be entered and
         continue unstayed, for a period of ninety (90) days; or

                  (5) If any certificate, representation or warranty furnished
         by Customer proves to be false or incomplete in any material respect.

         (b)  Upon the happening of any event of default as set forth in
              subparagraph 13.2(a) above, Company shall have the right to do any
              one or more of the following without demand or notice of any kind:

                  (1) Declare due, sue for, and receive from Customer the sum of
              all payments and all other amounts due and owing under the Service
              Agreement plus the sum of all payments and other amounts to become
              payable during the balance of the term of the Service Agreement;

                  (2) Retake possession of the entire capacity of the System
              without any court order or other process of law and without any
              rights of Company being thereupon terminated;

                  (3) Terminate the Service Agreement and any Service Order
              related thereto, and the Exhibits;

                  (4) Pursue any other remedy at law or in equity.

         (c)  Any of the following events or conditions shall constitute an
              Event of Default with respect to Company under the Service
              Agreement:

                  (1) Default in the crediting of any sums due to Customer or in
              the payment of any other sums due to Customer under the Service
              Agreement for a period of thirty (30) days after the same is
              established by Company to have become due;

                  (2) Company's breach of any material term or condition of the
              Service Agreement and the failure of Company to cure such breach
              within thirty (30) days after written demand by Customer or such
              longer period of time after such notice as may be reasonably
              required to cure such breach if the breach is not reasonably
              curable within such thirty (30) day period, provided that Company
              shall have commenced such cure within such thirty (30) day period
              and thereafter diligently continues its efforts to cure such
              breach until such breach shall have been fully cured.

                  (3) Company shall (i) apply for or consent to the appointment
              of or taking of possession by a receiver or liquidator of itself
              or substantially all of its property, (ii) make a general
              assignment for the benefit of its creditors, (iii) commence a
              voluntary case under the Federal Bankruptcy Code, or (iv) file a
              petition seeking to take advantage of any other law relating to
              bankruptcy, insolvency, reorganization, winding-up or composition
              or adjustment of debts of Company;

                  (4) A proceeding or case shall be commenced, without the
              application or consent of the affected party, in any court of
              competent jurisdiction, seeking (i) liquidation, reorganization,
              dissolution, winding-up or composition or adjustment of debts of
              Company, (ii) the appointment of a trustee, receiver, liquidator
              or custodian of such party or of all or substantially all of its
              assets, or (iii) similar relief under any law relating to
              bankruptcy or insolvency, and such proceeding or case shall
              continue undismissed, or an order, judgment or decree approving or
              ordering any of the foregoing shall be entered and continue
              unstayed, for a period of ninety (90) days;

                  (5) If any certificate, representation, or warranty furnished
              by

<PAGE>


         Company proves to be false incomplete in any material respect.

         (d) Upon the happening of any event of default as set forth in
             subparagraph 13.2(c) above, Customer shall have the right to do any
             one or more of the following without demand or notice of any kind:

                  (1) Declare due, sue for, and receive from Company the sum of
             all outstanding credits and other amounts due and owing under the
             Service Agreement;

                  (2) Terminate the Service Agreement and any Service Order
             related thereto, and the Exhibits;

                  (3) Pursue any other remedy at law or in equity.

         (e)  The rights granted to Company and Customer hereunder shall be
              cumulative as to each and action on one shall not be deemed to
              constitute an election or waiver of any other right to which
              Company or Customer may be entitled.

         (f)  Upon the termination of the Service Agreement, whether by lapse or
              time or otherwise, Customer will surrender any and all rights in
              the Systems immediately.

         13.3 Company shall not be liable to Customer by reason of the failure
of Company to deliver, or the Customer to receive, natural Gas when Customer has
been notified of such failure and such failure is caused by repairs,
maintenance, rebuilding, expansion, reduction, changes or adjustments in the
System or in Company's equipment and facilities. Company will cooperate with
Customer in the timing of repairs, maintenance, rebuilding, expansion,
reduction, changes and adjustments to the System to cause least impact to both
parties.

         13.4 No waiver by Company or Customer of any default or the other under
the Service Agreement shall operate as a waiver of any future default, whether
of a like or different character.

         13.5 The Service Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their successors and assigns. Neither the
Service Agreement nor the Exhibits attached thereto nor the rights and
obligations of either party hereunder may be assigned without the consent of the
other party, which consent shall not be unreasonably withheld or delayed
provided that the assignee demonstrates that it is financially capable of
performing the duties and obligations of the party making such assignment.

         13.6 Customer will not mortgage, create a security interest in, or
encumber the Service Agreement, or sublet the rights granted hereby, or permit
its use by others, or pledge, loan, sublet, create a security interest in, or in
any other manner attempt to dispose of such rights, or permit its use by others,
or suffer any liens or legal process to be incurred or levied thereon; provided,
however, that Customer may grant a security interest or similar encumbrance in
connection with any financing arrangement to be associated with Customer's
facility or replacement of such credit facilities.

         13.7 The payments under the Service Agreement have been computed on the
understanding that Company shall have the benefit of any investment credit
available under the applicable sections of the Internal Revenue Code, as
amended, with respect to the Systems and all appurtenant facilities related to
such System.

         13.8 THE SERVICE AGREEMENT SHALL BE INTERPRETED UNDER THE LAWS OF THE
STATE OF TEXAS, EXCLUDING ANY LAW THEREOF DIRECTING THE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION.

         13.9 Company and Customer agree to exercise and take reasonable steps
necessary to safeguard and cause their officers, directors, employees, agents,
advisers, and representatives to safeguard the confidentiality of the Service
Agreement and the terms and conditions thereof (as contrasted with the existence
and effectiveness of the Service Agreement which are not confidential) and not
to disclose any part of it or any information derived therefrom or any
negotiations relating thereto to any party or person except that limited number
of people within Company's and Customer's organizations, and their advisers,
lenders and potential investors, as may need to know the terms

<PAGE>

and conditions hereof in order to evaluate, understand, execute and perform the
Service Agreement. Company and Customer agree not to copy or permit the copying
of the Service Agreement, except as may be necessary for their operations. In
the event Customer or Company or any of their officers, directors, employees,
agents, attorneys, or representatives, is requested or required (by oral or
written question or request for information or documents in legal proceedings,
interrogatories, subpoena, Civil Investigative Demand or similar process) to
disclose any information concerning the Service Agreement or the terms and
conditions thereof or any negotiations relating thereto, it is agreed that the
party receiving such question or request will provide the other parties with
prompt notice thereof so that such other parties may seek a protective order or
other appropriate relief or a release from the other parties. It is further
agreed that if, in the absence of a protective order or receipt of a release,
the other party is compelled to disclose such information or else stand liable
for contempt or suffer other censure or penalty or adverse effect, then such
party may disclose such information. The parties hereto are further authorized
to make disclosure of the Service Agreement as may be required by Federal,
state, or local regulation or agency, or as may be required by auditors or
accountants in connection with the preparation of financial statements or tax
returns. Disclosure hereunder shall not constitute a basis for defense,
termination or modification of the Service Agreement.

         13.10 (a) Informal Resolution. Customer is first encouraged to work
with Company to resolve problems on an informal filing a formal complaint.

         (b) Formal Resolution. In the event of an unresolved problem, Customer
             should submit a complaint in writing to the Company at the
             following address:

         ONEOK WesTex Transmission, L.P.
         100 West Fifth Street
         Tulsa, Oklahoma 74103-4298
         Attn.:   Formal Complaint

         The complaint should contain sufficient facts to identify the specific
         transportation and/or problem involved and an explanation of why, in
         the Customer's opinion, the situation gave rise to the complaint. Such
         complaint shall state that it constitutes a complaint pursuant to the
         procedure.

         (c) Response Period. The Company shall respond to all complaints in
             writing within thirty (30) days of the date the complaint was
             received by the Company.

         (d) Additional Review. If the complaint is not resolved to the
             Customer's satisfaction, the Customer may request formal review by
             the Company's Vice President.

         13.11 The parties hereto agree, except with respect to the term as
stated in the Service Agreement, that any differences arising over the
performance of the Service Agreement, or an alleged breach thereof, or the
interpretation or effectuation of any provision contained herein, shall be
settled by arbitration pursuant to Oklahoma's Uniform Arbitration Act, 15 O.S.
1981, "801-18" as amended. Each party shall select one arbitrator, and the two
arbitrators so chosen shall then select a third person, who shall not have an
interest in the outcome of the controversy or be related to or have an economic
interest in or related to one of the other arbitrators or one of the parties
hereto. Each arbitrator must be familiar with the natural Gas industry. The
procedures to be followed in the arbitration, including discovery (if any is
ordered by the arbitrators or a majority thereof) shall be established by the
arbitrators, or a majority thereof. A decision of a majority of the arbitrators,
after a full hearing and opportunity to present the full case of each party, in
writing and with notification to the parties, shall be binding on the parties,
and be a condition precedent to any action at law or in equity relating to the
Service Agreement. Each party shall bear full responsibility for that party's
own expenses attendant to the arbitration proceeding, including attorneys' fees
and the fees and expenses of the arbitrator appointed by that party, and both
parties shall share equally in the payment of all other costs of the
arbitration.

         13.12 LIMITATION OF LIABILITY. EXCEPT AS OTHERWISE SPECIFICALLY
PROVIDED HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF ANY CHARACTER,
INCLUDING BUT NOT

<PAGE>



LIMITED TO LOSS OF USE, LOST PROFITS (PAST AND FUTURE), ADDITIONAL OUT OF POCKET
EXPENSES INCURRED BY EITHER PARTY, OR TORT, CONTRACT OR OTHER CLAIMS RESULTING
FROM, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY INCIDENT TO ANY ACT OR
OMISSION OF EITHER PARTY RELATED TO THE PROVISIONS OF THIS SERVICE AGREEMENT,
IRRESPECTIVE OF WHETHER CLAIMS OR ACTIONS FOR SUCH DAMAGES ARE BASED UPON
CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR ANY OTHER REMEDY AT LAW OR
EQUITY.

         13.13 Conflict. In the event of a conflict between the terms and
conditions of the Transportation Service Agreement and the General Terms and
Conditions, the Service Agreement will control and in the event of conflict
between the Service Agreement, and/or the General Terms and Conditions, and the
Service Order, the terms and conditions of the Service Order control.
<PAGE>



                                     SAMPLE
                                  EXHIBIT A___
                              TO SERVICE AGREEMENT
                                     BETWEEN
                         ONEOK WESTEX TRANSMISSION, L.P.
                                       AND
                         ENERGAS COMPANY, A DIVISION OF
                            ATMOS ENERGY CORPORATION


                                  SERVICE ORDER

         ONEOK WesTex Transmission, L.P. (Company) and ENERGAS Company, A
division of Atmos Energy Corporation (Customer) agreed to this Service Order
pursuant to the terms of that Service Agreement effective January 1, 2002,
between Company and Customer.


Type of Service:
Transportation Period:
Maximum Daily Receipt Quantity:
Maximum Daily Delivery Quantity:
Maximum Monthly Receipt Quantity:
Maximum Monthly Delivery Quantity:
Maximum Annual Receipt Quantity:
Maximum Annual Delivery Quantity:
Demand Quantity:
Monthly Commodity Charge:
Monthly Demand Rate:
Month of delivery)
Fuel and Use Quantity:
Point(s) of Receipt:
Point(s) of Delivery:
Other Conditions:


ENERGAS COMPANY                    ONEOK WesTex Transmission, L.P. division
of Atmos Energy Corporation        By: ONEOK WesTex Gas Pipeline, Inc.
                                   General Partner


By:     SAMPLE-NO SIGNATURE        By:   SAMPLE-NO SIGNATURE

Name:        SAMPLE N/A                     John L. Sommer

Title:       SAMPLE N/A                     Vice President

Date:        SAMPLE N/A



<PAGE>


                                    EXHIBIT B

<Table>
<Caption>

FACILITY DATA                    DATA DEFINITION                       REMARKS
-------------                    ---------------                       -------
<S>                             <C>                             <C>
FACILITY NAME
METER TYPE
OPERATOR
3RD PARTY
CAPACITY
STATE
COUNTY
SECTION
TOWNSHIP/BLOCK
RANGE/SURVEY
SYSTEM NUMBER
I.D. DATE
ASSOCIATED CONTRACT
COMMENTS
</Table>



<PAGE>


                                    EXHIBIT C
                                     ENERGAS

Location Name:
Technician:
Energas Premise Number:
ONEOK Account Number:

Pipeline Number:
System Number:
Meter Size:
Meter S/N:
--------------------------------------------------------------------------------
P.D. METER PRESSURE CHANGE

Type of Instrument:    VTC ____   FF ____  PCI ____ Gauge ____ Oz. ___ Chart ___
Meter Reading:
Pressure Changed From:
Pressure Changed To:
--------------------------------------------------------------------------------
INDEX CHANGE

Old Index Reading:
New Index Reading:
--------------------------------------------------------------------------------
POSITIVE METER CHANGE OUT

Old Meter Serial No.: _________________ Size: __________  Code: _____________
Out Reading:

New Meter Serial No.: _________________  Size: __________  Code: _____________
In Reading:
--------------------------------------------------------------------------------
Pressure Base:
Pressure:
Local Atmospheric Pressure _________  Latitude: _________ Longitude: ___________
--------------------------------------------------------------------------------
Whom Notified:                                                Notified By:
Date Notified:                                                Time Notified:
Date Completed:                                               Time Completed:
Current Date:
--------------------------------------------------------------------------------
Remarks:


--------------------------------------------------------------------------------
CC: Jamie Luckett, ONEOK - Lubbock
    Lubbock Measurement - Tina Fowler, Energas - Lubbock


                                       30

<PAGE>

                                                          Agreement No .27657-FT

                                   EXHIBIT A-4

                              TO SERVICE AGREEMENT
                                     BETWEEN
                         ONEOK WESTEX TRANSMISSION, L.P.
                                       AND
                         ENERGAS COMPANY, A DIVISION OF
                            ATMOS ENERGY CORPORATION

                      Transportation for Large Volume Sales

                                  SERVICE ORDER

        ONEOK WesTex Transmission, L.P. (Company) and ENERGAS Company, a
division of Atmos Energy Corporation (Customer) agreed to this Service Order
pursuant to the terms of that Service Agreement effective January 1, 2002,
between Company and Customer.

Type of Service:                            Firm

Transportation Period:                      January 1, 2002 through March 31,
                                            2005 and year to year thereafter by
                                            either party with sixty (60) days
                                            advance written notice prior to
                                            March 31, 2005 or any anniversary
                                            thereof.

Maximum Daily Receipt Quantity:             N/A

Maximum Daily Delivery Quantity:            Up to 18,000 MMBtu per Day

Maximum Monthly Receipt Quantity:           N/A

Maximum Monthly Delivery Quantity:          N/A

Maximum Annual Receipt Quantity:            N/A

Maximum Annual Delivery Quantity:           N/A

Monthly Commodity Charge:                   (1) For the period commencing
                                            January 1, 2002 through December 31,
                                            2002, the rate shall be $0.14 per
                                            MMBtu times the actual MMBtu's of
                                            Gas delivered to Customer at the
                                            Point(s) of Delivery.

Fuel and Use Quantity:                      Customer will provide an in kind
                                            fuel reimbursement equal to one and
                                            one-quarter percent (1.25%) of the
                                            total quantity of Gas delivered at
                                            the Point(s) of Receipt. Possession
                                            and title of the fuel reimbursement
                                            Gas shall be transferred at the
                                            Point(s) of Receipt.

Point(s) of Receipt:                        Interconnection facilities of others
                                            with Company for the delivery of Gas
                                            to Company.

Point(s) of Delivery:                       All points of interconnection
                                            between Company and Customer where
                                            Customer receives Gas for delivery
                                            to Customer's large volume
                                            industrial customers.

Other Conditions:                           See Schedule A-4 attached hereto and
                                            by this reference included herein.



<PAGE>

ENERGAS Company, a division of              ONEOK WesTex Transmission, L.P.
Atmos Corporation                           By: ONEOK WesTex Pipeline, Inc.
                                            General Partner

By: /s/ Gordon J. Roy                       By: /s/ John L. Sommer
Name:  Gordon J. Roy                                John L. Sommer
Title:   Vice President                             Vice President









<PAGE>








                                  SCHEDULE A-4

I.       Definitions

         (a)      "Industrial Customers" shall mean those customers shown on
                  List #1 attached to this Schedule A-4.

         (b)      "Industrial Load" shall mean the volumes of Gas delivered to
                  Customer for delivery to the Industrial Customers.

II.      Industrial Load

         (a)      Customer nominations

                  (1)     Customer will nominate the supplies of gas into
                          Company and deliveries of gas from Company on or
                          before 11:45 A.M. of the Day preceding the Day on
                          which gas is to flow such that supplies match the
                          Customer s nominations on a daily basis, provided that
                          with respect to weekends the nomination shall be
                          provided to Company on or before 11:45 A.M. of the Day
                          before the weekend which is not a holiday; and
                          provided further that with respect to holidays the
                          nomination shall be provided to Company on or before
                          11:45 A.M. of the Day before the holiday which Day is
                          not a weekend or holiday.

                  (2)      Both Parties acknowledge that the Industrial Load can
                           change at any time, at which time Company may require
                           Customer, as discussed via telephone and confirmed in
                           writing, via fax or other electronic means, to make
                           intraDay nominations and either (A) deliver such
                           additional gas as Company may request for such gas
                           Day or next gas Day or (B) reduce deliveries to
                           Company, in such amount as requested by Company for
                           such gas Day. Customer must use its best efforts to
                           comply with such intra-Day nomination request and
                           delivery or reduce supplies to Company. Company shall
                           not request Customer to make intra-Day nominations
                           and adjust deliveries in excess of thirty percent
                           (30%) of the flowing industrial volumes for such gas
                           Day.

                  (3)      Delivery nominations will be made for all of the
                           Industrial Load directly connected to Company's
                           system.

                  (4)      Supply nominations will be by Point(s) of Receipt.

         (b)      Imbalances

If actual receipts of gas at the Point(s) of Receipt nominated and scheduled for
the Industrial Customers in any given month are different than the actual
deliveries of Gas to the Industrial Customers, then any such imbalance shall be
eliminated by in-kind balancing within sixty (60) days after the date of the
invoice which initially documents such imbalance.


<PAGE>


                                        2


SCHEDULE A-4

                                     List #1
                              Industrial Customers

<Table>
<Caption>

                   Name                                                         TBS or Direct Connect(DC)

<S>                                                                             <C>
WEYERHAUSER                                                                                   TBS
CROUSE-HINDS                                                                                  TBS
VALLEY PROTEIN                                                                                TBS
FARMLAND                                                                                      TBS
LAMESA COTTON OIL                                                                             TBS
WOOLAM GIN WEST                                                                               TBS
COVENANT LAKESIDE IMAGING                                                                     TBS
COVENANT LAKESIDE HOSPITAL                                                                    TBS
COVENANT LAKESIDE PLAZA                                                                       TBS
COVENANT LAKESIDE PLACE                                                                       TBS
COVENANT- 075-2466647                                                                         TBS
NURSING SCHOOL - 101-3922311                                                                  TBS
COV. MEDICAL CTR. - 007-0021120                                                               TBS
DOCTOR'S LOUNGE - 077-1564044                                                                 TBS
DAYCARE - 055-5002911                                                                         TBS
PHYS.PLANT - 053-0012526                                                                      TBS
E.PARKING GARAGE - 039-5452235                                                                TBS
W PARKING GARAGE - 039-5440018                                                                TBS
WEST TEXAS VA HEALTHCARE                                                                      TBS
PENATEK                                                                                       TBS
SHE RLEY ANDERSON GRAIN                                                                       TBS
SHERLEY ANDERSON GRAIN                                                                        TBS
SHERLEY ANDERSON GRAIN                                                                        TBS
TEXAS SESAME- #1                                                                              TBS
TEXAS SESAME- #2                                                                              TBS
TEXAS SESAME- #3                                                                              TBS
TEXAS SESAME- #4                                                                              TBS
WESTERN CONTAINER                                                                             TBS
WESTERN CONTAINER                                                                             TBS
KOCH MATERIALS                                                                                TBS
KOCH MATERIALS                                                                                TBS
ENTERRA HARRISBURG- WOOLEY                                                                    TBS
DELEON PEANUT - LAMESA                                                                        T8S
AGRI FARM #4                                                                                  TBS
AGRI FARM #5                                                                                  TBS
AGRI FARM #6                                                                                  TBS
AGRI FARM- TULIA                                                                              TBS
WEST TEXAS PEANUT                                                                             TBS
MEADOW FARMERS COOP                                                                           TBS
TERRY COUNTY COOP GIN                                                                         TBS
BIRDSONG - BROWN FIELD                                                                        TBS
</Table>


<PAGE>






                                        3


<Table>

<S>                                                                                     <C>
LOOP COOP GIN                                                                                 TBS
Hi Pro Feeds                                                                                  TBS
Gaines Co Farm Supply                                                                         DC
Continental Sulphur - Odessa                                                                  DC
DeLeon Peanut - B'FIELD                                                                       DC
Minza Southwest                                                                               DC
Debruce Grain                                                                                 DC
Zipp Industries                                                                               DC
Sherley Anderson Grain                                                                        DC
AGRI FARM -#2                                                                                 DC
AGRI FARM-GROWERS                                                                             DC
AGRI FARM - PLAINVIEW                                                                         DC
Olton Grain COOP                                                                              DC
Amoco Prod. - Cedar Lake                                                                      DC
Martin Resources                                                                              DC
DeLeon Peanut - Seminole                                                                      DC
Lakeview Gin - Tulia                                                                          DC
TDCJ- Lamesa                                                                                  DC
United Farm IND                                                                               DC
United Farm Edmonson                                                                          DC
Union Coop Gin                                                                                DC
Union Coop Gin                                                                                DC
Hereford Bi-Products                                                                          DC
Farstad Oil                                                                                   DC
AMF Vetco                                                                                     DC
Windham Gin                                                                                    DC
Sherley Anderson Grain                                                                         DC
Amoco Production - Spade                                                                       DC
Texas Sesame - Earth                                                                           DC
T.D.C.J.-Lub. Trusty Unit                                                                      DC
T.D.C.J.-Lub. Psychiatric                                                                      DC
Edmonson Wheat Growers                                                                         DC
Edmonson Wheat Growers                                                                         DC
Edmonson Wheat Growers                                                                         DC
Windstar, Inc.                                                                                 DC
Farmers Tuco Gin/ Edcot                                                                        DC
Owens Coop Gin                                                                                 DC
</Table>


<PAGE>






                                        4

<Table>

<S>                                                                                     <C>
Owens Coop Gin                                                                                 DC
Owens Coop Gin                                                                                 DC
WEST TEXAS PEANUT                                                                              DC
AGRI FARM- FLAGG                                                                               DC
Fourway Gin                                                                                    DC
Gaines Farm Supply-west                                                                        DC
Ten Hi Gin                                                                                     DC
Fiber Tex Gin                                                                                  DC
New Tex Gin                                                                                    DC
Tule Creek Gin                                                                                 DC
Parmer County Cotton Growers                                                                   DC
Parmer County Cotton Growers                                                                   DC
United Cotton Growers                                                                          DC
Birdsong - Seminole                                                                            DC
United Farm #194                                                                               DC
DEAF SMITH FEEDYARD                                                                            DC
DEAF SMITH FEEDYARD                                                                            DC
KIRKLAND CATTLE                                                                                DC
SUGARLAND FEEDYARD                                                                             DC
BEEFTECH CATTLE FEEDERS                                                                        DC
BEEFTECH CATTLE FEEDERS                                                                        DC
BEEFTECH CATTLE FEEDERS                                                                        DC
BEEFTECH CATTLE FEEDERS                                                                        DC
CAVINESS PACKING CO                                                                            DC
BARRETT & CROFOOT E                                                                            DC
DAWN FEEDYARD                                                                                  DC
DAWN FEEDYARD                                                                                  DC
XCL FEEDERS                                                                                    DC
C M CATTLE - FORMERLY FRIO                                                                     DC
BARRETT & CROFOOT W                                                                            DC
FRIONA FEEDERS                                                                                 DC
PACO                                                                                           DC
CONAGRA CATTLE / ASSO.                                                                         DC
CONAGRA CATTLE / ASSO.                                                                         DC
A2 CATTLE FEEDING                                                                              DC
RAFTER 3 FEEDYARD                                                                              DC
BUD HILL FEEDLOT                                                                               DC
BEEFCO FEEDERS                                                                                 DC
SLASH 0 (FORMERLY SMITH)                                                                       DC
CLUCK CATTLE CO. - MILL                                                                        DC
NUTT FEEDYARD                                                                                  DC
LONE STAR FEEDYARD                                                                             DC
LONE STAR FEEDYARD                                                                             DC
</Table>


<PAGE>


                                        5

<Table>

<S>                                                                                     <C>
LONE STAR FEEDYARD                                                                             DC
RANDALL COUNTY FEEDYARD                                                                        DC
SWISHER CATTLE CO                                                                              DC
PRAIRIE CATTLE                                                                                 DC
TULIA FEEDLOTS                                                                                 DC
C-BAR FEEDYARD                                                                                 DC
HALE CENTER FEEDYARD                                                                           DC
HILL FARM FEEDLOT                                                                              DC
SHEPARD FEED LOT I HALE CO.                                                                    DC
CAPROCK INDUSTRIES                                                                             DC
LITTLEFIELD FDYARD / FRIONA LAD.                                                               DC
LITTLEFIELD FDYARD / FRIONA LAD.                                                               DC
BOVINA FEEDERS                                                                                 DC
XVES-TEX FEEDYARDS                                                                             DC
CATTLEMENS I OLTON                                                                             DC
CARSON CO FEEDLOT                                                                              DC
GODHOLD FEEDS                                                                                  DC
TEXZONA CUSTOM- SMYER                                                                          DC
</Table>


<PAGE>

                                   EXHIBIT A-3
                              TO SERVICE AGREEMENT
                                     BETWEEN
                         ONEOK WESTEX TRANSMISSION, L.P.
                                       AND
                         ENERGAS COMPANY, A DIVISION OF
                            ATMOS ENERGY CORPORATION

                              IRRIGATION TRANSPORT

                                  SERVICE ORDER

        ONEOK WesTex Transmission, L.P. (Company) and ENERGAS Company, a
division of Atmos Energy Corporation (Customer) agreed to this Service Order
pursuant to the terms of that Service Agreement effective January 1, 2002,
between Company and Customer.

Type of Service:                            Firm

Transportation Period:                      January 1, 2002 through December 31,
                                            2004 and year to year thereafter
                                            until terminated by either party
                                            with sixty (60) days advance written
                                            notice prior to December 31, 2004 or
                                            any anniversary thereof.

Maximum Daily Receipt Quantity:             N/A

Maximum Daily Delivery Quantity:            Up to 15,000 MMBtu per Day

Maximum Monthly Receipt Quantity:           N/A

Maximum Monthly Delivery Quantity:          N/A

Maximum Annual Receipt Quantity:            N/A

Maximum Annual Delivery Quantity:           N/A

Monthly Commodity Charge:                   $0.2858 per MMBtu times the actual
                                            MMBtu's of Gas delivered to Customer
                                            at the Point(s) of Delivery
                                            excluding storage injections and
                                            withdrawals.

Fuel and Use Quantity:                      Customer will provide an in kind
                                            fuel reimbursement equal to one and
                                            one-quarter percent (1.25%) of the
                                            total quantity of Gas delivered at
                                            the Point(s) of Receipt. Possession
                                            and title of the fuel reimbursement
                                            Gas shall be transferred at the
                                            Point(s) of Receipt. Fuel
                                            reimbursement excludes storage
                                            injections and withdrawals.

Point(s) of Receipt:                        Interconnection facilities of others
                                            with Company for the delivery of Gas
                                            to Company including storage
                                            facilities of ONEOK Texas Gas
                                            Storage, L.P. pursuant to the
                                            Storage Agreement.

Point(s) of Delivery:                       All points of interconnection
                                            between Company and Customer where
                                            Customer receives delivery of Gas
                                            from Company for delivery to
                                            Customer's irrigation customers
                                            including storage facilities of
                                            ONEOK Texas Gas Storage, L.P.
                                            pursuant to the Storage Agreement.

Other Conditions:                           See Schedule A-3 attached hereto and
                                            by this reference included herein.



<PAGE>




ENERGAS Company, a division of          ONEOK WesTex Transmission, L.P.
Atmos Corporation                       By: ONEOK WesTex Pipeline, Inc.
                                        General Partner

By:  /s/ Gordon J. Roy                  By: /s/ John L. Sommer
Name:    Gordon J. Roy                          John L. Sommer
Title:   Vice President                         Vice President










<PAGE>




                                  SCHEDULE A-3


Definitions

         (a)      "All Other Areas" shall mean the areas of Company's pipeline
                  not included in the Triangle Area defined below.

         (b)      "Irrigation Load" shall mean volumes delivered by Company for
                  delivery to Customer's irrigation customers.

         (c)      "Line Segments" shall mean the sections of Company's pipeline
                  shown on Map #3 attached to this Schedule A-3 and included
                  herein and identified by line numbers 5,6,8,23,26,
                  27,28,53,54, and 58.

         (d)      "RSE" shall mean the revised Scada estimate which shall be
                  made.

         (e)      "Scada" shall mean Supervisory Control and Data Acquisition
                  system of Company.

         (f)      "Scada estimates" shall mean twenty-four (24) hour accumulated
                  volumes from the Supervisory Control and Data Acquisition
                  system.

         (g)      "Triangle Area" shall mean the geographical area served from
                  the Line Segments.

         (h)      Triangle Area Supply Points shall be those Point(s) of Receipt
                  shown on List #6 attached to Schedule A-1 of Exhibit A-1
                  attached to the Service Agreement.

II. Irrigation Load

         (a)      Customer's requirements for forecasting Irrigation Load and
                  for nominations

                  (1)     The forecasted Irrigation Load will be calculated by
                          Customer and provided to Company on or before 8:00
                          A.M. of the Day before the Day on which gas is to flow
                          provided that with respect to weekends the Irrigation
                          Load forecast shall be provided to Company on or
                          before 8:00 A.M. of the Day before the weekend which
                          is not a holiday; and provided further that with
                          respect to holidays the Irrigation Load forecast shall
                          be provided to Company on or before 8:00 A.M. of the
                          Day before the holiday which Day is not a weekend or
                          holiday. Company shall also prepare a Irrigation Load
                          forecast and Customer and Company shall compare each
                          of their respective Irrigation Load forecasts for each
                          gas Day and shall attempt to agree to an Irrigation
                          Load forecast.

                          (A)      Should the Parties agree to an Irrigation
                                   Load forecast, then the agreed upon
                                   Irrigation Load forecast shall be equal to
                                   the daily nomination for gas deliveries to
                                   satisfy such Load in full, adjusted for any
                                   confirmed makeup or intra-Day nominations.


<PAGE>




                                        2


                          (B)      In the event the parties cannot agree as to
                                   the Irrigation Load forecast, then Customer
                                   shall nominate to Company such Gas as it
                                   deems appropriate for the Irrigation Load.

                  (2)     Customer will nominate the delivery of supplies into
                          and deliveries from Company on or before 11:45 A.M of
                          the Day preceding the Day on which gas is to flow such
                          that supplies match the Customer's nominations on a
                          daily basis, except that with respect to weekends and
                          holidays, nominations need to be made on or before
                          11:45 A.M. of the Day before the weekend or holiday
                          described in Section II (a)(1) above.

                  (3)     Both Parties acknowledge that the Irrigation Load
                          forecast can change at any time, at which time Company
                          and Customer will discuss what action, if any, should
                          be taken, including withdrawal of gas from or
                          injection of gas into storage or additional or reduced
                          gas supply from third parties. If the parties agree as
                          to the action to be taken, then Customer, as discussed
                          via telephone and confirmed in writing, via fax or
                          other electronic means, will make intra-Day
                          nominations and either (A) deliver such additional gas
                          as Company may request for such gas Day or next gas
                          Day or (B) reduce deliveries to Company, in such
                          amount as requested by Company for such gas Day or (c)
                          inject gas into or withdraw gas from Storage as
                          allowed by and pursuant to the Storage Agreement.
                          Customer must use its best efforts to comply with such
                          intra-Day nomination request and deliver or reduce
                          supplies to Company. Company shall not request
                          Customer to make intra-Day nominations and adjust
                          deliveries in excess of thirty percent (30%) of the
                          flowing irrigation volumes for such gas Day. If the
                          parties disagree, then Customer will take such action
                          as it deems necessary for the Irrigation Load.

                  (4)     Delivery Nominations will be made as follows:

                          (A)      Triangle Area

                          (B)      All Other Areas

                  (5)     Supply nominations will be by Point(s) of Receipt and
                          will be made as follows:

                          (A)      Triangle Area supplies -- (Supply from the
                                   Triangle Area Supply Points must provide on a
                                   daily basis 35% of the Triangle Area
                                   forecasted and nominated deliveries for the
                                   months March through the next following
                                   September.)

                          (B)      All other supplies

                          (C)      Storage will only be considered as supply for
                                   the Triangle Area only after the above supply
                                   requirements have been satisfied for such
                                   area.


<PAGE>

                                       3

         (b)      Scada Estimates and RSE

                  Company requirements for reporting Scada estimates and RSE
                  volumes

                  (1)     The RSE Volumes for the Irrigation Load will be
                          reported by the Company by the following two areas:

                          (A)      Triangle Area

                          (B)      All Other Areas

                  (2)     The Scada estimates and RSE volumes for the Irrigation
                          Load for each area described immediately above will be
                          provided to Customer as described below and will be
                          calculated as follows:

                          (A)      Sum of receipts into each Line Segment that
                                   are available by daily collected BEM
                                   readings.

                          (B)      Less the Non-Customer deliveries that are
                                   available by daily collected EFM readings.

                          (C)      Less the estimated Non-Customer deliveries
                                   that are not available by daily collected BEM
                                   readings.

                          (D)      Less the estimated Customer LDC volumes for
                                   each Line Segment.

                          (E)      Plus or minus the change in line pack.

                  (3)     Company shall provide the Scada estimate of the
                          Irrigation Load for such gas Day to Customer on or
                          before 12:00 noon following the end of a gas Day.

                  (4)     Company shall provide the RSE for the Irrigation Load
                          to Customer on or before 12:00 noon on the second Day
                          following the gas Day.

         (c)      Imbalances.

                  (1)     If the Company and the Customer have agreed to the
                          Irrigation Load forecast for a Day of a Month and have
                          agreed for such Day as to any intra-Day nominations to
                          be omitted or made for such Day, as appropriate, then
                          there shall be no Daily Cashout pursuant to Section
                          11(d) below and any imbalance will be handled pursuant
                          to Section 11(e) of this Schedule A-3.

                  (2)     If the Company and Customer have agreed to the
                          Irrigation Load forecast for a Day but have not agreed
                          as to any intra-Day nominations to be omitted or made
                          for such Day, then on a daily basis, any imbalance
                          between the actual deliveries to the Company at the
                          Point(s) of Receipt for




<PAGE>

                                       4


                          the Irrigation Load and the RSE for such Day in excess
                          of five percent (5%) of the RSE for that Day shall
                          automatically be reduced by delivering gas into or
                          withdrawing gas from storage pursuant to and only as
                          allowed by the Storage Agreement for such Day. If
                          after such automatic balancing the imbalance still
                          exceeds five percent (5%) of the RSE for that Day,
                          then to the extent storage is available as determined
                          by Company in its sole discretion such excess shall be
                          deemed to be an overrun delivery into or withdrawal
                          from storage pursuant to the Storage Agreement and
                          Customer shall pay to Company any overrun fee imposed
                          by the Storage Agreement. If storage is not available,
                          then Customer shall be subject to the requirements
                          described in Section 11(d) below.

                  (3)     When there is no agreement between Company and
                          Customer as to the Irrigation Load forecast for a Day
                          during a Month but Company and Customer have agreed as
                          to any intra-Day nominations to be omitted or made for
                          such Day, then for such Day there shall be no Daily
                          Cashout thereof pursuant to Sections II(d) below and
                          any imbalance will be handled pursuant to Section
                          II(e) below.

                  (4)     If the Company and Customer have not agreed as to the
                          Irrigation Load Forecast for a Day and have not agreed
                          as to any intra-Day nominations for such Day, then on
                          a daily basis any imbalance between the actual
                          deliveries to the Company at the Point(s) of Receipt
                          for the Irrigation Load and the RSE for such Day in
                          excess of five percent (5%) of the RSE for that Day
                          shall automatically be reduced by delivering into or
                          withdrawing from storage pursuant to and only as
                          allowed by the Storage Agreement for such Day. If
                          after such automatic balancing the imbalance still
                          exceeds five percent (5%) of the RSE for that Day,
                          then Customer shall be subject to the requirements
                          described in Section II(d) below.

         (d)      Daily Cashout.

                  (1)     If nominations of gas as actually scheduled at the
                          Point(s) of Receipt for the Irrigation Load on any
                          given Day exceed the sum of the RSE and any intra-Day
                          adjustments requested by Company and provided by
                          Customer on such Day (Imbalance Day) by greater than
                          five percent (50 O), Company shall purchase from
                          Customer (on an MMBtu basis) any gas volumes in excess
                          of five percent (5%) on that Imbalance Day at a rate
                          equivalent to ninety percent (90%) of the published
                          price shown for the Day that the RSE for such
                          Imbalance Day is communicated to Customer in the
                          publication, Gas Daily, as found in the chart entitled
                          "Daily Price Survey," under the column entitled
                          "Midpoint" for the Permian Basin Area for "Texas
                          intras, Waha Area."

                  (2)     If the sum of the RSE and any intra-Day adjustments
                          requested by Company and provided by Customer on any
                          given Day exceeds the nominations of gas as actually
                          scheduled at the Point(s) of Receipt for the
                          Irrigation Load on such Day by greater than five
                          percent (5%), Customer shall purchase from Company (on
                          an MMBtu basis) any gas volumes in excess of five
                          percent (5%) on that Imbalance Day at a rate
                          equivalent to the published price shown for the Day
                          that the RSE for such Imbalance Day is communicated to
                          Customer in the publication. Gas Daily, as found


<PAGE>



                                       5

                          in the chart entitled "Daily Price Survey," under the
                          column entitled "Midpoint" for the Permian Basin Area
                          for "Texas intras, Waha area" times one hundred ten
                          percent (110%).

         (e)      In-kind Balancing.

                  At the end of each month and after taking into account the
                  buying and selling of gas pursuant to Sections II(d) above, if
                  there is any monthly imbalance between Company and Customer
                  (including, without limitation, any imbalances within the five
                  percent (5%) tolerance described above), it shall be
                  eliminated by in-kind balancing within sixty (60) days after
                  the date of the invoice which initially documents such
                  imbalance.

         (f)      Payment.

                  With respect to any imbalance payment due, if due by Company,
                  it shall be paid by Company within thirty (30) days after the
                  Company notifies Customer of such imbalance; and if due by
                  Customer, it shall be paid by Customer within thirty (30) Days
                  of receipt of invoice from Company of such imbalance.


<PAGE>
                                   EXHIBIT A-2
                              TO SERVICE AGREEMENT
                                     BETWEEN
                         ONEOK WESTEX TRANSMISSION, L.P.
                                       AND
                         ENERGAS COMPANY, A DIVISION OF
                            ATMOS ENERGY CORPORATION

                                  LDC Amarillo

                                  SERVICE ORDER

         ONEOK WesTex Transmission, L.P. (Company) and ENERGAS Company, a
division of Atmos Energy Corporation (Customer) agreed to this Service Order
pursuant to the terms of that Service Agreement effective January 1, 2002,
between Company and Customer.

Type of Service:                            Firm

Transportation Period:                      January 1, 2002 through March 31,
                                            2005, and year to year thereafter
                                            until terminated by either party
                                            with sixty (60) days advance written
                                            notice prior to March, 2005 or any
                                            anniversary thereof.

Maximum Daily Receipt Quantity:             N/A

Maximum Daily Delivery Quantity:            Winter Period - Not in excess of
                                            pipeline capacity at MAOP at the
                                            Point(s) of Delivery
                                            Summer Period - Not in excess of
                                            pipeline capacity at NAOP at the
                                            Point(s) of Delivery

Maximum Monthly Receipt Quantity:           N/A

Maximum Monthly Delivery Quantity:          N/A

Maximum Annual Receipt Quantity:            N/A

Maximum Annual Delivery Quantity:           N/A

Demand Quantity:                            N/A

Monthly Commodity Charge:                   $0.05 per MMBtu times the actual
                                            quantity of Gas delivered to
                                            Customer at the Point(s) of Delivery
                                            shown on List #1 attached to
                                            Schedule A-2.

Monthly Demand Rate:                        N/A

Fuel and Use Quantity:                      Customer will provide an in kind
                                            fuel reimbursement equal to one and
                                            one-quarter percent (1.25%) of the
                                            total quantity of Gas delivered at
                                            the Point(s) of Receipt. Possession
                                            and title of the fuel reimbursement
                                            Gas shall be transferred at the
                                            Point(s) of Receipt.

Point(s) of Receipt:                        Interconnection facilities of others
                                            with Company for the delivery of Gas
                                            to Company.

Point(s) of Delivery:                       All pints of interconnection between
                                            Company and Customer shown on List
                                            #1 attached to Schedule A-2.

Other Conditions:                           See Schedule A-2 attached hereto and
                                            by this reference included herein.



<PAGE>




ENERGAS Company, a division
of Atmos Energy Corporation             ONEOK WESTEX TRANSMISSION, L.P.
                                        By: ONEOK WesTex Pipeline, Inc.
By:  /s/ Gordon J. Roy                  General Partner

Name:    Gordon J. Roy                  By: /s/ John L. Sommer
         Vice President
                                        John L. Sommer
                                        Vice President
          8-22-02
          -------
            [JS]











<PAGE>



                                  SCHEDULE A-2

DEFINITIONS

         (a)      "Amarillo Area" shall mean the geographical area served from
                  Point(s) of Delivery as detailed on List #1 attached to and
                  made a part of this Schedule A-2.

         (b)      "Amarillo Load" shall mean volumes delivered by Company to the
                  Point(s) of Delivery on List #1 attached to and made a part of
                  this Schedule A-2 for delivery to Customer's distribution
                  customers.

         (c)      "Amarillo Area Supply Points" shall mean those Points of
                  Receipt shown on List #2 attached to and made a part of this
                  Schedule A-2.

         (d)      "MAOP" shall mean the maximum allowable operating pressure for
                  a particular pipeline as it may change from time to time.

         (e)      "RSE" shall mean the revised Scada estimate which shall be
                  made.

         (f)      "Scada" shall mean Supervisory Control and Data Acquisition
                  system of Company.

         (g)      "Scada estimates" shall mean twenty-four (24) hour accumulated
                  volumes from the Supervisory Control and Data Acquisition
                  system.

         (h)      "TBS" shall mean the town border stations within an area.

II.      Amarillo Load

         (a)      Customer requirements for forecasting Amarillo Load and for
                  nominations

                  (1)      The forecasted Amarillo Load for the Company system
                           will be calculated by Customer and provided to
                           Company on or before 8:00 A.M. of the Day before the
                           Day on which gas is to flow provided that with
                           respect to weekends the Amarillo Load forecast shall
                           be provided to Company on or before 8:00 A.M. of the
                           Day before the weekend which is not a holiday; and
                           provided further that with respect to holidays the
                           Amarillo Load forecast shall be provided to Company
                           on or before 8:00 A.M. of the Day before the holiday
                           which Day is not a weekend or holiday. Company shall
                           also prepare a Amarillo Load forecast and Customer
                           and Company shall compare each of their respective
                           Amarillo Load forecasts for each gas Day and shall
                           attempt to agree to an Amarillo Load forecast.

                           (A)     Should the Parties agree to an Amarillo Load
                                   forecast, then the agreed upon load forecast
                                   shall be equal to the daily nomination for
                                   gas



<PAGE>

                                   deliveries to satisfy such Load in full,
                                   adjusted for any confirmed makeup or intra
                                   Day nominations.

                           (B)     In the event the parties cannot agree as to
                                   the Amarillo Load forecast, then Customer
                                   shall nominate to Company such Gas as it
                                   deems appropriate for the Amarillo Load.

                  (2)      Customer will nominate the supplies of gas into
                           Company and deliveries of gas from Company on or
                           before 11:45 A.M. of the Day preceding the Day on
                           which gas is to flow such that supplies match the
                           Customer's nominations on a daily basis, except that
                           with respect to weekends and holidays, nominations
                           need to be made on or before 11:45 A.M. of the Day
                           before the weekend or holiday described in Section
                           II(a)( 1) above.

                  (3)      Both Parties acknowledge that the Amarillo Load
                           forecast can change at any time, at which time
                           Company may request Customer, as discussed via
                           telephone and confirmed in writing, via fax or other
                           electronic means, to make intra-Day nominations and
                           either (A) deliver such additional gas as Company may
                           request for such gas Day or next gas Day or (B)
                           reduce deliveries to Company, in such amount as
                           requested by Company for such gas Day. Customer must
                           use its best efforts to comply with such intraDay
                           nomination request and deliver or reduce the supplies
                           to Company. Company shall not request Customer to
                           make intra-Day nominations and adjust deliveries in
                           excess of thirty percent (30%) of the flowing
                           Amarillo volumes for such gas Day. However, with
                           respect to Saturdays, Sundays and holidays, when the
                           parties are in agreement as to an Amarillo Load
                           forecast, Customer will not be required to perform
                           intra-Day nomination and delivery changes for such
                           Saturdays, Sundays or holidays. If the parties are
                           not in agreement as to the Amarillo Load forecast for
                           a Saturday, Sunday or holiday, then Customer shall be
                           subject to making intra Day nominations and delivery
                           requirements as described above for such Days.

                  (4)      Delivery Nominations will be for the Amarillo Area.

                  (5)      Supply Nominations will be by Point(s) of Receipt
                           within the Amarillo Area and Amarillo Area Supply
                           Points must provide all of Amarillo Load
                           requirements.

         (b)      Scada Estimates and RSE

                  Company requirements for reporting Scada estimates and RSE
                  Volumes

                  (1)      The RSE volumes for the Amarillo Load will be
                           reported by Company by the Amarillo Area alone.

                  (2)      The RSE volumes for Amarillo Load will be provided to
                           Customer as described below and will be the sum of
                           all the Amarillo TBS volumes that are available by
                           daily collected EFM readings for the Amarillo Area.


<PAGE>

                  (3)      A Scada estimate of the Amarillo Load for each gas
                           Day will be communicated to Customer by 12:00 noon
                           following the end of each gas Day by fax, e-mail,
                           phone, or other electronic means that may be
                           available in the future.

                  (4)     The RSE volumes for Amarillo Area will be available
                          two working Days after the end of the gas Day by fax
                          or other electronic means that may be available in the
                          future. Once available, the RSE for Amarillo Load
                          based on the actual Amarillo volumes will be
                          calculated using the methodology described above and
                          communicated to Customer by 12:00 noon on the second
                          Day following the end of the gas Day by fax, e-mail,
                          phone, or other electronic means that may be available
                          in the future.

         (c)      Imbalances.

                  (1)     If the Company and the Customer have agreed to the
                          Amarillo Load forecast for every Day of a Month, then
                          there shall be no Daily Cashout pursuant to Section
                          II(d) below.

                  (2)      When there is no agreement between the Company and
                           Customer as to the Amarillo Load forecast for any and
                           all Days during a month, then for each such Day,
                           Customer nominations (as actually scheduled) for the
                           Amarillo Load on a daily basis to Company shall be
                           within the tolerances as described in Section II(d)
                           below when compared to the sum for such Day of (A)
                           the RSE and (B) any intra-Day delivery adjustments
                           requested by Company and provided by Customer. In the
                           event such nominations, as adjusted, are not within
                           the required tolerance, then Customer shall be
                           subject to the requirements described in Section
                           II(d) below.

         (d)      Daily Cashout

                  (1)     If nominations of gas as actually scheduled at the
                          Point(s) of Receipt for the Amarillo Load on any given
                          Day exceed the sum of Subsections II(c)(2)(A) and (B)
                          on such Day (Imbalance Day) by greater than five
                          percent (5%), Company shall purchase from Customer (on
                          an MMBtu basis) any gas volumes in excess of five
                          percent (5%) on that Imbalance Day at a rate
                          equivalent to ninety percent (90%) of the published
                          price shown for the Day that the RSE for such
                          Imbalance Day is communicated to Customer in the
                          publication, Gas Daily, as found in the chart entitled
                          "Daily Price Survey," under the column entitled
                          "Midpoint" for the Permian Basin Area for "Texas
                          intras, Waha Area."

                  (2)      If the sum of Subsections II(c)(2)(A) and (B) on any
                           given Day exceeds the nominations of gas as actually
                           scheduled at the Point(s) of Receipt for the Amarillo
                           Load on such Day (Imbalance Day) by greater than five
                           percent (5%), Customer shall purchase from Company
                           (on an MMBtu




<PAGE>

                          basis) any gas volumes in excess of five percent (5%)
                          on that Imbalance Day at a rate equivalent to the
                          published price shown for the Day that the RSE for
                          such Imbalance Day is communicated to Customer in the
                          publication, Gas Daily, as found in the chart entitled
                          "Daily Price Survey," under the column entitled
                          "Midpoint" for the Permian Basin Area for "Texas
                          intras, Waha area" times one hundred ten percent
                          (110%).

         (e)      In-kind Balancing

                  At the end of each month and after taking into account the
                  buying of gas pursuant to Section II(d) above, if there is any
                  monthly imbalance between Company and Customer (including
                  without limitation any imbalances within the five percent (5%)
                  tolerance described above), it shall be eliminated by in-kind
                  balancing at the direction and in accordance with the timing
                  specifications of Company within sixty (60) days after the
                  date of the invoice which initially documents such imbalance.

         (f)      Payment

                  With respect to any imbalance payment due, if due by Company,
                  it shall be paid by Company within thirty (30) days after the
                  Company notifies Customer of such imbalance; and if due by
                  Customer, it shall be paid by Customer within thirty (30) Days
                  of receipt of invoice from Company of such imbalance.


<PAGE>









                                  SCHEDULE A-2
                                     LIST #1
                                  Amarillo Area

<Table>
<Caption>

          STATION NAME                                        STATION #
<S>                                                              <C>
          AMARILLO CREEK TO ENERGAS                              036811
          AMARILLO TBS #5                                        480030
          AMARILLO EMER IP 5                                     481008
          OWT TO AMARILLO KALKA                                  482001
</Table>


<PAGE>


                                  SCHEDULE A-2
                                     LIST #2
                           Amarillo Area Supply Points

<Table>
<Caption>

STATION NAME                                           STATION #

<S>                                                    <C>
NGPL POTTER                                                11442
</Table>


<PAGE>







                                   EXHIBIT A-i
                              TO SERVICE AGREEMENT
                                     BETWEEN
                         ONEOK WESTEX TRANSMISSION, L.P.
                                       AND
                         ENERGAS COMPANY, A DIVISION OF
                            ATMOS ENERGY CORPORATION

                            LDC (Excluding Amarillo)

                                  SERVICE ORDER

         ONEOK WesTex Transmission, L.P. (Company) and ENERGAS Company, a
division of Atmos Energy Corporation (Customer) agreed to this Service Order
pursuant to the terms of that Service Agreement effective January 1, 2002,
between Company and Customer.


Type of Service:                            Firm

Transportation Period:                      January 1, 2002 through March 31,
                                            2005, and year to year thereafter
                                            until terminated by either party
                                            with sixty (60) days advance written
                                            notice prior to March, 2005 or any
                                            anniversary thereof.

Maximum Daily Receipt Quantity:             N/A

Maximum Daily Delivery Quantity:            Winter Period - (November-April)
                                            208,000 MMBtu per Day
                                            Summer Period - (May-October) 39,000
                                            MMBstu per Day


Maximum Monthly Receipt Quantity:           N/A

Maximum Monthly Delivery Quantity:          N/A

Maximum Annual Receipt Quantity:            N/A

Maximum Annual Delivery Quantity:           Winter Period - (November-April)
                                            37,648,000 MMBtu
                                            Summer Period - (May-October)
                                            7,176,000 MMBtu

Demand Quantity:                            Winter Period - (November-April)
                                            208,000 MMBtu per day
                                            Summer Period - (May-October) 39,000
                                            MMBtu per day

Monthly Commodity Charge:                   $0.02 per MMBtu times the actual
                                            quantity of Gas delivered to
                                            Customer at the Point(s) of Delivery
                                            excluding storage injections and
                                            withdrawals.

Monthly Demand Rate:
(to be paid in advance
of the Month of delivery)                   Winter Period - $0.07 times the
                                            Winter Period Demand Quantity times
                                            the number of Days in the respective
                                            Month of delivery.

Fuel and Use Quantity:                      Customer will provide an in kind
                                            fuel reimbursement equal to one and
                                            one-quarter percent (1.25%) of the
                                            total quantity of Gas delivered at
                                            the Point(s) of Receipt. Possession
                                            and title of the fuel reimbursement
                                            Gas shall be transferred at the
                                            Point(s) of Receipt. Fuel
                                            reimbursement excludes storage
                                            injections and withdrawals.

Point(s) of Receipt:                        Interconnection facilities of others
                                            with Company for the delivery of Gas
                                            to Company including storage
                                            facilities of ONEOK Texas Gas
                                            Storage, L.P. pursuant to the
                                            Storage Agreement.

Point(s) of Delivery:                       All pints of interconnection between
                                            Company and Customer where Customer
                                            receives Gas fom Company for




<PAGE>
                                            delivery to Customer's distribution
                                            customers including storage
                                            facilities of ONEOK Texas Gas
                                            Storage, L.P. pursuant to the
                                            Storage Agreement.

Other Conditions:                           See Schedule A-1 attached hereto and
                                            by this reference included herein.

ENERGAS COMPANY
a division of Atmos Energy Corporation      ONEOK WesTex Transmission, L.P.
                                            By: ONEOK WesTex Gas Pipeline, Inc.
By: /s/ Gordon J. Roy                       General Partner
Name: Gordon J. Roy                         By: /s/ John L. Sommer
Title:  Vice President                      John L. Sommer
Date: 8-22-02                               Vice President












<PAGE>



                                  SCHEDULE A-1

Definitions

         (a)      "All Other Areas" shall mean the geographical areas served
                  from the Point(s) of Delivery as detailed on List #1 attached
                  to and made a part of this Schedule A-1.

         (b)      "Amarillo Area" shall mean the geographical areas served from
                  the Point(s) of Delivery as detailed on List #2 attached to
                  and make a part of this Schedule A-1.

         (c)      "Amarillo Load" shall mean volumes delivered by Company to the
                  Point(s) of Delivery on List #2 attached to and made a part of
                  this Schedule A-1 for delivery to Customer's distribution
                  customers.

         (d)      "LDC" shall mean all of the local distribution facilities of
                  Customer separately defined as the Triangle Area, the North
                  End Area, and All Other Areas but specifically not including
                  the Amarillo Area.

         (e)      "LDC Load" shall mean volumes delivered by Company for
                  delivery to Customer's distribution customers excluding the
                  Amarillo Load.

         (f)      North End Area" shall mean the geographical areas served from
                  the Point(s) of Delivery as detailed on List #3 attached to
                  and made a part of this Schedule A-1.

         (g)      "North End Area Supply Points" shall be those Points(s) of
                  Receipt into the Company as shown on List #4 attached to and
                  made a part of this Schedule A-1.

         (h)      "RSE" shall mean the revised Scada estimate which shall be
                  made.

         (i)      "Scada" shall mean Supervisory Control and Data Acquisition
                  system of Company.

         (j)      "Scada Estimates" shall mean twenty-four (24) hour accumulated
                  volumes from the Supervisory Control and Data Acquisition
                  system.

         (k)      "TBS" shall mean the town border stations within an area.

         (1)      "Triangle Area" shall mean the Point(s) of Delivery as
                  detailed on List #5 attached to and made a part of this
                  Schedule A-1.

         (m)      "Triangle Area Supply Points" shall be those Point(s) of
                  Receipt shown on List #6 attached to and made a part of this
                  Schedule A-1.


<PAGE>






                                        2

II.      LDC Load

        (a)       Customer requirements for forecasting LDC Load and for
                  nominations

                  (1)      The forecasted LDC Load for the Company system will
                           be calculated by Customer and provided to Company on
                           or before 8:00 A.M. of the Day before the Day on
                           which gas is to flow provided that with respect to
                           weekends the LDC Load forecast shall be provided to
                           Company on or before 8:00 A.M. of the Day before the
                           weekend which is not a holiday; and provided further
                           that with respect to holidays the LDC Load forecast
                           shall be provided to Company on or before 8:00 A.M.
                           of the Day before the holiday which Day is not a
                           weekend or holiday. Company shall also prepare a LDC
                           Load forecast and Customer and Company shall compare
                           each of their respective LDC Load forecasts for each
                           gas Day and shall attempt to agree to a LDC Load
                           forecast.

                           (A)     Should the Parties agree to a LDC Load
                                   forecast, then the agreed upon LDC Load
                                   forecast shall be equal to the daily
                                   nomination for gas deliveries to satisfy such
                                   Load in full, adjusted for any confirmed
                                   makeup or intra-Day nominations.

                           (B)     In the event the parties cannot agree as to
                                   the LDC Load forecast, then Customer shall
                                   nominate to Company such Gas as it deems
                                   appropriate for the LDC Load.

                  (2)      Customer will nominate the supplies of gas into
                           Company and deliveries of gas from Company on or
                           before 11:45 A.M. of the Day preceding the Day on
                           which gas is to flow such that supplies of gas match
                           the Customer's nominations on a daily basis, except
                           that with respect to weekends and holidays,
                           nominations need to be made on or before 11:45 A.M.
                           of the Day before the weekend or holiday described in
                           Section II(a)(1) above.

                  (3)      Both Parties acknowledge that the LDC Load forecast
                           can change at any time, at which time Company may
                           request Customer, as discussed via telephone and
                           confirmed in writing, via fax or other electronic
                           means, to make intra-Day nominations and either (A)
                           deliver such additional gas as Company may request
                           for such gas Day or next gas Day or (B) reduce
                           deliveries to Company, in such amount as requested by
                           Company for such gas Day. Customer must use its best
                           efforts to comply with such intraDay nomination
                           request and deliver or reduce supplies to Company.
                           Company shall not request Customer to make intra-Day
                           nominations and adjust deliveries in excess of thirty
                           percent (30%) of the flowing LDC volumes for such gas
                           Day. However, with respect to Saturdays, Sundays and
                           holidays, when the parties are in agreement as to a
                           LDC Load forecast, Customer will not be required to
                           perform intraday nomination and delivery changes for
                           such Saturdays, Sundays or holidays. If the parties
                           are not in agreement as to the LDC Load forecast for
                           a Saturday,


<PAGE>



                                       3


                          Sunday or holiday, then Customer shall be subject to
                          making intra-Day nominations and delivery requirements
                          as described above for such Days.

                  (4)     Delivery nominations will be made as follows:

                          (A)      North End Area [Excluding Amarillo Area]

                          (B)      Triangle Area

                          (C)      All Other Areas

                  (5)     Supply nominations will be by Point(s) of Receipt
                          within the areas shown below and will be made as
                          follows:

                          (A)      North End Area supplies -- (Supply from the
                                   North End Area Supply Points must provide on
                                   a daily basis at least 55% of the North End
                                   Area nominated deliveries [excluding Amarillo
                                   Area] unless Customer is supplying 100% of
                                   the gas supply requirements for the Amarillo
                                   Area only from NGPL -- Potter North End
                                   Supply Point, in which case the 55%
                                   requirement is waived.)

                          (B)      Triangle Area supplies -- (Supply from
                                   Triangle Area Supply Points must provide on a
                                   daily basis at least 20% of the Triangle Area
                                   nominated deliveries for the months of
                                   November through March.)

                          (C)      All Other Area supplies

                          (D)      Storage will only be considered as supply for
                                   the North End and Triangle Areas only after
                                   the above supply requirements have been
                                   satisfied for such Areas.

        (b)       Scada Estimates and RSE

                  Company requirements for reporting Scada estimates and RSE
                  Volumes:

                  (1)     The RSE volumes for the LDC Load will be reported by
                          Company by the following three areas:

                          (A)     North End Area

                          (B)     Triangle Area

                          (C)     All Other Areas

                  (2)     The Scada estimates and RSE volumes for the LDC Load
                          for each area described immediately above will be
                          provided to Customer as described below and will be
                          calculated as follows:



<PAGE>
                                       4

                          (A)      Sum of all TBS volumes that are available by
                                   daily collected EFM readings for each area.

                          (B)      Less the nominations behind those TBS for
                                   Industrial Load as required pursuant to
                                   Section II of Schedule A-4 attached to
                                   Exhibit A-4 of the Service Agreement.

                          (C)      Plus an estimate for the remaining 15% of the
                                   TBS volume based on a proration of the daily
                                   collected EFM readings.

                          (D)      Plus an estimate of the rural system volumes
                                   for each area based on a proration of the
                                   daily collected EFM readings.

                  (3)     A Scada estimate of the LDC Load by area for each gas
                          Day will be communicated to Customer by 12:00 noon
                          following the end of each gas Day by fax, e-mail,
                          phone, or other electronic means that may be
                          available in the future.

                  (4)     The RSE volumes for the listed TBS's will be
                          available two working Days after the end of the gas
                          Day by fax or other electronic means that may be
                          available in the future. Once available, the RSE for
                          LDC Load based on the actual TBS volumes will be
                          calculated using the methodology described above and
                          communicated to Customer by 12:00 noon on the second
                          Day following the end of the gas Day by fax, e-mail,
                          phone, or other electronic means that may be
                          available in the future.

         (c)      Imbalances

                  (1)     If the Company and the Customer have agreed to the LDC
                          Load forecast for every Day of a Month, then there
                          shall be no Daily Cashout pursuant to Section 11(d)
                          below. On a daily basis any imbalance between the
                          actual deliveries to the Company at the Point(s) of
                          Receipt for the LDC Load and the RSE for such Day in
                          excess of five percent (5%) of the RSE for that Day,
                          shall automatically be reduced by delivering gas into
                          or withdrawing gas from storage pursuant to and only
                          as allowed by the Storage Agreement for such Day. If
                          after such automatic balancing the imbalance still
                          exceeds five percent (5%) of the RSE for that Day then
                          such excess shall also be deemed to be an overrun
                          delivery into or withdrawal from storage pursuant to
                          the Storage Agreement except that Customer shall not
                          pay to Company any overrun fee imposed by the Storage
                          Agreement.

                  (2)     When there is no agreement between Company and
                          Customer as to the LDC Load forecast for any or all
                          Days during a month, then for each such Day, Customer
                          nominations (as actually scheduled) for the LDC Load
                          on a daily basis to Company shall be within the
                          tolerance as described in Section 11(d) below when
                          compared to the sum for such Day of (A) the RSE and
                          (B) any intra-Day delivery adjustments requested by
                          Company and provided by Customer. On a daily basis any
                          imbalance between the actual deliveries to the Company
                          at the Point(s) of Receipt for the LDC Load and the
                          RSE for such Day in excess of five percent (5%) of the
                          RSE for that Day, shall automatically be reduced by
                          delivering gas into or



<PAGE>

                                        5


                          withdrawing gas from storage pursuant to and only as
                          allowed by the Storage Agreement for such Day. If
                          after such automatic balancing the imbalance still
                          exceeds five percent (5%) of the RSE for that Day then
                          (C) if allowed by Company in its sole discretion, such
                          excess may be injected into or withdrawn from storage
                          pursuant to and only as allowed by the Storage
                          Agreement as an overrun and Customer will pay for any
                          such overruns in accordance with the Storage
                          Agreement; or (D) if storage overrun is not available,
                          Customer shall be subject to the requirements
                          described in Section II(d) below.

         (d)      Daily Cashout

                  (1)     If nominations of gas as actually scheduled at the
                          Point(s) of Receipt for the LDC Load on any given Day
                          (Imbalance Day) exceed the sum of Subsections
                          II(c)(2)(A) and (B) on such Day by greater than five
                          percent (5%), Company shall purchase from Customer (on
                          an MMBtu basis) any gas volumes in excess of five
                          percent (5%) on that Imbalance Day at a rate
                          equivalent to ninety percent (90%) of the published
                          price shown for the Day that the RSE for such
                          Imbalance Day is communicated to Customer in the
                          publication, Gas Daily, as found in the chart entitled
                          "Daily Price Survey," under the column entitled
                          "Midpoint" for the Permian Basin Area for "Texas
                          intras, Waha Area."

                  (2)     If the sum of Subsections II (c)(2)(A) and (B) on any
                          given Day exceeds the nominations of gas as actually
                          scheduled at the Point(s) of Receipt for the LDC Load
                          on such Day (Imbalance Day) by greater than five
                          percent (5%), Customer shall purchase from Company (on
                          an MMBtu basis) any gas volumes in excess of five
                          percent (5%) on that Imbalance Day at a rate
                          equivalent to the published price shown for the Day
                          that the RSE for such Imbalance Day is communicated to
                          Customer in the publication, Gas Daily, as found in
                          the chart entitled "Daily Price Survey," under the
                          column entitled "Midpoint" for the Permian Basin Area
                          for "Texas intras, Waha area" times one hundred ten
                          percent (110%).

         (e)     In-kind Balancing

                  At the end of each month and after taking into account the
                  buying of gas pursuant to Sections II(d) above, if there is
                  any monthly imbalance between Company and Customer (including
                  without limitation any imbalances within the five percent (5%)
                  tolerance as described above), it shall be eliminated by
                  in-kind balancing within sixty (60) days after the date of the
                  invoice which initially documents such imbalance.

         (f)      Payment

                  With respect to any imbalance payment due, if due by Company,
                  it shall be paid by Company within thirty (30) days after the
                  Company notifies Customer of such


<PAGE>


                                        6

                  imbalance; and if due by Customer, it shall be paid by
                  Customer within thirty (30) Days of receipt of invoice from
                  Company of such imbalance.

         (g)      Right of First Refusal

                  If at the termination of the LDC transportation contract,
                  Company shall obtain a bona fide, executed written offer from
                  a responsible and ready, willing and able party to transport
                  gas on that part of Company's system which is used to serve
                  Customer's LDC transportation customers as shown on the list
                  provided below Company, without identifying the party
                  submitting such offer, shall submit an exact copy of such
                  offer to Customer. Customer shall have the right, exercisable
                  by written notice delivered to Company within thirty (30) days
                  from the date of delivery of an exact copy of such offer to
                  Customer, to enter into a transportation agreement with
                  Company for the price and on the same terms and conditions
                  contained in such offer. If Customer does not timely exercise
                  its right of first refusal, Company may complete the
                  transportation arrangement pursuant to and on the terms of
                  such third party offer and Customer shall no longer have any
                  right of first refusal pursuant to this Service Agreement.

         (h)      Reduction Rights

                  Should Company directly serve an LDC transportation customer
                  and Customer is no longer involved at all in delivering gas to
                  such transportation customer, then Company shall reduce the
                  Demand Quantity by the amount set opposite such transportation
                  customer's name on the list attached hereto as List A-5 to
                  this Schedule A- 1. Customer shall provide Company a list of
                  the LDC transportation customers and shall be attached hereto
                  as List A-5 to this Schedule A- 1. The maximum aggregate
                  reduction for all LDC transportation customers (under the
                  Agreement and all Exhibits and Schedules attached thereto)
                  shall be 208,000 MMBtu/day.


<PAGE>






                                        7



                                  SCHEDULE A-1
                                     LIST #1
                                 All Other Areas

<Table>
<Caption>

     STATION NAME                                        STATION #

<S>                                                         <C>
     BIG SPRING #3                                          480024
     SLATON TBS                                             480062
     SOUTHLAND TBS                                          480063
     POST TBS                                               480064
     O'DONNELL TBS                                          480067
     O'DONNELL TBS                                          480068
     LAMESATBS1                                             480069
     LAMESATBS1                                             480070
     ROPES TBS                                              480071
     MEADOWS TBS                                            480072
     STANTON TBS                                            480075
     STANTON TBS                                            480076
     WELCH TBS                                              480090
     WELLMANTBS                                             480098
     COAHOMATBS                                             480120
     COAHOMATBS                                             480121
     SEMINOLE TBS                                           480384
     SEMINOLE TBS                                           480385
     SEAGRAVES TBS                                          480391
     SEAGRAVES TBS                                          480392
     FORSAN TBS T.O.                                        480394
     BROWNFIELD TBS NO 1                                    481110
     BROWNFIELD TBS NO 2                                    481115
     LAMESATBSNO2                                           481180
     BIG SPRING TBS NO.1                                    481700
     BIG SPRING TBS NO.2                                    481705
     WELCH TBS SECONDARY                                    480101
</Table>


<PAGE>






                                        8



                                  SCHEDULE A-1
                                     LIST #2
                                  Amarillo Area

<Table>
<Caption>

           STATION NAME                                        STATION #
<S>                                                            <C>
           AMARILLO CREEK TO ENERGAS                              036811
           AMARILLO TBS #5                                        480030
           AMARILLO EMER IP 5                                     481008
           OWT TO AMARILLO KALKA                                  482001
</Table>


<PAGE>






                                        9

                                  SCHEDULE A-i
                                     LIST #3
                                 North End Area

<Table>
<Caption>

     STATION NAME                                        STATION #
<S>                                                      <C>
     PANHANDLE TBS #2                                       480026
     ENERGAS-FRITCH TBS #2                                  480032
     TANGLEWOOD TBS #1                                      480095
     TANGLEWOOD TBS #2                                      480096
     ENERGAS - SANFORD TBS                                  480724
     ENERGAS - FRITCH TBS #1                                480725
     CANYON TBS #2                                          480890
     CANYON TBS NO. 1                                       481120
     PANHANDLE TBS                                          481730
     PAMPA SOUTH TBS                                        481735
     PAMPA WEST TBS                                         481740
</Table>


<PAGE>






                                       10



                                  SCHEDULE A-i
                                     LIST #4
                             North End Supply Points


<Table>
<Caption>

      STATION NAME                                        STATION #
<S>                                                       <C>
      Pioneer! Fain Processing Plant                          36911
      NGPL/Potter                                             11442
      Trans WesternlCarson                                   103767
      NNG/Carson                                             103748
</Table>


<PAGE>






                                       11


                                  SCHEDULE A-i
                                     LIST #5
                                  Triangle Area

<Table>
<Caption>

         STATION NAME                                        STATION #
<S>                                                         <C>
         DAWN TBS                                               540900
         HEREFORD EMERGENCY T                                   480035
         DIMMITT TBS #3                                         480037
         HAPPY TBS                                              480038
         KRESS TBS                                              480039
         SILVERTON TBS                                          480044
         SILVERTON TBS                                          480045
         QUITAQUE TBS                                           480046
         TURKEY TBS                                             480047
         MULESHOE TBS #2                                        480048
         SUDAN TBS                                              480049
         SUDAN TBS                                              480050
         AMHERST TBS                                            480051
         AMHERST TBS                                            480052
         ANTON TBS                                              480053
         ANTON TBS                                              480054
         EARTH TBS                                              480055
         SHALLO WATER TBS                                       480058
         LORENZOTBS                                             480060
         LORENZOTBS                                             480061
         WILSON TBS                                             480065
         WILSON TBS                                             480066
         WHITHARRELL TBS                                        480080
         WOLFFORTH TBS                                          480081
         WOLFFORTH TBS                                          480082
         NEW DEAL TBS                                           480083
         SPRINGLAKETBS                                          480084
         SPRINGLAKE TBS                                         480085
         VEGA TBS                                               480086
         VEGA TBS                                               480087
         HART TBS #1                                            480088
         HART TBS #2                                            480089
         EDMONSON TBS                                           480091
         NEW HOMES TBS                                          480092
         NEW HOMES TBS                                          480093
         SMYER TBS                                              480094
         NAZARETH TBS                                           480097
         LAKE RANSON TBS #1                                     480099
         LAKE RANSON TBS #2                                     480100
         SMYER TBS #2                                           480102
</Table>


<PAGE>






                                       12

                                  SCHEDULE A-1
                                     LIST #5
                                  Triangle Area


<Table>
<Caption>

         STATION NAME                                        STATION #
<S>                                                             <C>
         FRIONA TBS - A                                         480382
         FRIONA TBS - B                                         480383
         HALE CENTER TBS                                        480386
         HALE CENTER TBS                                        480387
         LOCKNEYTBS                                             480388
         LOCKNEYTBS                                             480389
         LITTLEFIELD TBS #3                                     480397
         IDALOU T.B.S.                                          480402
         IDALOU T.B.S.                                          480403
         DIMMIT TBS #2                                          480540
         DIMMITT TBS #1                                         480553
         ENERGAS-FLOYDADA TBS                                   480562
         ENERGAS-RALLS TBS                                      480563
         ABERNATHY TBS                                          481100
         BOVINA TBS                                             481105
         CROSBYTON TBS                                          481130
         HEREFORD TBS NO.1                                      481165
         HEREFORDTBSNO2                                         481170
         LEVELLAND EMERG. TBS 1                                 481185
         LEVELLAND TBS #2                                       481190
         LITTLEFIELD TBS                                        481195
         LITTLEFIELD NO 2                                       481198
         MULESHOE TBS NO 1                                      481240
         OLTON TBS                                              481275
         PETERSBURG TBS                                         481280
         PLAINVIEWTBS NO. 1                                     481285
         PLAINVIEW TBS NO.2                                     481290
         PLAINVIEW TBS NO.4                                     481292
         TAHOKATBS                                              481325
         TULIA TBS NO. 1                                        481330
         TULIA TBS NO. 3                                        481340
         LUBBOCK NE TBS                                         481343
         LUBBOCK NW TBS                                         481344
         LUBBOCK SE TBS                                         481345
         LUBBOCK EAST TBS                                       481346
         PLAINVIEW TBS                                          480040
         BUFFALO SPRINGS TBS                                    542656
</Table>


<PAGE>






                                       13


                                  SCHEDULE A-1
                                     LIST #6
                           Triangle Area Supply Points

<Table>
<Caption>

         STATION NAME                                        STATION H
<S>                                                          <C>
         El Paso Natural Gas/Umbarger                           103809
         El Paso Natural Gas/Amherst                            103808
         NGPL/Bailey                                             11443
         NGPL/Deaf Smith                                         25026
         NNG/Hale                                               103762
         El Paso Natural Gas/DWSTRHRT                           315830
</Table>





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>5
<FILENAME>d01510exv10w16.txt
<DESCRIPTION>PRECEDENT AGREEMENT, CORNERSTONE EXPANSION PROJECT
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.16


                               PRECEDENT AGREEMENT

                          CORNERSTONE EXPANSION PROJECT


         THIS PRECEDENT AGREEMENT ("Precedent Agreement") is entered into this
16th day of April, 2002, by and between TRANSCONTINENTAL GAS PIPE LINE
CORPORATION ("Transco"), a Delaware corporation, and UNITED CITIES GAS COMPANY,
A DIVISION OF ATMOS ENERGY CORPORATION, ("Shipper"), a Texas and Virginia
corporation. Transco and Shipper are sometimes referred to individually as
"Party" and jointly as "Parties."

                                   WITNESSETH:

         WHEREAS, Shipper desires firm transportation service under Transco's
proposed Cornerstone Expansion Project ("Cornerstone") for 6,000 dekatherms of
gas per day ("dt/d") ("Contract Quantity") on Transco's mainline from the
receipt point(s) specified in Exhibit A hereto to the delivery point(s)
specified in Exhibit B hereto; and

         WHEREAS, subject to the terms and conditions of this Precedent
Agreement, Transco is willing to provide such firm transportation service for
Shipper under Cornerstone pursuant to the terms of this Precedent Agreement and
the Service Agreement (as hereinafter defined) commencing as soon as all rights
and regulatory approvals are received and accepted by Transco and all of the
necessary facilities are constructed and ready for service, as further set forth
herein below.

         NOW THEREFORE, in consideration of the mutual covenants herein assumed,
Transco and Shipper hereby agree as follows:

         1. Rights and Approvals. Following the execution by Transco and Shipper
of this Precedent Agreement, Transco shall seek such contract rights, property
rights, financing


                                       1
<PAGE>

arrangements and regulatory approvals, including, without limitation, the
requisite authorizations from the Federal Energy Regulatory Commission ("FERC"),
including recourse rates based on a straight-fixed-variable ("SFV") rate design
methodology and an incremental cost of service, as may be necessary to provide
firm transportation service for Shipper of the Contract Quantity from point(s)
of receipt set forth in Exhibit A hereto to point(s) of delivery set forth in
Exhibit B hereto, and to construct the facilities necessary to provide such firm
transportation service. Transco reserves the right to file and prosecute
applications for any required authorizations, any supplements or amendments
thereto (including the right at any time to withdraw any application for
required authorizations or not to accept such authorizations), and, if
necessary, court review, in such manner as it deems to be in its best interest.

         Shipper agrees to cooperate with and support Transco in obtaining the
necessary regulatory approvals for Cornerstone and to provide Transco with any
necessary information reasonably requested in order to obtain contract rights,
property rights, financing arrangements and/or regulatory approvals. In that
regard, Shipper shall file with the FERC in support of Transco's application
filed pursuant to Section 7(c) of the Natural Gas Act for a certificate of
public convenience and necessity authorizing Cornerstone ("FERC Authorization").
In addition, if the FERC determines that information relating to Shipper's
markets, gas supply or upstream or downstream transportation or storage
arrangements is required from Transco, Shipper shall provide Transco with such
information in a timely manner to enable Transco to respond within the time
required by the FERC. If any such information provided by Shipper is
commercially sensitive or confidential, Transco will request that the FERC treat
such information as privileged and confidential and place such information in a
nonpublic file.


                                       2
<PAGE>

         2. Service Agreement. Within thirty (30) days (or within such shorter
time frame as may be required for timely commencement of construction of
Cornerstone) after Transco's receipt and acceptance of the FERC Authorization in
a form and substance satisfactory to Transco in its sole opinion, Transco and
Shipper shall execute and deliver a service agreement under Transco's Rate
Schedule FT ("Service Agreement") substantially in the form attached as Exhibit
C hereto; provided, however, that the Parties shall not be obligated to execute
the Service Agreement if this Precedent Agreement shall have been previously
terminated in accordance with Paragraph 5 below. The Service Agreement shall
provide for the firm transportation by Transco for Shipper of the Contract
Quantity from the point(s) of receipt set forth in Exhibit A hereto to the
point(s) of delivery set forth in Exhibit B hereto. Notwithstanding the Parties'
execution of the Service Agreement, Transco's obligation to provide firm
transportation service to Shipper is expressly made subject to Transco's
receipt and acceptance of any remaining necessary contract rights, property
rights, financing arrangements and regulatory approvals in a form and substance
satisfactory to Transco in its sole opinion and Transco's completion of
construction and placement into service of Transco's facilities necessary to
provide service to Shipper under Cornerstone.

         3. Rates. For the firm transportation service under the Service
Agreement, Shipper shall pay the stated maximum reservation rate for Cornerstone
services under Transco's Rate Schedule FT, as amended from time to time, plus
all applicable commodity charges, reservation and commodity surcharges and fuel
applicable under Transco's Rate Schedule FT, as amended from time to time, for
firm transportation service under Cornerstone, unless otherwise agreed to by the
Parties.

         4. Service and Reservation Charge Commencement; Term of Service. The
firm transportation service for Shipper under Cornerstone and Shipper's
obligation to pay Transco


                                       3
<PAGE>

reservation charges for such service shall commence on the later of: (i) May 1,
2004; or (ii) the date on which Transco's facilities necessary to deliver
natural gas to Shipper under the Service Agreement have been constructed and are
ready for service as determined in Transco's sole opinion. Such firm
transportation service shall continue for a primary term of fifteen (15) years
from the date that the firm transportation service commences, and year-to-year
thereafter subject to termination after such primary term by either Party upon
one (1) year prior written notice to the other Party, unless otherwise agreed to
by the Parties. Notwithstanding anything contained herein to the contrary, in
the event the Georgia Public Utility Commission disallows a fifteen (15) year
term, Transco and Shipper shall amend this Precedent Agreement to reflect a
primary term of no less than ten (10) years at a higher rate to be determined by
Transco. Such firm transportation service shall then continue for a primary term
often (10) years from the date that the firm transportation service commences,
and (i) year-to-year thereafter subject to termination after such primary term
by either Party upon one (1) year prior written notice to the other Party,
unless otherwise agreed to by the Parties or (ii) Shipper shall have the right
to extend the primary term for an additional five (5) year term upon a minimum
of one (1) year prior written notice to Transco before the end of the ten (10)
year term, and year-to-year thereafter subject to termination after such primary
term by either Party upon one (1) year prior written notice to the other Party,
unless otherwise agreed to by the Parties..

         5. Termination of Agreements. This Precedent Agreement shall become
effective upon execution by both Transco and Shipper, and shall remain in effect
unless terminated as hereinafter provided. Transco has the right to terminate
this Agreement if Transco has not received the necessary approvals by its Board
of Directors, which approvals are expected to be obtained by no later than May
16,2002.Transco will provide written notice to Shipper under this Paragraph 5 by
no


                                       4
<PAGE>

later than May 23, 2002, if it intends to terminate this Agreement because the
necessary approvals have not been obtained. If Transco has not received and
accepted the necessary FERC Authorizations on or before April 1, 2004, then at
any time thereafter until Transco receives and accepts such FERC Authorizations,
either Party shall have the right to terminate this Precedent Agreement by
giving thirty (30) days advance written notice to the other Party; provided,
however, that such termination shall not be effective if during the 30-day
period Transco receives and accepts the necessary FERC Authorizations. Further,
if as a result of orders or actions taken by the Georgia Public Service
Commission, Shipper concludes, in Shipper's sole opinion, reasonably exercised,
that Shipper will not be able to include the firm transportation service cost
from Cornerstone as part of its capacity supply contracts, the Shipper may
terminate this Precedent Agreement by giving twenty-four (24) hours advance
written notice to Transco; provided that such right to terminate must be
exercised on or before May 31, 2002. Additionally, if Transco has not commenced
the firm transportation service contemplated herein to Shipper on or before May
1, 2005, either Party shall have the right to terminate this Precedent Agreement
and the Service Agreement by giving twenty-four (24) hours advance written
notice to the other Party; provided that such right must be exercised on or
before May 15, 2005, or else such right shall be waived. Furthermore, Transco
shall have the right to terminate this Precedent Agreement immediately upon
written notice to Shipper if (i) Shipper, in Transco's reasonable judgment,
fails to demonstrate creditworthiness, and (ii) Shipper fails to provide
adequate security as determined by Transco. Except as otherwise provided herein
or unless otherwise agreed to by the Parties, termination of this Precedent
Agreement in accordance with the terms of this Paragraph 5 shall be without
liability for costs or expenses to the terminating Party or its partners,
shareholders, officers, employees or agents.


                                       5
<PAGE>

         6. Construction. After both Parties' execution of the Service Agreement
pursuant to Paragraph 1 above and Transco's receipt and acceptance of all other
necessary contract rights, property rights, financing arrangements and
regulatory approvals in a form and substance satisfactory to Transco in its sole
opinion, reasonably exercised, Transco shall proceed with the construction of
the Cornerstone facilities so as to begin firm transportation service for
Shipper by a proposed in-service date of May 1, 2004. If Transco is unable to
complete such construction and place such facilities into operation by such
proposed in-service date despite its exercise of due diligence, Transco shall
provide notice thereof to Shipper, with such notice including the revised
projected in-service date, and shall continue to proceed with due diligence to
complete such construction, place such facilities in operation and commence
service for Shipper at the earliest practicable date thereafter. Transco shall
not be liable in any manner to Shipper, nor shall this Precedent Agreement or
the Service Agreement be subject to termination other than in accordance with
the termination rights set forth in Paragraph 5 above, if for any reason Transco
is unable to complete the construction of such facilities and commence firm
transportation service contemplated herein by the proposed in-service date.

         7. Prepayment Refund. Transco and Shipper agree that any prepayment
submitted by Shipper for service under Cornerstone plus any interest that
accrues on the prepayment amount (any interest on the prepayment amount
calculated hereunder shall be at the interest rate set forth in the billing and
payment provisions of the General Terms and Conditions of Transco's FERC Gas
Tariff) prior to the in-service date of the project will be applied to Shipper's
reservation charges due for the first month of firm transportation service under
the project. In the event that service commences on a


                                       6
<PAGE>

date other than the first day of the month, the reservation charge will be
prorated and the prepayment plus accrued interest will be applied to such
prorated reservation charge. In the event either Party terminates this Precedent
Agreement pursuant to Paragraph 5 above, other than termination by Transco due
to Shipper's failure to demonstrate creditworthiness and failure to provide
adequate security, Transco shall promptly refund Shipper's prepayment plus
accrued interest.

         8. Remedies. Shipper recognizes that Transco will be required to incur
material expenses to construct the Cornerstone facilities by a proposed
in-service date of May 1, 2004. In the event that Shipper fails to perform its
obligations under this Precedent Agreement or terminates this Precedent
Agreement in a manner inconsistent with Paragraph 5 above, or in the event that
Transco terminates this Precedent Agreement due to Shipper failing to
demonstrate creditworthiness and failing to provide adequate security pursuant
to Paragraph 6 above, Transco shall have the right to retain Shipper's
prepayment (plus accrued interest) made in accordance with Shipper's request for
firm transportation service under Cornerstone and to seek any other legal
remedies available to Transco.

         9. Notices. Any notices hereunder shall be in writing and shall be
addressed as follows:

         If to Shipper:
         United Cities Gas Company,
         A division of Atmos Energy Corporation
         P. 0. Box 650205
         (5430 LBJ Freeway, Suite 160, 75240)
         Dallas, TX 75265-0205
         Facsimile: 972-855-3773
         Attention: Contract Administration

         If to Transco:
         Transcontinental Gas Pipe Line Corporation
         P. 0. Box 1396
         (2800 Post Oak Boulevard 77056)
         Houston, Texas 77251-1396
         Facsimile: 713-215-2549
         Attention: Vice President - Planning and Development


                                       7
<PAGE>

Notices may be given by hand, electronic transmission, mail or courier. Notices
shall be deemed given upon the date the notice is sent. Either party may change
its address or facsimile number for notices hereunder by providing written
notice of such change to the other party.

         10. Assignment. Either Party may, without the prior consent of the
other Party, pledge, mortgage or assign its rights hereunder to any entity as
security for its indebtedness, provided that such entity meets the non-assigning
Party's creditworthiness requirements; otherwise, any assignment of this
Precedent Agreement or any of the rights and obligations hereunder shall be void
and of no force or effect unless the assigning Party first obtains the consent
thereto in writing of the other Party. With respect to the foregoing sentence,
Shipper and Transco hereby agree to execute and deliver to any pledgee or
mortgagee of the other Party upon written request by such Party as soon as
reasonably practicable a consent to assignment to the extent such consent does
not alter any of the terms and conditions of this Precedent Agreement. Any
assignment hereof shall be subject to the receipt and acceptance by Transco of
any necessary regulatory or governmental authorizations. This Precedent
Agreement shall be binding upon and shall inure to the benefit of the respective
authorized successors and assigns.

         11. Governing Law. This Precedent Agreement and any actions, claims,
demands or settlements hereunder shall be governed by and construed in
accordance with the laws of the State of Texas, excluding, however, any
"conflicts of laws" rules or principles which might require the application of
the laws of another jurisdiction.

         12. Third Persons. Except as expressly provided in this Precedent
Agreement, nothing


                                       8
<PAGE>

herein expressed or implied is intended or shall be construed to confer upon or
to give any person not a Party hereto any rights, remedies or obligations under
or by reason of this Precedent Agreement.

         13. Laws and Regulatory Bodies. This Precedent Agreement and the
obligations of the Parties hereunder are subject to all applicable laws, rules,
orders and regulations of governmental authorities having jurisdiction and, in
the event of conflict, such laws, rules, orders and regulations of governmental
authorities having jurisdiction shall control.

         14. Captions. The titles to each of the paragraphs in this Precedent
Agreement are included for convenience of reference only and shall have no
effect on, or be deemed as part of the text of, this Precedent Agreement.

         15. Severability. Any provision of this Precedent Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of that prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of that provision in any other jurisdiction.

         16. Waiver. No waiver by either Party of any default by the other Party
in the performance of any provision, condition or requirement herein shall be
deemed to be a waiver of, or in any manner release the other Party from,
performance of any other provision, condition or requirement herein, nor shall
such waiver be deemed to be a waiver of, or in any manner release the other
Party from, future performance of the same provision, condition or requirement.
Any delay or omission of either Party to exercise any right hereunder shall not
impair the exercise of any such right, or any like right, accruing to it
thereafter.

         17. Further Assurances. Each Party agrees to execute and deliver all
such other and additional instruments and documents and to do such other acts as
may be reasonably necessary to effectuate the terms and provisions of this
Precedent Agreement.


                                       9
<PAGE>

         18. Joint Preparation. The terms, conditions and provisions of this
Precedent Agreement shall be considered as prepared through the joint efforts of
the Parties and shall not be construed against either Party as a result of the
preparation or drafting thereof.


                                       10
<PAGE>

          IN WITNESS WHEREOF, duly authorized representatives of the Parties
have executed this Precedent Agreement as of the date first above written.

                                       TRANSCONTINENTAL GAS PIPE LINE
                                                CORPORATION


                                       BY:         /s/ JAMES C. MOORE
                                           -------------------------------------
                                           James C. Moore
                                           Vice President
                                           Planning and Development



                                       UNITED CITIES GAS COMPANY,
                                       A DIVISION OF ATMOS ENERGY CORPORATION

                                       By:         /s/ Gordon J. Roy
                                           -------------------------------------
                                           Gordon J. Roy, Vice President

<PAGE>
                                    EXHIBIT A


<Table>
<Caption>
                                                      MAXIMUM DAILY QUANTITY
                                                      AT EACH RECEIPT POINT
              RECEIPT POINT                                  (dt/day)(1)
              -------------                           ----------------------
<S>                                                   <C>
1) Point of interconnection between Transco's
mainline system and Destin Pipeline
at milepost 756.860 in Clarke County, MS                        3,000

2) Transco's Compressor Station 65
at the existing point of interconnection
between Transco's southeast Louisiana
lateral and Transco's mainline in
St. Helena Parish, LA                                           3,000
</Table>

----------

(1) These quantities do not include the additional quantities of gas to be
retained by Transco for compressor fuel and line loss make-up. Therefore,
Shipper also shall deliver or cause to be delivered at the receipt points such
additional quantities of gas to be retained by Transco for compressor fuel and
line loss make-up.


<PAGE>

                                    EXHIBIT B


<Table>
<Caption>
                                                MAXIMUM DAILY QUANTITY AT EACH
            DELIVERY POINT                          DELIVERY POINT (dt/day)
            --------------                      ------------------------------
<S>                                             <C>
United Cities Gainesville Meter Station
located at milepost 1096.57 on Transco's
main transmission line in Oconee County, GA                  6,000
</Table>


<PAGE>



                                    EXHIBIT C





                                SERVICE AGREEMENT

                                     Between


                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION

                                       and

                                      Buyer

<PAGE>
Transcontinental Gas Pipe Line Corporation           Third Revised Sheet No. 436
FERC Gas Tariff                                                      Superseding
Third Revised Volume No. 1                                        Second Revised


                            FORM OF SERVICE AGREEMENT
                    (For Use Under Sellers Rate Schedule FT)


         THIS AGREEMENT entered into this ___________ day of __________________,
_____________ (year), by and between TRANSCONTINENTAL GAS PIPE LINE CORPORATION,
a Delaware corporation, hereinafter referred to as "Seller," first party, and
_____________________________________________, hereinafter referred to as
"Buyer," second party,

                                   WITNESSETH


      WHEREAS,

      NOW, THEREFORE, Seller and Buyer agree as follows:


                                   ARTICLE I
                           GAS TRANSPORTATION SERVICE

      1. Subject to the terms and provisions of this agreement and of Seller's
Rate Schedule PT, Buyer agrees to deliver or cause to be delivered to Seller gas
for transportation and Seller agrees to receive, transport and redeliver natural
gas to Buyer or for the account of Buyer, on a firm basis, up to a
Transportation Contract Quantity ("TCQ") of _______________________ dt per day.

      2. Transportation service rendered hereunder shall not be subject to
curtailment or interruption except as provided in Section 11 of the General
Terms and Conditions of Seller's FERC Gas Tariff.


                                   ARTICLE II
                               POINT(S) OF RECEIPT

      Buyer shall deliver or cause to be delivered gas at the point(s) of
receipt hereunder at a pressure sufficient to allow the gas to enter Seller's
pipeline system at the varying pressures that may exist in such system from time
to time; provided, however, the pressure of the gas delivered or caused to be
delivered by Buyer shall not exceed the maximum operating pressure(s) of
Seller's pipeline system at such point(s) of receipt. In the event the maximum
operating pressure(s) of Seller's pipeline system, at the point(s) of receipt
hereunder, is from time to time increased or decreased, then the maximum
allowable pressure(s) of the gas delivered or caused to be delivered by Buyer to
Seller at the point(s) of receipt shall be correspondingly increased or
decreased upon written notification of Seller to Buyer. The point(s) of receipt
for natural gas received for transportation pursuant to this agreement shall be:

      See Exhibit A, attached hereto, for points of receipt.


                                   ARTICLE III
                              POINT(S) OF DELIVERY

      Seller shall redeliver to Buyer or for the account of Buyer the gas
transported hereunder at the following point(s) of delivery and at a pressure(s)
of:

      See Exhibit B, attached hereto, for points of delivery and pressures.


Issued by: Frank J. Ferazzi, Vice President
Issued on: November 21, 1997                        Effective: December 21, 1997


<PAGE>
Transcontinental Gas Pipe Line            Substitute Fifth Revised Sheet No. 437
  Corporation                                                        Superseding
FERC Gas Tariff                                      Fifth Revised Sheet No. 437
Third Revised Volume No. 1


                            FORM OF SERVICE AGREEMENT
                    (For Use under Seller's Rate Schedule FT)
                                   (Continued)


                                   ARTICLE IV
                                TERM OF AGREEMENT

         This agreement shall be effective as of _________________________,
___________ (year) and shall remain in force and effect until 9:10 a.m. Central
Clock Time ____________________, _______ (year) and thereafter until terminated
by Seller or Buyer upon at least _______________________________ written notice;
provided, however, this agreement shall terminate immediately and, subject to
the receipt of necessary authorizations, if any, Seller may discontinue service
hereunder if (a) Buyer, in Seller's reasonable judgment fails to demonstrate
credit worthiness, and (b( Buyer fails to provide adequate security in
accordance with Section 32 of the General Terms and Conditions of Seller's
Volume No. 1 Tariff. As set forth in Section 8 of Article II of Seller's August
7, 1989 revised Stipulation and Agreement in Gocket Nos. RP88-68 etal., (a)
pregranted abandonment under Section 284.221(d) of the Commission's Regulations
shall not apply to any long term conversions from firm sales service to
transportation service under Seller's Rate Schedule FT and (b) Seller shall not
exercise its right to terminate this service agreement as it applies to
transportation service resulting from conversions from firm sales service so
long as Buyer is willing to pay rates no lees favorable than Seller is otherwise
able to collect from third parties for such service.


                                    ARTICLE V
                             RATE SCHEDULE AND PRICE

         1. Buyer shall pay Seller for natural gas delivered to Buyer hereunder
in accordance with Seller's Rate Schedule FT and the applicable provisions of
the General Terms and Conditions of Seller's FERC Gas Tariff as filed with the
Federal Energy Regulatory Commission, and as the same may be legally amended or
superseded from time to time. Such Rate Schedule and General Terms and
Conditions are by this reference made a part hereof. In the event Buyer and
Seller mutually agree to a negotiated rate pursuant to the provisions in Section
53 of the General Terms and Conditions and specified term for service hereunder,
provisions governing such negotiated rate (including surcharges) and term shall
be set forth on Exhibit C to the service agreement.

         2. Seller and Buyer agree that the quantity of gas that Buyer delivers
or causes to be delivered to Seller shall include the quantity of gas retained
by Seller for applicable compressor fuel, line loss make-up (and injection fuel
under Seller's Rate Schedule OSS, if applicable) in providing the transportation
service hereunder, which quantity may be changed from time to time and which
will be specified in the currently effective Sheet No. 44 of Volume No. 1 of
this Tariff which relates to service under this agreement and which is
incorporated herein.

         3. In addition to the applicable charges for firm transportation
service pursuant to Section 3 of Seller's Rate Schedule FT, Buyer shall
reimburse Seller for any and all filing fees incurred as a result of Buyer's
request for service under Seller's Rate Schedule FT, to the extent such fees are
imposed upon Seller by the Federal Energy Regulatory Commission or any successor
governmental authority having jurisdiction.


                                   ARTICLE VI
                                  MISCELLANEOUS

         1. This Agreement supersedes and cancels as of the effective date
hereof the following contract(s) between the parties hereto:

         2. No waiver by either party of any one or more defaults by the other
in the performance of any provisions of this agreement shall operate or be
construed as a waiver of any future default or defaults, whether of a like or
different character.


Issued by: Frank J. Ferazzi, Vice President
Issued on: October 15, 1999                          Effective: November 1, 1999


<PAGE>
Transcontinental Gas Pipe Line Corporation                Original Sheet No. 438
FERC Gas Tariff
Third Revised Volume No. 1


                            FORM OF SERVICE AGREEMENT
                    (For Use Under Seller's Rate Schedule FT)
                                   (Continued)


         3. The interpretation and performance of this agreement shall be in
accordance with the laws of the State of ________________________ without
recourse to the law governing conflict of laws, and to all present and future
valid laws with respect to the subject matter, including present and future
orders, rules and regulations of duly constituted authorities.

         4. This agreement shall be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns.

         5. Notices to either party shall be in writing and shall be considered
as duly delivered when mailed to the other party at the following address:

         (a)      If to Seller:
                  Transcontinental Gas Pipe Line Corporation
                  P.0. Box 1388
                  Houston, Texas  77251
                  Attention:

         (b)      If to Buyer:


         Such addresses may be changed from time to time by mailing appropriate
notice thereof to the other party by certified or registered mail.

         IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
signed by their respective officers or representatives thereunto duly
authorized.

                                       TRANSCONTINENTAL GAS PIPE LINE
                                                CORPORATION
                                                  (Seller)


                                       By
                                          ----------------------------------


                                       -------------------------------------
                                                   (Buyer)


                                       By
                                          ----------------------------------


Issued by: M. D. White, President
Issued on: July 22, 1991                               Effective: August 1, 1991
Filed to comply with order of the Federal Energy
   Regulatory Commission.
Docket No. CP88-391-006, issued June 19, 1991



<PAGE>
Transcontinental Gas Pipe Line Corporation    Substitute Original Sheet No. 438A
FERC Gas Tariff
Third Revised Volume No. 1


                            FORM OF SERVICE AGREEMENT
                    (For Use Under Seller's Rate Schedule FT)
                                   (Continued)


                                    Exhibit A



        Point(s) of Receipt



Issued by: R. W. Best, President
Issued on: August 31, 1992                          Effective: September 1, 1992


<PAGE>
Transcontinental Gas Pipe Line Corporation    Substitute Original Sheet No. 438B
FERC Gas Tariff
Third Revised Volume No. 1


                            FORM OF SERVICE AGREEMENT
                    (For Use Under Seller's Rate Schedule FT)
                                   (Continued)


                                    Exhibit B



          Points(s) of Delivery



Issued by: R. W. Best, President
Issued on: August 31, 1992                          Effective: September 1, 1992


<PAGE>
Transcontinental Gas Pipe Line Corporation               Original Sheet No. 438C
FERC Gas Tariff
Third Revised Volume No. 1


                            FORM OF SERVICE AGREEMENT
                    (For Use Under Seller's Rate Schedule FT)
                                   (Continued)


                                    EXHIBIT C


Specification of Negotiated Rate and Term



Issued by: Frank J. Ferazzi, Vice President
Issued: August 30, 1996                               Effective: October 1, 1996


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>6
<FILENAME>d01510exv10w17.txt
<DESCRIPTION>TRANSPORATION SERVICE AGREEMENT
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.17


                        TRANSPORTATION SERVICE AGREEMENT
                         UNDER RATE SCHEDULE FTS OR ITS

         THIS AGREEMENT ("Agreement"), entered into on May 20, 1992, is between
Arkansas Western Pipeline Company ("Transporter"), an Arkansas corporation, and
Associated Natural Gas Company, a division of Arkansas Western Gas Company,
("Shipper");

                                  WITNESSETH:

         WHEREAS, Shipper has requested natural gas for that Transporter
transport Shipper; and

         WHEREAS, Transporter has agreed to provide such transportation for
Shipper subject to the terms and conditions set forth in this Agreement.

         NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

         1.1      "Maximum Daily Delivery Obligation (MDDO)" means the maximum
                  daily quantity of natural gas, expressed in Dekatherms (Dth),
                  that Transporter is obligated to deliver from time to time at
                  the Point(s) of Delivery specified in Exhibit B to the
                  executed Agreement.

         1.2      "Maximum Daily Quantity (MDQ) " means the maximum daily
                  quantity of natural gas, expressed* in Dth's, that Transporter
                  is obligated under the executed Agreement to transport on
                  behalf of' Shipper, which shall be 23,000 Dth.

         1.3      "Equivalent Quantity" means the quantity, expressed in Dth's,
                  delivered to Shipper by Transporter at the Point(s) of
                  Delivery. Such quantity is equal to the quantity of gas
                  received from Shipper at the Point(s) of Receipt less Fuel
                  Usage and Applicable Shrinkage.

         1.4      "Fuel Usage and Applicable Shrinkage" means the quantity of
                  natural gas retained by Transporter for fuel usage, leakage,
                  blow-down, minor line pack fluctuations, and lost and
                  unaccounted for natural gas.


<PAGE>
                                   ARTICLE II

                       NATURAL GAS TRANSPORTATION SERVICE

         2.1      Beginning on the date on which deliveries of natural gas are
                  commenced hereunder, and thereafter for the remaining term of
                  this Agreement, Shipper agrees to tender gas to Transporter at
                  the Point(s) of Receipt, and Transporter agrees to transport
                  and redeliver and Shipper agrees to accept delivery of the
                  Equivalent Quantities of gas at the Point(s) of Delivery, all
                  in accordance with the terms of this Agreement.

         2.2      Transportation service rendered hereunder shall be
                  firm/interruptible service as described in Section 2 of
                  Transporter's X Rate Schedule FTS _____ Rate Schedule ITS.

                                  ARTICLE III

                              POINT(S) OF RECEIPT

         The Point(s) of Receipt at which Transporter shall receive gas for
         transportation under this Agreement shall be specified in Exhibit A to
         this Agreement.

                                   ARTICLE IV

                              POINT(S) OF DELIVERY

         The Point(s) of Delivery at which Transporter shall redeliver to
         Shipper or for the account of Shipper an Equivalent Quantity of gas for
         transportation under this Agreement shall be specified in Exhibit B to
         this Agreement. Notwithstanding the MDDO at each Point of Delivery,
         Shipper shall not nominate a total quantity of natural gas at all
         Points of Delivery that exceeds the MDQ set forth in this Agreement.

                                   ARTICLE V

                               TERM OF AGREEMENT

         5.1      Subject to the General Terms and Conditions of Transporter's
                  FERC Gas Tariff and Rate Schedule FTS/ITS, this Agreement
                  shall be effective as of the date of physical completion of
                  and initial deliveries on Transporter's pipeline and shall
                  continue for a primary term of ten years. Thereafter, this
                  Agreement shall be effective month to month, until terminated
                  by Transporter or Shipper upon the following written notice to
                  the other specifying a termination date: sixty (60) days for


<PAGE>
                  interruptible transportation under Rate Schedule ITS and 180
                  days for firm transportation under Rate Schedule FTS.

         5.2      Any portions of this Agreement necessary to balance receipts
                  and deliveries under this Agreement as required by the FTS/ITS
                  Rate Schedule, shall survive the other parts of this Agreement
                  until such time as such balancing has been accomplished.

                                   ARTICLE VI

                           RATE SCHEDULE AND CHARGES

         6.1      Shipper shall pay Transporter for the service hereunder an
                  amount determined in accordance with Transporter's FTS/ITS
                  Rate Schedule, and the General Terms and Conditions of
                  Transporter's FERC Gas Tariff, all as may be revised from time
                  to time. Such FTS/ITS Rate Schedule and General Terms and
                  Conditions are incorporated by reference and made a part
                  hereof.

         6.2      Transporter may seek authorization from the FERC and/or other
                  appropriate body to change any rate(s) and/or term(s) set
                  forth herein or in the FTS or ITS Rate Schedule. Nothing
                  herein shall be construed to deny Shipper any rights it may
                  have under the Natural Gas Act or the Natural Gas Policy Act
                  including the right to participate fully in rate proceedings
                  by intervention or otherwise to contest increased rates in
                  whole or in part.

                                  ARTICLE VII

                             REDUCTION IN CAPACITY

         For firm transportation only, if Transporter's capacity is reduced for
         any reason and a reduction of the quantity of gas being transported
         hereunder is required, Shipper's MDQ shall be reduced pro rata with the
         MDQ's of the other firm Shippers during the period of such capacity
         reduction.

                                  ARTICLE VIII

                                  MISCELLANEOUS

         8.1      Amendment. This Agreement shall only be amended, varied or
                  modified by an instrument in writing executed by Transporter
                  and Shipper. Such amendment will be effective upon compliance
                  with Article VIII herein.


<PAGE>

         8.2      Applicable Law. This Agreement and the rights and duties of
                  Transporter and Shipper hereunder shall be governed by and
                  interpreted in accordance with the laws of the State of
                  Arkansas, without recourse to the law governing conflict of
                  laws.

         8.3      Waiver. No waiver by either Transporter or Shipper of any
                  default by the other in the performance of any provision,
                  condition or requirement herein shall be deemed a waiver of,
                  or in any manner a release from, performance of any other
                  provision, condition or requirement herein, nor deemed to be a
                  waiver of, or in any manner a release from, future performance
                  of the same provision, condition or requirement; nor shall any
                  delay or omission by Transporter or Shipper to exercise any
                  right hereunder impair the exercise of any such right or any
                  like right accruing to it thereafter.

         8.4      Headings. The headings of each of the various sections in this
                  Agreement are included for convenience of reference only and
                  shall have no effect on, nor be deemed part of the text of,
                  this Agreement.

         8.5      Further Assurances. Transporter and Shipper shall execute and
                  deliver all instruments and documents and shall do all acts
                  necessary to effectuate this Agreement.

         8.6      Entire Agreement. This Agreement constitutes the entire
                  agreement between Transporter and Shipper concerning the
                  subject matter hereof and supersedes all prior understandings
                  and written and oral agreements relative to said matter.

         8.7      Cancellation of Prior Agreement(s). This Agreement, upon its
                  effective date, supersedes and cancels any and all other
                  agreements between Transporter and Shipper relating to the
                  transportation of gas by Transporter for Shipper.

                                   ARTICLE IX

                                    NOTICES

         All notices, requests, statements or other communications provided for
         under this Agreement shall be in writing and shall be given by personal
         delivery or by United States mail, postage prepaid, and addressed as
         follows:

         If to Shipper:

         Arkansas Western Gas Company
         1001 Sain Street
         P. 0. Box 1288
         Fayetteville, AR 72702-1288


<PAGE>
         If to Transporter:

         Arkansas Western Pipeline Company
         1083 Sain Street
         P. O. Box 1408
         Fayetteville, AR 72702-1408
         Attn: Manager of Transportation Services

         All written notices, requests, statements or other communications shall
         be sufficiently given if mailed postage prepaid by registered,
         certified, or regular mail and shall be deemed to have been duly
         delivered on the third business day following the date on which same
         was deposited in the United States mail, addressed in accordance with
         this Article VIII. Either Shipper or Transporter may designate a
         different address to which notices, requests, statements, payments or
         other communications shall be sent upon proper notice as set forth in
         this Article VIII.

              IN WITNESS WHEREOF, Transporter and Shipper have caused this
Agreement to be duly executed by their duly authorized officers in two (2)
original counterparts as of May 20, 1992.

                                      "TRANSPORTER"

                                      ARKANSAS WESTERN PIPELINE COMPANY
                                      an Arkansas Corporation


                                      By /s/ [ILLEGIBLE]
                                         ---------------------------------------
                                         President


WITNESS: /s/ [ILLEGIBLE]
         ------------------------

                                      "SHIPPER"

                                      ASSOCIATED NATURAL GAS COMPANY,
                                      a division of Arkansas Western Company Gas
                                      Company


                                      By /s/ [ILLEGIBLE]
                                         ---------------------------------------


WITNESS:
         ------------------------




<PAGE>
                                    EXHIBIT A
                                       TO
                        TRANSPORTATION SERVICE AGREEMENT
                               DATED MAY 20, 1992
                     BETWEEN ASSOCIATED NATURAL GAS COMPANY
                      AND ARKANSAS WESTERN PIPELINE COMPANY


<Table>
<Caption>
                                                                              Pressure Psig
                               Meter                                   MDQ    -------------
     Receipt Point             Number     SEC-TWN-RNG   County   ST   Dth/d    Max     Min
     -------------             -------    -----------   ------   --   ------  -----   -----
<S>  <C>                       <C>        <C>           <C>      <C>  <C>     <C>     <C>
1.   NOARK Pipeline System     Pending     31-19N-9E     Clay    AR   23,000   685     550
</Table>


SHIPPER:                                TRANSPORTER:
ASSOCIATED NATURAL GAS COMPANY          ARKANSAS WESTERN PIPELINE COMPANY


By: /s/ [ILLEGIBLE]                     By: /s/ [ILLEGIBLE]
    --------------------------              -----------------------------



<PAGE>
                                    EXHIBIT B
                                       TO
                        TRANSPORTATION SERVICE AGREEMENT
                               DATED MAY 20, 1992
                     BETWEEN ASSOCIATED NATURAL GAS COMPANY
                      AND ARKANSAS WESTERN PIPELINE COMPANY


<Table>
<Caption>
                                                                               Pressure Psig
                               Meter                                   MDDO    -------------
     Delivery Point            Number     SEC-TWN-RNG   County    ST   Dth/d    Max     Min
     --------------            -------    -----------   -------   --   ------  -----   -----
<S>  <C>                       <C>        <C>           <C>       <C>  <C>     <C>     <C>
1.   Associated Natural Gas    Pending    28-19N-10E    Dunklin   mo   23,000   500     400
</Table>


SHIPPER:                                TRANSPORTER:
ASSOCIATED NATURAL GAS COMPANY          ARKANSAS WESTERN PIPELINE COMPANY


By: /s/ [ILLEGIBLE]                     By: /s/ [ILLEGIBLE]
    --------------------------              -----------------------------
    President
<PAGE>

                                   SCHEDULE 2

              CONTRACTS BIFURCATED OR PARTIALLY ASSIGNED TO ATMOS


<Table>
<Caption>
Contract                               Quantity Assigned        Expiration
--------                               -----------------        ----------
Transportation & Storage:
<S>                                    <C>                      <C>
AWP FT dated 5/20/92                    13,370 MMBtu/d          07/31/2003
Ozark FT #Z2001 @ AWP                   13,370 MMBtu/d          10/31/2002
Ozark FT #Z2001 @ NGPL                   .2000 MMBtu/d          10/31/2002
TETCO CDS (FT) #800204                   9,826 MMBtu/d          10/31/2012
TETCO SSI #400184                       11,303 DTH/d W/D        04/30/2012
                                        .3,876 DTH/d Inj.       04/30/2012
Supply:
SEECO Finn Sales dated 10/1/90          15,370 MMBtu/d          09/30/2000
</Table>

<PAGE>
              FORM OF NOTICE OF PERMANENT RELEASE OF FIRM CAPACITY
                        AND CONSENT TO PARTIAL ASSIGNMENT

A.       Associated Natural Gas Company, a division of Arkansas Western Gas
         Company ("Releasing Shipper") is a firm Shipper that is party to an
         executed and valid Service Agreement with Arkansas Western Pipeline
         Company under Rate Schedule FTS ("Transporter"). Releasing Shipper
         proposes to release capacity as set forth below, and in accordance with
         the applicable provisions of Transporter's FERC Gas Tariff. Upon the
         satisfaction of all conditions applicable to the proposed release
         transaction, including all applicable provisions of Section 14 of the
         General Terms and Conditions of Transporter's FERC Gas Tariff,
         Releasing Shipper will consent to a partial and permanent assignment of
         capacity on Transporter's system. Subject to the satisfaction of such
         conditions by the Releasing Shipper and the Replacement Shipper,
         Transporter will consent to this partial and permanent assignment of
         capacity on its system, and will waive the requirement under Section
         14.7 of the General Terms and Conditions of Transporter's FERC Gas
         Tariff, providing that Releasing Shipper shall remain the guarantor of
         payment to Transporter of all demand charges arising under its Service
         Agreement with Transporter for such assigned capacity.

B.       Rate Schedule and contract number pursuant to which capacity is
         released, Contract Number: FTS - 0 1

C.       Quantity of capacity to be released: Max 13,370 Dfli/Day,
                               Min 13,370 DthDay.

D.       (i) Minimum transportation rate acceptable to Releasing Shipper (if
         none, write "none"; includes commodity component):

         Tariff Rate

         (ii) Bid Requirements:

              (a) _X_ Reservation, __Volumetric

                  or ___ Volumetric with ___ volume commitment

              (b) __ Dollar/Cents or __ Percentage

E.       Receipt Points and Delivery Points (designate primary and/or
         secondary):

         Receipt Point: "Ozark/AWP Interconnect" Meter 00010

         Delivery Point: "AWP/ANG Interconnect" Meter 00020 MDQ @ 13,370
         MMBtu/d.


<PAGE>
F.       Bid Evaluation Methodology: i) highest rate, net revenue or present
         value

         ii).     If Releasing Shipper chooses to provide weighting factors in
                  accordance with Section 14.9 of the General Terms and
                  Conditions of Transporter's FERC Gas Tariff, weighting factors
                  are as follows: Please provide a range for each factor between
                  0 - 1,000. The numbers need not add up to 1,000.

                  _________________ Volume (0 - 1,000)

                  Max Rate ___________________ -1 Rate (0 - 1,000)


G.       i).      Designated Replacement Shipper (if none, write "none"):

                  United Cities Gas Company a, division of Atmos Energy
                  Corporation.

         ii).     Terms and conditions agreed to between Releasing Shipper and
                  Designated Replacement Shipper:

                               _________ Demand Rate (MMBtu)

                               13,370 Volume MMBtu/Day

         iii)     Releasing Shipper and Designated Replacement Shipper
                  understand Designated Replacement Shipper may not receive the
                  released capacity if it fails to match any best bid submitted
                  by another potential Shipper as provided in Transporter's FERC
                  Gas Tariff.

H.       Other terms and conditions (if none, write "none"): _________________

This is a maximum tariff rate, permanent assignment of capacity, not subject to
bid.

     "Date                         Releasing Shipper: Associated Natural Gas Co.
                                   Charles V. Stevens, Sr. Vice President

                                     ANY, a division of Atmos Energy Corporation

                                   UNITED CITIES GAS

                                   BY: /s/ [ILLEGIBLE]
                                       -----------------------------------------
                                       Replacement Shipper*

 -May 24, 2000

     Date

     Date                                         Transporter:

                       ARKANSAS WESTERN PIPELINE COMPANY

To be executed, prior to posting by Transporter, by Replacement Shipper only if
Replacement Shipper has been designated by Releasing Shipper in G(i) above.


<PAGE>
                      BID ON PERMANENTLY RELEASED CAPACITY
                      ON ARKANSAS WESTERN PIPELINE COMPANY

A.       United Cities Gas Company a, division of Atmos Energy Corporation
         ("Bidder") hereby bids on released capacity ("Capacity") on the system
         of Arkansas Western Pipeline Company ("Transporter"). This bid will
         remain open until Transporter selects a winning bidder, or notice of
         withdrawal is received by Transporter.

B.       The Capacity was released by Associated Natural Gas Company, a division
         of Arkansas Western Gas Company.

         (FTS - 01) under Transporter's Rate Schedule FTS,

C.       The transportation rate bid is Maximum Tariff Rate per Dth, not
         including commodity charge, fuel, or other applicable fees.

D.       The quantity of Capacity bid for is 13,370 Dth/Day

E.       The term of the Capacity bid for is (Permanent Assignment through
         original contract term) Months/Years, beginning June 1, 2000 and ending
         at the expiration date of contract FTS - 01.

F.       Receipt and Delivery points (designate primary and/or secondary)

         Receipt Point: "Ozark/AWP Interconnect" Meter 000 10

         Delivery Point: "AWP/ANG Interconnect" Meter 00020 MDQ @ 13,370
         MMBtu/d.

G.       Other information requested by the Releasing Shipper

         This is a maximum tariff rate, permanent assignment of capacity, not
         subject to bid.

H.       Bidder agrees to comply with all terms and conditions of Transporter's
         FERC Gas Tariff.

I.       If selected by Transporter as the winning bidder, Bidder will
         immediately execute the partial assignment form set forth below.


i        Bidder acknowledges that it has the full authority to make this bid and
         bind itself and its agents and/or principals to this bid.


                           UNITED CITIES GAS COMPANY, a division of May 24, 2000

Atmos Energy Corporation
------------------------   -----------------------------------------------------

Date                                             BIDDER

                           By: /s/ GORDON J. ROY

                               Gordon J. Roy
                               Vice President

<PAGE>
                         PARTIAL ASSIGNMENT OF CAPACITY
                      ON ARKANSAS WESTERN PIPELINE COMPANY

A.       United Cities Gas Company a, division of Atmos Energy Corporation
         ("Replacement Shipper") has submitted the winning bid for firm capacity
         on the system of Arkansas Western Pipeline Company ("Transporter") for
         capacity released by Associated Natural Gas Company, a division of
         Arkansas Western Gas Company ("Releasing Shipper"), and understands
         that its bid of (date) June 1, 2000 has been accepted by Transporter.

B.       Replacement Shipper has read and understands the terms and conditions
         under which the Releasing Shipper has permanently released such
         capacity on Transporter and hereby contracts for such capacity, in
         accordance with its bid, subject to terms and conditions set forth on
         Transporter's FERC Gas Tariff and the Service Agreement between the
         Releasing Shipper and Transporter (copy of bid and release notice
         attached). Replacement Shipper adopts such Service Agreement for the
         assigned capacity, and from and after the effective date of the
         referenced release shall be fully liable to Transporter for all demand
         charges, volumetric charges, surcharges, and other charges arising
         under the terms of the Service Agreement with Transporter for such
         assigned capacity from and after that effective date.

C.       Releasing Shipper hereby makes a partial assignment of its rights and
         obligations under contract number FTS - 01 in accordance with the
         attached bid and release notice. This assignment is made in accordance
         with Transporter's FERC Gas Tariff.

                               Releasing Shipper: Associated Natural Gas Co.
                             Charles V. Stevens, Sr. Vice President
                             UNITED GAS a division of Atmos Energy Corporation

                             BY:
                                        CITIES COMPANY

                               /s/ GORDON J. ROY
                               -------------------------------------------------
                               Replacement Shipper Gordon J. Roy, Vice President

                             Transporter:

                             Arkansas Western Pipeline Company

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>7
<FILENAME>d01510exv10w18.txt
<DESCRIPTION>SERVICE AGREEMENT
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.18

                                                Contract #: 400227
                                                            ------


                                SERVICE AGREEMENT
                             FOR RATE SCHEDULE SS-1


         This Service Agreement, made and entered into this 31st day of May,
2000, by and between TEXAS EASTERN TRANSMISSION CORPORATION, a Delaware
Corporation (herein called "Pipeline") and UNITED CITIES GAS COMPANY, a division
of Atmos Energy (herein called "Customer," whether one or more),

                                  WITNESSETH:

         WHEREAS, Pipeline and Associated Natural Gas Company ("Associated") are
parties to an existing service agreement dated April 11, 1994, under Pipeline's
Rate Schedule SS-1 (Pipeline's Contract No. 400184); and

         WHEREAS, Customer entered into a permanent capacity release transaction
on May 26, 2000, as reflected on the Addendum ("Addendum") to Customer's
Capacity Release Umbrella Agreement (Pipeline's Contract No. 900483, Capacity
Release Deal No. 016807), pursuant to which Associated permanently assigned
certain of its capacity rights under Pipeline's Contract No. 400184 to Customer;
and

         WHEREAS, Pipeline and Customer desire to enter into this Service
Agreement which supersedes the Addendum and reflects that Customer has taken
permanent assignment of the capacity specified in the Addendum;

         NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties do covenant and agree as
follows:

                                   ARTICLE I

                               SCOPE OF AGREEMENT

         Subject to the terms, conditions and limitations hereof and of
Pipeline's Rate Schedule SS-1, Pipeline agrees to provide firm service for
Customer under Rate Schedule SS-1 and to receive and store for Customer's
account quantities of natural gas up to the following quantity:

<Table>
<S>                                                      <C>
            Maximum Daily Injection Quantity (MDIQ)        3,876 dth
            Maximum Storage Quantity (MSQ)               753,969 dth
</Table>


<PAGE>


                                SERVICE AGREEMENT
                             FOR RATE SCHEDULE SS-1
                                   (CONTINUED)

         Pipeline agrees to withdraw from storage for Customer, at Customer's
request, quantities of gas up to Customer's Maximum Daily Withdrawal Quantity
(MDWQ) of 11,303 dekatherms, or such lesser quantity as determined pursuant to
Rate Schedule SS-1, from Customer's Storage Inventory, plus Applicable
Shrinkage, and to deliver for Customer's account such quantities. Pipeline's
obligation to withdraw gas on any day is governed by the provisions of Rate
Schedule SS-1, including but not limited to Section 6.

                                   ARTICLE II

                               TERM OF AGREEMENT

         The term of this Service Agreement shall commence on June 1, 2000 and
shall continue in force and effect until April 30, 2012 and year to year
thereafter unless this Service Agreement is terminated as hereinafter provided.
This Service Agreement may be terminated by either Pipeline or Customer upon
five (5) years prior written notice to the other specifying a termination date
of April 30, 2012 or any April 30 thereafter. Subject to Section 22 of
Pipeline's General Terms and Conditions and without prejudice to such rights,
this Service Agreement may be terminated at any time by Pipeline in the event
Customer fails to pay part or all of the amount of any bill for service
hereunder and such failure continues for thirty (30) days after payment is due;
provided, Pipeline gives thirty (30) days prior written notice to Customer of
such termination and provided further such termination shall not be effective
if, prior to the date of termination, Customer either pays such outstanding bill
or furnishes a good and sufficient surety bond guaranteeing payment to Pipeline
of such outstanding bill.

         THE TERMINATION OF THIS SERVICE AGREEMENT WITH A FIXED CONTRACT TERM OR
THE PROVISION OF A TERMINATION NOTICE BY CUSTOMER TRIGGERS PREGRANTED
ABANDONMENT UNDER SECTION 7 OF THE NATURAL GAS ACT AS OF THE EFFECTIVE DATE OF
THE TERMINATION. PROVISION OF A TERMINATION NOTICE BY PIPELINE ALSO TRIGGERS
CUSTOMER'S RIGHT OF FIRST REFUSAL UNDER SECTION 3.13 OF THE GENERAL TERMS AND
CONDITIONS ON THE EFFECTIVE DATE OF THE TERMINATION.

         In the event there is gas in storage for Customer's account on April 30
of the year of termination of this Service Agreement, this Service Agreement
shall continue in force and effect for the sole purpose of withdrawal and
delivery of said gas to Customer for an additional one-hundred and twenty (120)
days.


                                       2                                  400227
<PAGE>
                                SERVICE AGREEMENT
                             FOR RATE SCHEDULE SS-1
                                   (CONTINUED)

                                  ARTICLE III

                                 RATE SCHEDULE

         This Service Agreement in all respects shall be and remain subject to
the applicable provisions of Rate Schedule SS-1 and of the General Terms and
Conditions of Pipeline's FERC Gas Tariff on file with the Federal Energy
Regulatory Commission, all of which are by this reference made a part hereof.

         Customer shall pay Pipeline, for all services rendered hereunder and
for the availability of such service in the period stated, the applicable prices
established under Pipeline's Rate Schedule SS-1 as filed with the Federal Energy
Regulatory Commission and as the same may be hereafter revised or changed.

         Customer agrees that Pipeline shall have the unilateral right to file
with the appropriate regulatory authority and make changes effective in (a) the
rates and charges applicable to service pursuant to Pipeline's Rate Schedule
SS-1, (b) Pipeline's Rate Schedule SS-1, pursuant to which service hereunder is
rendered or (c) any provision of the General Terms and Conditions applicable to
Rate Schedule SS-1. Notwithstanding the foregoing, Customer does not agree that
Pipeline shall have the unilateral right without the consent of Customer
subsequent to the execution of this Service Agreement and Pipeline shall not
have the right during the effectiveness of this Service Agreement to make any
filings pursuant to Section 4 of the Natural Gas Act to change the MDIQ, MSQ and
MDWQ specified in Article I, to change the term of the service agreement as
specified in Article II, to change Point(s) of Receipt specified in Article IV,
to change the Point(s) of Delivery specified in Article IV, or to change the
firm character of the service hereunder. Pipeline agrees that Customer may
protest or contest the aforementioned filings, and Customer does not waive any
rights it may have with respect to such filings.

                                   ARTICLE IV

                  POINT(S) OF RECEIPT AND POINT(S) OF DELIVERY

         The natural gas received by Pipeline for Customer's account for storage
injection pursuant to this Service Agreement shall be those quantities scheduled
for delivery pursuant to Service Agreements between Pipeline and Customer under
Rate Schedules CDS, FT-1, SCT, PTI or IT-1 which specify as a Point of Delivery
the IISS-1 Storage Point". For purposes of billing of Usage Charges under Rate
Schedules CDS, FT-1, SCT, PTI or IT-1,


                                       3                                  400227
<PAGE>

                                SERVICE AGREEMENT
                             FOR RATE SCHEDULE SS-1
                                   (CONTINUED)

deliveries under Rate Schedules CDS, FT-1, SCT, PTI or IT-1 for injection into
storage scheduled directly to the SS-1 Storage Point" shall be deemed to have
been delivered 60% in Market Zone 2 and 40% in Market Zone 3. In addition, at
Customer's request any positive or negative variance between scheduled
deliveries and actual deliveries on any day at Customer's Points of Delivery
under Rate Schedules CDS, FT-1, SCT, or IT-1 shall be deemed for billing
purposes delivered at the Point of Delivery and shall be injected into or
withdrawn from storage for Customer's account. In addition to accepting gas for
storage injection at the SS-1 Storage Point, Pipeline will accept gas tendered
at points of interconnection between Pipeline and third party facilities at
Oakford and Leidy Storage Fields provided that such receipt does not result in
Customer tendering aggregate quantities for storage in excess of the Customer
MDIQ.

         The Point(s) of Delivery at which Pipeline shall deliver gas shall be
specified in Exhibit A of the executed service agreement.

         Exhibit A and B are hereby incorporated as part of this Service
Agreement for all intents and purposes as if fully copied and set forth herein
at length.

                                    ARTICLE V

                                    QUALITY

         All natural gas tendered to Pipeline for Customer's account shall
conform and be subject to the provisions of Section 5 of the General Terms and
Conditions. Customer agrees that in the event Customer tenders for service
hereunder and Pipeline agrees to accept natural gas which does not comply with
Pipeline's quality specifications, as expressly provided for in Section 5 of
Pipeline's General Terms and Conditions, Customer shall pay all costs associated
with processing of such gas as necessary to comply with such quality
specifications.

                                   ARTICLE VI

                                   ADDRESSES

         Except as herein otherwise provided or as provided in the General Terms
and Conditions of Pipeline's FERC Gas Tariff, any notice, request, demand,
statement, bill or payment provided for in this Service Agreement, or any notice
which any party may desire to give to the other, shall be in writing and shall
be considered as duly delivered when mailed by registered,


                                       4                                  400227
<PAGE>

                               * SERVICE AGREEMENT
                             FOR RATE SCHEDULE SS-1
                                   (CONTINUED)

certified, or regular mail to the post office address of the parties hereto, as
the case may be, as follows:

                  Pipeline:     Texas Eastern Transmission Corporation
                                5400 Westheimer Court
                                Houston, Texas 77056-5310

                  Customer:     United Cities Gas Company,
                                A Division of Atmos Energy
                                5430 LBJ Freeway
                                Suite 160
                                Dallas, TX 75:240

or such other address as either party shall designate by formal written notice.

                                  ARTICLE VII

                                  ASSIGNMENTS

         Any Company which shall succeed by purchase, merger, or consolidation
to the properties, substantially as an entirety, of Customer, or of Pipeline, as
the case may be, shall be entitled to the rights and shall be subject to the
obligations of its predecessor in title under this Service Agreement; and either
Customer or Pipeline may assign or pledge this Service Agreement under the
provisions of any mortgage, deed of trust, indenture, bank credit agreement,
assignment, receivable sale, or similar instrument which it has executed or may
execute hereafter; otherwise, neither Customer nor Pipeline shall assign this
Service Agreement or any of its rights hereunder unless it first shall have
obtained the consent thereto in writing of the other; provided further, however,
that neither Customer nor Pipeline shall be released from its obligations
hereunder without the consent of the other. In addition, Customer may assign its
rights to capacity pursuant to Section 3.14 of the General Terms and Conditions.
To the extent Customer so desires, when it releases capacity pursuant to Section
3.14 of the General Terms and Conditions, Customer may require privity between
Customer and the Replacement Customer, as further provided in the applicable
Capacity Release Umbrella Agreement.


                                       5                                  400227
<PAGE>


                                SERVICE AGREEMENT
                             FOR RATE SCHEDULE SS-1
                                   (CONTINUED)

                                   ARTICLE IX

                       CANCELLATION OF PRIOR CONTRACT(S)

         This Service Agreement supersedes and cancels, as of the effective date
of this Service Agreement, the contract(s) between the parties hereto as
described below:

         The Addendum to Customer's Capacity Release Umbrella Agreement
         (Pipeline's Contract No. 900483, Pipeline's Capacity Release Deal No.
         016807) which reflects the permanent assignment from Associated to
         Customer of certain of the capacity rights specified in Pipeline's
         Contract No. 400184 dated April 11, 1994.


                                       6                                  400227
<PAGE>


         IN WITNESS WHEREOF, the Parties hereto have caused this Service
Agreement to be signed by their respective Presidents, Vice Presidents, or other
duly authorized agents and their respective corporate seals to be hereto affixed
and attested by their respective Secretaries or Assistant Secretaries, the day
and year first above written.

                                        TEXAS EASTERN TRANSMISSION CORPORATION


                                        By: /s/ GREGORY J. RIZZO
                                            ---------------------------------
                                             Vice President, Marketing      pmr


ATTEST:


/s/ [ILLEGIBLE]
---------------------------------
Assistant Secretary


                                        UNITED CITIES GAS COMPANY,
                                        A DIVISION OF ATMOS ENERGY

                                        By:  /s/ Gordon J. Roy

ATTEST:


<PAGE>


                                                              Contract #: 40022.
                                                                          ------

                    EXHIBIT A, POINT(S) OF DELIVERY, (con't.)
              UNITED CITIES GAS COMPANY, A DIVISION OF ATMOS ENERGY

provided, however, that until changed by a subsequent Agreement between Pipeline
and Customer, Pipeline's aggregate maximum daily delivery obligations at each of
the points of delivery described above, including Pipeline's maximum daily
delivery obligations under this and all other Service Agreements existing
between Pipeline and Customer, shall in no event exceed the following:


<Table>
<Caption>
                                    Aggregate Maximum
Point of Delivery               Daily Delivery Obligation
-----------------               -------------------------
<S>                             <C>
     No. 1                              19,260 dth

     No. 2                               2,595 dth

     No. 3                              18,826 dth for no more than 20 days
                                during the period of November 16
                                through April 15 of each year-otherwise,
                                11,346 dth

     No. 4                                 519 dth
</Table>


SIGNED FOR IDENTIFICATION

PIPELINE:   /s/ GREGORY J. RIZZO        CBA
          -----------------------------

CUSTOMER:   /s/ GORDON J. ROY
          -----------------------------
                                        PJD
          -----------------------------
SUPERSEDES EXHIBIT A DATED:                [ILLEGIBLE]
                            -----------------------------



                                      A-2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>8
<FILENAME>d01510exv12.txt
<DESCRIPTION>COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TEXT>
<PAGE>
                                                                      EXHIBIT 12


                            Atmos Energy Corporation
                    Computation of Earnings to Fixed Charges



<Table>
<Caption>
                                                        Year Ended September 30
                                          ----------------------------------------------------
                                            2002       2001       2000       1999       1998
                                          --------   --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>        <C>
Income from continuing operations
     before provision for income taxes
     per statement of income              $ 94,836   $ 89,458   $ 56,237   $ 27,299   $ 87,071
Add:
     Portion of rents representative of
       the interest factor                   3,614      2,917      3,007      3,520      3,050
     Interest on debt & amortization
       of debt expense                      59,174     47,011     43,823     37,063     35,579
                                          --------   --------   --------   --------   --------
        Income as adjusted                $157,624   $139,386   $103,067   $ 67,882   $125,700
                                          ========   ========   ========   ========   ========

Fixed charges:
     Interest on debt & amortization
       of debt expense (1)                $ 59,174   $ 47,011   $ 43,823   $ 37,063   $ 35,579
     Capitalized interest (2)                1,272      1,494         --      3,724      4,132
     Capitalized expenses related
       to indebtedness (3)                      --      4,718         --         --         --
     Rents                                  10,842      8,752      9,020     10,560      9,149
     Portion of rents representative of
       the interest factor (4)               3,614      2,917      3,007      3,520      3,050
                                          --------   --------   --------   --------   --------
        Fixed charges (1)+(2)+(3)+(4)     $ 64,060   $ 56,140   $ 46,830   $ 44,307   $ 42,761
                                          ========   ========   ========   ========   ========

Ratio of earnings to fixed charges            2.46       2.48       2.20       1.53       2.94
</Table>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>9
<FILENAME>d01510exv21.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<PAGE>
                                                                      EXHIBIT 21

                    SUBSIDIARIES OF ATMOS ENERGY CORPORATION


<Table>
<Caption>
                                                                        State of               Percent of
                Name                                                  Incorporation             Ownership
------------------------------------------------------------          -------------             ---------
<S>                                                                   <C>                      <C>
ATMOS ENERGY HOLDINGS, INC.                                              Delaware                 100%

ATMOS ENERGY SERVICES, LLC                                               Delaware                 100%
(a limited liability company)
(wholly-owned by Atmos Energy Holdings, Inc.)

GREELEY ENERGY SERVICES, INC.                                            Delaware                 100%
(wholly-owned by Atmos Energy Services, LLC)

TRANS LOUISIANA ENERGY SERVICES, INC.                                    Delaware                 100%
(wholly-owned by Atmos Energy Services, LLC)

UNITED CITIES ENERGY SERVICES, INC.                                      Delaware                 100%
(wholly-owned by Atmos Energy Services, LLC)

WKG ENERGY SERVICES, INC.                                                Delaware                 100%
(wholly-owned by Atmos Energy Services, LLC)

EGASCO, LLC                                                               Texas                   100%
(a limited liability company) (wholly-owned by
Atmos Energy Holdings, Inc.)

ENERGAS ENERGY SERVICES TRUST                                          Pennsylvania               100%
(a business trust)
(wholly-owned by Atmos Energy
Services, LLC)

UNITED CITIES PROPANE GAS, INC.                                         Tennessee                 100%
(a wholly-owned subsidiary of Atmos Energy
Holdings, Inc.)

ENERMART ENERGY SERVICES TRUST (a                                      Pennsylvania               100%
business trust)
(wholly-owned by Atmos Energy Holdings, Inc.)

ATMOS ENERGY MARKETING, LLC                                              Delaware                 100%
(a limited liability company)
(wholly-owned by Atmos Energy Holdings, Inc.)

ATMOS POWER SYSTEMS, INC.                                                Georgia                  100%
(a wholly-owned subsidiary of Atmos Energy
Holdings, Inc.)
</Table>

<PAGE>


<Table>
<Caption>
                                                                        State of               Percent of
                Name                                                  Incorporation             Ownership
------------------------------------------------------------          -------------             ---------
<S>                                                                   <C>                      <C>
ATMOS PIPELINE AND STORAGE, LLC                                          Delaware                 100%
(a limited liability company)
(wholly-owned by Atmos Energy Holdings, Inc.)

UCG STORAGE, INC.                                                        Delaware                 100%
(wholly-owned by Atmos Pipeline and Storage, LLC)

WKG STORAGE, INC.                                                        Delaware                 100%
(wholly-owned by Atmos Pipeline and Storage, LLC)

ATMOS EXPLORATION AND PRODUCTION, INC.                                   Delaware                 100%
(wholly-owned by Atmos Pipeline and Storage, LLC)

TRANS LOUISIANA INDUSTRIAL GAS COMPANY, INC.                             Delaware                 100%
(wholly-owned by Atmos Energy Marketing, LLC)

WOODWARD MARKETING, LLC                                                  Delaware                 100%
(a limited liability company)
(wholly-owned by Atmos Energy Marketing, LLC)

SOUTHERN RESOURCES, INC.                                                 Kentucky                 100%
(wholly-owned by Woodward Marketing, LLC)

TRANS LOUISIANA GAS PIPELINE, INC.                                      Louisiana                 100%
(wholly-owned by Atmos Pipeline and Storage, LLC)

TRANS LOUISIANA GAS STORAGE, INC.                                        Delaware                 100%
(wholly-owned by Atmos Pipeline and Storage, LLC)
</Table>



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>10
<FILENAME>d01510exv23.txt
<DESCRIPTION>CONSENT OF INDEPENDENT AUDITOR, ERNST & YOUNG LLP
<TEXT>
<PAGE>
                                                                      EXHIBIT 23



CONSENT OF INDEPENDENT AUDITORS


We consent to the incorporation by reference in the Registration Statements
(Form S-3, No. 33-37869; Form S-3 D/A, No. 33-70212; Form S-3, No. 33-58220;
Form S-3, No. 33-56915; Form S-3/A, No. 333-03339; Form S-3/A, No. 333-32475;
Form S-3/A, No. 333-50477; Form S-3/A, No. 333-93705; Form S-3, No. 333-95525;
Form S-3, No. 333-75576; Form S-4, No. 333-13429; Form S-8, No. 33-68852; Form
S-8, No. 33-57687; Form S-8, No. 33-57695; Form S-8, No. 333-32343; Form S-8,
No. 333-46337; Form S-8, No. 333-73143; Form S-8, No. 333-73145; Form S-8, No.
333-63738; and Form S-8, No. 333-88832) of Atmos Energy Corporation and in the
related Prospectuses of our report dated November 8, 2002, with respect to the
consolidated financial statements and schedule of Atmos Energy Corporation
included in this Annual Report (Form 10-K) for the year ended September 30,
2002.




                                                  ERNST & YOUNG LLP

Dallas, Texas
November 22, 2002


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>11
<FILENAME>d01510exv99w1.txt
<DESCRIPTION>CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
<TEXT>
<PAGE>
                                                                    EXHIBIT 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of Atmos Energy Corporation (the
"Company") on Form 10-K for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Robert W. Best, Chairman, President and Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Secion 906
of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

         (1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.




/s/ ROBERT W. BEST
---------------------------
Robert W. Best
Chairman, President and
Chief Executive Officer
November 22, 2002


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>12
<FILENAME>d01510exv99w2.txt
<DESCRIPTION>CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
<TEXT>
<PAGE>
                                                                    EXHIBIT 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of Atmos Energy Corporation (the "Company")
on Form 10-K for the period ending September 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, John P.
Reddy, Senior Vice President and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

         (1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.



/s/ JOHN P. REDDY
-----------------------------
John P. Reddy
Senior Vice President and
Chief Financial Officer
November 22, 2002


</TEXT>
</DOCUMENT>
</SUBMISSION>
