<SUBMISSION>
<ACCESSION-NUMBER>0000950134-02-001381
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>9
<PERIOD>20011231
<FILING-DATE>20020214
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>ATMOS ENERGY CORP
<CIK>0000731802
<ASSIGNED-SIC>4924
<IRS-NUMBER>751743247
<STATE-OF-INCORPORATION>TX
<FISCAL-YEAR-END>0930
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-10042
<FILM-NUMBER>02549649
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1800 THREE LINCOLN CTR
<STREET2>5430 LBJ FREEWAY
<CITY>DALLAS
<STATE>TX
<ZIP>75240
<PHONE>9729349227
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1800 THREE LINCOLN CTR
<STREET2>5430 LBJ FREEWAY
<CITY>DALLAS
<STATE>TX
<ZIP>75240
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>ENERGAS CO
<DATE-CHANGED>19881024
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d94293e10-q.txt
<DESCRIPTION>FORM 10-Q FOR QUARTER ENDED DECEMBER 31, 2001
<TEXT>
<PAGE>
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2001

         OR

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

For the transition period from ________________ to ________________

Commission File Number 1-10042

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

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

       Three Lincoln Centre, Suite 1800
       5430 LBJ Freeway, Dallas, Texas                 75240
   (Address of principal executive offices)          (Zip Code)

                                 (972) 934-9227
              (Registrant's telephone number, including area code)

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
                                       ---      ---

Number of shares outstanding of each of the issuer's classes of common stock, as
of January 31, 2002.

<Table>
<Caption>
                  Class                         Shares Outstanding
                  -----                         ------------------
<S>                                                 <C>
               No Par Value                         41,077,144
</Table>

<PAGE>

PART 1.   FINANCIAL INFORMATION
Item 1.      Financial Statements


                            ATMOS ENERGY CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<Table>
<Caption>
                                                                      December 31,      September 30,
                                                                         2001               2001
                                                                      ------------      -------------
                                                                       (Unaudited)

<S>                                                                   <C>               <C>
ASSETS
Property, plant and equipment                                          $ 2,148,347       $ 2,109,867
    Less accumulated depreciation and amortization                         792,850           774,469
                                                                       -----------       -----------
        Net property, plant and equipment                                1,355,497         1,335,398
Current assets
    Cash and cash equivalents                                               12,785            15,263
    Cash held on deposit in margin account                                  47,529            66,666
    Accounts receivable, net                                               233,602           124,046
    Inventories                                                              5,595             6,041
    Gas stored underground                                                 109,356            89,555
    Assets from risk management activities                                  69,601            95,968
    Deferred gas cost                                                        2,509            10,999
    Other current assets and prepayments                                    10,198            15,713
                                                                       -----------       -----------
        Total current assets                                               491,175           424,251
Intangible assets                                                           11,774            12,125
Goodwill                                                                    64,941            64,745
Noncurrent assets from risk management activities                           30,374            29,771
Deferred charges and other assets                                          169,785           169,890
                                                                       -----------       -----------
                                                                       $ 2,123,546       $ 2,036,180
                                                                       ===========       ===========

SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
    Common stock                                                       $       205       $       204
    Additional paid-in capital                                             494,307           489,948
    Retained earnings                                                      103,693            95,132
    Accumulated other comprehensive income (loss)                             (783)           (1,420)
                                                                       -----------       -----------
        Shareholders' equity                                               597,422           583,864
Long-term debt                                                             679,057           692,399
                                                                       -----------       -----------
        Total capitalization                                             1,276,479         1,276,263
Current liabilities
    Current maturities of long-term debt                                    20,413            20,695
    Short-term debt                                                        207,136           201,247
    Accounts payable and accrued liabilities                               204,191            84,471
    Taxes payable                                                            8,375            11,620
    Customers' deposits                                                     30,065            32,351
    Liabilities from risk management activities                             81,558           119,484
    Other current liabilities                                               34,596            41,161
                                                                       -----------       -----------
        Total current liabilities                                          586,334           511,029
Deferred income taxes                                                      145,731           138,934
Noncurrent liabilities from risk management activities                       9,521             7,412
Deferred credits and other liabilities                                     105,481           102,542
                                                                       -----------       -----------
                                                                       $ 2,123,546       $ 2,036,180
                                                                       ===========       ===========
</Table>

See accompanying notes to condensed consolidated financial statements



                                       2
<PAGE>

                            ATMOS ENERGY CORPORATION
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                      (In thousands, except per share data)


<Table>
<Caption>
                                                                     Three months ended
                                                                         December 31
                                                                  ------------------------
                                                                     2001           2000
                                                                  ---------      ---------

<S>                                                               <C>            <C>
Operating revenues                                                $ 271,342      $ 442,790
Purchased gas cost                                                  161,977        332,842
                                                                  ---------      ---------
    Gross profit                                                    109,365        109,948

Gas trading margin                                                    7,163           --

Operating expenses
    Operation and maintenance                                        42,528         35,959
    Depreciation and amortization                                    20,474         15,781
    Taxes, other than income                                         10,080          9,267
                                                                  ---------      ---------
        Total operating expenses                                     73,082         61,007
                                                                  ---------      ---------
Operating income                                                     43,446         48,941

Equity in earnings of Woodward Marketing, L.L.C                        --            2,040
Miscellaneous income (expense)                                        5,401         (2,387)
Interest charges, net                                                15,992         12,246
                                                                  ---------      ---------
Income before income taxes                                           32,855         36,348

Income taxes                                                         12,222         13,376
                                                                  ---------      ---------
        Net income                                                $  20,633      $  22,972
                                                                  =========      =========
Basic net income per share                                        $     .51      $     .70
                                                                  =========      =========
Diluted net income per share                                      $     .50      $     .70
                                                                  =========      =========
Cash dividends per share                                          $    .295      $    .290
                                                                  =========      =========

Weighted average shares outstanding:
    Basic                                                            40,837         32,810
                                                                  =========      =========
    Diluted                                                          40,922         32,908
                                                                  =========      =========
</Table>


See accompanying notes to condensed consolidated financial statements



                                       3
<PAGE>

                            ATMOS ENERGY CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (In thousands)


<Table>
<Caption>
                                                                          Three months ended
                                                                              December 31
                                                                       -------------------------
                                                                          2001            2000
                                                                       ---------       ---------

<S>                                                                    <C>             <C>
Cash Flows From Operating Activities
    Net income                                                         $  20,633       $  22,972
    Adjustments to reconcile net income to
      net cash provided (used) by operating activities:
      Depreciation and amortization:
          Charged to depreciation and
            amortization                                                  20,474          15,781
          Charged to other accounts                                          693             750
      Deferred income taxes (benefit)                                      6,421          (4,606)
      Other                                                                 (171)           --
      Net assets/liabilities from risk management activities              (8,035)           --
      Net change in operating assets and liabilities                      16,587         (49,529)
                                                                       ---------       ---------
        Net cash provided (used) by operating activities                  56,602         (14,632)

Cash Flows From Investing Activities
    Capital expenditures                                                 (28,009)        (19,464)
    Acquisitions                                                         (15,747)           --
    Retirements of property, plant and
        equipment, net                                                       123            (147)
    Proceeds from sale of assets, net                                       --             6,625
                                                                       ---------       ---------
          Net cash used in investing activities                          (43,633)        (12,986)

Cash Flows From Financing Activities
    Net increase (decrease) in short-term debt                             5,889        (102,446)
    Cash dividends paid                                                  (12,072)         (9,285)
    Repayment of long-term debt                                          (13,624)         (7,893)
    Issuance of common stock                                               4,360           3,379
    Proceeds from equity offering, net                                      --           142,043
                                                                       ---------       ---------
          Net cash provided (used) by financing activities               (15,447)         25,798
                                                                       ---------       ---------
Net decrease in cash and cash equivalents                                 (2,478)         (1,820)
Cash and cash equivalents at beginning
    of period                                                             15,263           7,379
                                                                       ---------       ---------
Cash and cash equivalents at end
    of period                                                          $  12,785       $   5,559
                                                                       =========       =========
</Table>


See accompanying notes to condensed consolidated financial statements



                                       4
<PAGE>

                            ATMOS ENERGY CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 2001

1.       Unaudited interim financial information

In the opinion of management, all material adjustments (consisting of only
normal recurring accruals) necessary for a fair presentation have been made to
the unaudited interim period financial statements. Because of seasonal and other
factors, the results of operations for the three month period ended December 31,
2001 are not indicative of expected results of operations for the year ending
September 30, 2002. These interim financial statements and notes are condensed
as permitted by the instructions to Form 10-Q and should be read in conjunction
with the audited consolidated financial statements of Atmos Energy Corporation
in its Annual Report on Form 10-K for the fiscal year ended September 30, 2001.

Principles of consolidation - The accompanying condensed consolidated financial
statements include the accounts of Atmos Energy Corporation and its wholly-owned
subsidiaries. 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 accounted for that ownership on a consolidated basis.

Common stock - As of December 31, 2001, we had 100,000,000 shares of common
stock, no par value (stated at $.005 per share), authorized and 41,027,472
shares outstanding. At September 30, 2001, we had 40,791,501 shares outstanding.

Goodwill - Total goodwill was $64.9 million and $64.7 million at December 31,
2001 and September 30, 2001. Goodwill applicable to the utility segment was
$36.9 million at December 31, 2001 and September 30, 2001. Goodwill applicable
to the non-regulated segment was $28.0 million and $27.8 million at December 31,
2001 and September 30, 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 non-regulated segment was amortized over 20 years
until September 30, 2001. Effective October 1, 2001, goodwill applicable to
the non-regulated segment will not be amortized under the provisions of
Statement of Financial Accounting Standards No. 142. The proforma effect on
goodwill amortization of adopting Statement of Financial Accounting Standards
No. 142 is not material.




                                       5
<PAGE>

Impairment of Intangible Assets - We periodically evaluate whether events or
circumstances have occurred that indicate that the value of intangible assets
may have been impaired. When such events or circumstances are present, we assess
the value of intangible assets by determining whether the carrying amount 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 amount, an impairment loss equal to the excess of the asset's carrying
value over its fair value is recorded. To date, no such impairment has been
recognized.

Goodwill - Under the provisions of Statement of Financial Accounting Standard
No. 142, we evaluate our goodwill balance annually. The initial evaluation will
take place during the second quarter of our current fiscal year. We do not
anticipate any impairment of the goodwill balance.

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
consists of natural gas sales to residential, commercial, industrial,
agricultural and other customers. The allowance for doubtful 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.

Risk management assets and liabilities, non-regulated 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 condensed consolidated statement of income as gas trading
margin. 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. 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.

Risk management assets and liabilities, utility segment - Our business units
have entered into financial instruments for the 2001-2002 heating season. The
purpose of entering into these financial instruments is to protect us and our
customers from unusually large winter



                                       6
<PAGE>


period gas price increases. We use the mark-to-market method to account for
these activities as described above. 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 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.

Comprehensive income - The following table presents the components of
comprehensive income, net of related tax, for the three-month period ended
December 31, 2001 and 2000:

<Table>
<Caption>
                                                                         Three months ended
                                                                             December 31
                                                                       ----------------------
                                                                         2001          2000
                                                                       --------      --------
                                                                           (In thousands)

<S>                                                                    <C>           <C>
Net income                                                             $ 20,633      $ 22,972
Unrealized holding gains (losses) on investments                            637        (1,522)
Unrealized losses on derivative financial instruments                      --          (3,634)
                                                                       --------      --------
Comprehensive income                                                   $ 21,270      $ 17,816
                                                                       ========      ========
</Table>

The only components of accumulated other comprehensive income (loss), net of
related tax, relate to unrealized holding gains and losses associated with
certain available for sale investments and unrealized gains and losses
associated with derivative financial instruments.

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.

Recently issued accounting standards not yet adopted - 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 are currently in the process of evaluating the impact the
adoption of this Statement will have on our financial condition, results of
operations or net cash flows.

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



                                       7
<PAGE>

2.       Contingencies

Litigation

Greeley Gas 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 Greeley Gas
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 is 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 because we believe that we have adequate
insurance and/or reserves to cover any damages that may ultimately be awarded.

Energas 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 Energas Division. The action arises 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 Energas
Division. The plaintiffs allege that they incurred damages as a result of
certain corrosive products that were introduced into the facility's turbine that
damaged the turbine and necessitated repair costs of approximately $0.9 million
and consequential damages of approximately $4.7 million comprised of electric
power purchases made by the plaintiffs from other sources while the facility was
inoperative or operating below specifications. The causes of action asserted by
the plaintiffs against the Energas Division include breach of contract, breach
of warranty and negligence. We have denied



                                       8
<PAGE>

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
because we believe that we have adequate insurance and/or reserves to cover any
damages that may ultimately be awarded.

Atmos Energy Louisiana Gas 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 have taken over the defense of this proceeding and
will have responsibility for administering and assuring the payment of refunds
and/or credits to ratepayers that may arise from Citizens Communications' past
activities with respect to the purchased gas costs. However, we



                                       9
<PAGE>

believe the outcome of this proceeding will not have a material adverse impact
on our financial condition, results of operations or net cash flows as Citizens
Communications has agreed to fully indemnify us for any liability that may arise
out of this proceeding.

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 because we believe that we have adequate insurance and/or reserves to
cover any damages that may ultimately be awarded.

We are a party to other litigation and claims that arise out of our ordinary
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 because we believe that we have adequate insurance
and/or reserves to cover any damages that may ultimately be awarded.

Environmental Matters

Manufactured Gas Plant Sites

The United Cities Gas 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 December 31, 2001. The
investigative phase of the work at the site has been completed. An interim
removal action was completed in June 2001. 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.



                                       10
<PAGE>

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 United Cities Gas 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 is currently being performed. 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 December 31, 2001, we had incurred costs of approximately $0.9 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 $0.8
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 agreed to amendments of the Orders with the Kansas Department of Health to
include all mercury meters that belonged to our Greeley Gas Division before the
merger with United Cities Gas Company on July 31, 1997. These sites will be
investigated in 2002 and any necessary remediation will be performed. As of
December 31, 2001, 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 out of our ordinary 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 or reserves.

3.       Short-term debt

At December 31, 2001, short-term debt was composed of $189.1 million of
commercial paper and $18.0 million outstanding under bank credit facilities.



                                       11
<PAGE>

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 with an option to
increase the amount by $100.0 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 and P-2 by Moody's. At December 31, 2001, $189.1 million of
commercial paper was outstanding. We have a second facility in place for $18.0
million. At December 31, 2001, $18.0 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
$125.0 million which is used for its non-regulated business. Atmos Energy
Marketing, LLC, our wholly-owned subsidiary, is the sole guarantor of all
amounts outstanding under this facility. At December 31, 2001, no amount was
outstanding under this credit facility. Related letters of credit totaling $48.6
million reduced the amount available under this facility. This facility is used
for working capital purposes.

We also have unsecured short-term uncommitted credit lines from two banks
totaling $40.0 million. No amounts were outstanding under these credit
facilities at December 31, 2001. The uncommitted lines are renewed or
renegotiated at least annually with varying terms and we pay no fee for the
availability of the lines. Borrowings under these lines are made on a when- and
as-available basis at the discretion of the banks. These facilities are also
used for working capital purposes.

In addition, Woodward Marketing has up to $100.0 million of credit available
from Atmos for its non-regulated business. At December 31, 2001, $91.8 million
was outstanding. This intercompany facility is subordinated in terms of
repayment to the $125.0 million uncommitted demand credit facility described
above.

4.       Earnings per share

Basic earnings per share has 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 has been computed by dividing net income for the
period by the weighted average number of common shares outstanding during the
period adjusted for the assumed exercise of restricted stock and other
contingently issuable shares of common stock. Net income for basic and diluted
earnings per share are the same, as there are no contingently issuable shares of
stock whose issuance would have impacted net income. A reconciliation between
basic and diluted weighted average common shares outstanding follows:



                                       12
<PAGE>



<Table>
<Caption>
                                                                      For the three months ended
                                                                              December 31
                                                                      --------------------------
                                                                          2001          2000
                                                                         ------        ------

<S>                                                                      <C>           <C>
Weighted average common shares - basic                                   40,837        32,810
Effect of dilutive securities:
    Restricted stock                                                         67            92
    Stock options                                                            18             6
                                                                        -------       -------
Weighted average common shares - assuming
    dilution                                                             40,922        32,908
                                                                        =======       =======
</Table>

5.       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
included in Note 1 of notes to consolidated financial statements in our Annual
Report on Form 10-K for the year ended September 30, 2001. All intersegment
sales prices are market based. We evaluate performance based on net income or
loss of the respective operating units.

In accordance with Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information", we have
identified the Utility and Non-regulated segments. For an expanded description
of these segments, please refer to Note 1 of notes to consolidated financial
statements in our Annual Report on Form 10-K for the year ended September 30,
2001. We consider each business unit within our utility segment to be a
reporting unit of the utility segment and not a reportable segment. Our chief
executive officer makes decisions about allocating resources to the utility
segment as a whole and not to individual reporting units. The individual
operations that comprise the non-regulated segment are not currently material to
our consolidated financial position or results of operations and therefore do
not require separate reporting. Prior to April 1, 2001, we owned a 45 percent
interest in Woodward Marketing and accounted for that ownership using the equity
method of accounting for investments. Subsequent to April 1, 2001, we own 100
percent of Woodward Marketing and account for that ownership on a consolidated
basis.



                                       13
<PAGE>


Summarized financial information concerning our reportable segments for the
three months ended December 31, 2001 and 2000 are shown in the following table:

<Table>
<Caption>
                                                                                  Non-
                                                          Utility              Regulated           Total
                                                        -----------            ----------       -----------
                                                                              (In thousands)

<S>                                                     <C>                    <C>              <C>
As of and for the three months ended
December 31, 2001:
Operating revenues for reportable
    segments                                            $   265,156            $    7,635       $   272,791
Elimination of intersegment
    revenues                                                   (639)                 (810)           (1,449)
                                                        -----------            ----------       -----------
      Total operating revenues                              264,517                 6,825           271,342

Net income                                                   16,834                 3,799            20,633

Total assets                                              1,944,012               334,759         2,278,771

December 31, 2000:
Operating revenues for reportable
    segments                                            $   428,462            $   15,967       $   444,429
Elimination of intersegment
    revenues                                                   (753)                 (886)           (1,639)
                                                        -----------            ----------       -----------
      Total operating revenues                              427,709                15,081           442,790

Net income                                                   22,838                   134            22,972

Total assets                                              1,508,608               107,961         1,616,569
</Table>

A reconciliation of total assets for the reportable segments to total
consolidated assets for December 31, 2001 and 2000 is presented below:

<Table>
<Caption>
                                                                 December 31
                                                        -----------------------------
                                                           2001               2000
                                                        -----------       -----------
                                                                  (In thousands)

<S>                                                     <C>               <C>
Total assets for reportable segments                    $ 2,278,771       $ 1,616,569
Elimination of intercompany accounts                       (155,225)          (16,555)
                                                        -----------       -----------
    Total consolidated assets                           $ 2,123,546       $ 1,600,014
                                                        ===========       ===========
</Table>

6.       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 establishes 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



                                       14
<PAGE>

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.

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.

In June 2001, we purchased a three year weather insurance policy with an option
to cancel in the third year if we obtain weather protection in our rate
structures. 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 approximately $13.2 million which
was prepaid and will be 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. During the quarter ended December 31,
2001, we recognized $5.9 million in income and $1.9 million in amortization
expense relating to this insurance policy.

Utility Hedging Activities

We have historically hedged 20 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 anticipated flowing gas requirements through
storage and futures and fixed forward contracts. This should provide protection
to us and our customers against sharp increases in the price of natural gas
during the 2001-2002 heating season.

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 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.

Non-Regulated Hedging Activities

At December 31, 2001, we had 2,744 open contracts, representing 0.3 Bcf of
notional volumes with average contract maturities of less than two years. These
contracts were marked to market. The $4.3 million mark-to-market gain associated
with these positions was recorded as unrealized trading margin on the condensed
consolidated statement of income.

Effective April 1, 2001, natural gas sales from our natural gas trading
operations are netted against purchased gas costs and shown as gas trading
margin on the consolidated statements of income. For the three months ended
December 31, 2001, our gas trading



                                       15
<PAGE>

margin consisted of a $2.9 million realized trading gain and a $4.3 million
unrealized trading gain.

We acquired a 45 percent interest in Woodward Marketing, L.L.C. in 1997 as a
result of the merger of Atmos and United Cities Gas Company, which had acquired
that interest in 1995. In April 2001, we acquired the 55 percent interest that
we did not own from J.D. 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-regulated
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 Woodward Marketing, including the activities of 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 Southwestern and Midwestern United States.
This business involves the sale of natural gas by Woodward 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 December
31, 2001, Woodward Marketing had a total of 78 municipal and local gas utility
customers and 296 industrial customers. Woodward 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, Woodward Marketing
supplies us with a portion of our natural gas requirements on a competitive bid
basis.

In the management of natural gas requirements for municipal and other local
utilities, Woodward Marketing sells physical natural gas for future delivery and
hedges 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 at the daily
close of business. Woodward Marketing links gas futures to physical delivery of
natural gas and balances its futures positions at the end of each trading day.
Over-the-counter swap agreements require Woodward 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. Woodward 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. Options held to hedge price risk provide the right, but not the
requirement, to buy or sell energy commodities at a fixed price. Woodward
Marketing uses options to manage margins and to limit overall price risk
exposure.

Energy related services provided by Woodward 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, Woodward Marketing generates income from its utility,
municipal and industrial customers through negotiated



                                       16
<PAGE>

prices based on the volume of gas supplied to the customer. Woodward 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.

Woodward Marketing also engages in limited speculative natural gas trading for
its own account, subject to a risk management policy established by us which
limits the level of trading loss in any fiscal year to a maximum of 25 percent
of the budgeted annual operating income of Woodward Marketing. 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 2.5 Bcf of natural gas. At December 31,
2001, Woodward Marketing's open positions in its trading operations totaled 0.3
Bcf. In its speculative trading, Woodward 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. Woodward Marketing had an
unrealized trading gain of $4.3 million for the quarter ended December 31, 2001,
but there can be no assurance that Woodward Marketing will have any speculative
trading gain in the future. In some prior years, Woodward Marketing experienced
losses in its speculative trading business. The financial exposure that results
from the daily fluctuations of gas prices and the potential for daily price
movements constitutes a risk of loss since the price of natural gas purchased
for future delivery at the beginning of the day may not be hedged until later in
the day.

Financial instruments, which subject Woodward 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.

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



                                       17
<PAGE>

INDEPENDENT ACCOUNTANTS' REVIEW REPORT


The Board of Directors
Atmos Energy Corporation

We have reviewed the accompanying condensed consolidated balance sheet of Atmos
Energy Corporation as of December 31, 2001 and the related condensed
consolidated statements of income and cash flows for the three-month periods
ended December 31, 2001 and 2000. These financial statements are the
responsibility of the Company's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with accounting principles generally
accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the Untied States, the consolidated balance sheet of Atmos Energy
Corporation as of September 30, 2001, and the related consolidated statements of
income, shareholders' equity and cash flows for the year then ended (not
presented herein) and in our report dated November 2, 2001, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of September 30, 2001 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.


                                                              ERNST & YOUNG LLP


Dallas, Texas
February 6, 2002



                                       18
<PAGE>



Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

Introduction

The following discussion should be read in conjunction with the condensed
consolidated financial statements contained in this Quarterly Report on Form
10-Q and Management's Discussion and Analysis contained in our Annual Report on
Form 10-K for the year ended September 30, 2001.

We distribute and sell natural gas to approximately 1.4 million residential,
commercial, industrial, agricultural and other customers. We operate through
five divisions in service areas located in Colorado, Georgia, Illinois, Iowa,
Kansas, Kentucky, Louisiana, Missouri, Tennessee, Texas and Virginia. Such
business is subject to regulation by state and/or local authorities in each of
the states in which we operate. In addition, our business is affected by
seasonal weather patterns, competitive factors within the energy industry and
economic conditions in the areas that we serve. We also transport natural gas
for others through our distribution system.

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 a municipality
regulated by the Tennessee Valley Authority. In addition, we market natural gas
to industrial and agricultural customers primarily in West Texas and to
industrial customers in Louisiana.

Cautionary Statement for the Purposes of the Safe Harbor under the Private
Securities Litigation Reform Act of 1995

The statements contained in this Quarterly Report on Form 10-Q 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 or drier than normal weather in the
Company's service territories; national, regional and



                                       19
<PAGE>

local economic conditions; competition from other energy suppliers and
alternative forms of energy; recent national events, including the impact of any
future terrorist attacks; regulatory and business trends and decisions,
including the impact of pending rate and related proceedings before various
state regulatory commissions; successful completion, financing and integration
of acquisitions; inflation and the volatility of 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. A discussion of these risks and uncertainties
may be found in the Company's Form 10-K for the year ended September 30, 2001.
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.

Weather and Seasonality

Our natural gas 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 affected by rainfall amounts and the price of natural gas.
Weather, adjusted for service areas with weather normalized operations, for the
three months ended December 31, 2001 was 11% warmer than normal and 29% warmer
than weather in the corresponding period of the prior year.

The effects of weather that is above or below normal are partially offset in the
Tennessee and Georgia jurisdictions served by the United Cities Gas Division and
in the Kentucky jurisdiction served by the Western Kentucky Gas 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 United Cities Gas
Division and Western Kentucky Gas 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 revenues of approximately $2.8 million for the
three months ended December 31, 2001, as compared with a decrease of
approximately $1.4 million for the three months ended December 31, 2000.
Approximately 377,000 or 27 percent of our meters in service are located in
Georgia,



                                       20
<PAGE>

Tennessee and Kentucky. We did not have weather normalization adjustments in our
other service areas during the three months ended December 31, 2001.

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. 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 if we obtain weather protection in our rate
structures. 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 approximately $13.2 million which
was prepaid and will be 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. During the quarter ended December 31,
2001, we recognized $5.9 million in income and $1.9 million in amortization
expense relating to this insurance policy.

We have historically hedged 20 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 anticipated flowing gas requirements through
storage and futures and fixed forward contracts. This should provide protection
to us and our customers against sharp increases in the price of natural gas
during the 2001-2002 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 assume outstanding debt of Mississippi Valley Gas, net of
working capital, of approximately $45.0 million. Mississippi Valley Gas provides
natural gas distribution service to more than 261,500 residential, commercial,
industrial and other customers located primarily in the northern and central
regions of Mississippi. The acquisition is subject to state and federal
regulatory approval. It is anticipated that the acquisition will be completed in
fiscal 2002.



                                       21
<PAGE>


FINANCIAL CONDITION

For the three months ended December 31, 2001, net cash provided by operating
activities totaled $56.6 million compared with net cash used by operating
activities of $14.6 million for the three months ended December 31, 2000. The
increase in net cash provided by operating activities from net cash used by
operating activities was primarily the result of a smaller increase in accounts
receivable, a decrease in cash held on deposit in margin accounts and a decrease
in deferred gas costs partially offset by an increase in gas stored underground
and decreases in net income, accounts payable and taxes payable. In addition, an
increase in depreciation and amortization and deferred income taxes added to the
increase in net cash provided by operating activities. These increases were
offset by the reduction in the net change in our assets/liabilities from risk
management activities. The decrease in net income was due primarily to higher
operating expenses and interest expense. These higher expenses were partially
offset by an increase in gas trading margin and miscellaneous income (expense).

For the three months ended December 31, 2001, net cash used in investing
activities totaled $43.6 million compared with $13.0 million for the three
months ended December 31, 2000. Major cash flows used in investing activities
for the three months ended December 31, 2001 included capital expenditures of
$28.0 million compared with $19.5 million for the three months ended December
31, 2000. The capital expenditures budget for fiscal 2002, excluding
acquisitions, is expected to be in the range of $121.0 million to $125.0 million
as compared with actual capital expenditures of $113.1 million for fiscal 2001.
Budgeted capital projects for fiscal 2002 include expenditures for additional
mains, services, meters and equipment. In fiscal 2002, we plan to complete the
Mississippi Valley Gas Company acquisition for $75.0 million cash, $75.0 million
of Atmos common stock and the assumption of approximately $45.0 million of
long-term debt. Capital expenditures and acquisitions for fiscal 2002 are
planned to be financed from internally generated funds and financing activities
as discussed below. For the three months ended December 31, 2001, investing
activities included $15.7 million for the acquisition of Kentucky-based market
area storage and associated pipeline facility assets and the gas marketing
assets of Innovative Gas Services, Inc. and common stock of Southern Resources,
Inc. For the three months ended December 31, 2000, we received net proceeds of
$6.6 million in connection with the sale of certain utility assets.

For the three months ended December 31, 2001, net cash used by financing
activities totaled $15.4 million compared with net cash provided by financing
activities of $25.8 million for the three months ended December 31, 2000. For
the three-month period ended December 31, 2001, short-term debt increased $5.9
million compared with a decrease of $102.4 million for the three months ended
December 31, 2000. The decrease for the three months ended December 31, 2000 was
due to the net proceeds of approximately $142.0 million from the equity offering
in December 2000 being used to reduce the amount of short-term debt outstanding.
Repayments of long-term debt totaled $13.6 million for the three months ended
December 31, 2001 compared with $7.9 million for the three months ended December
31, 2000. We paid $12.1 million in cash dividends during the three months ended
December 31, 2001 compared with dividends of $9.3



                                       22
<PAGE>

million during the three months ended December 31, 2000. This reflects increases
in the quarterly dividend rate and in the number of shares outstanding. During
the three months ended December 31, 2001, we issued 235,971 shares of common
stock.

The following table presents the number of shares issued for the three-month
periods ended December 31, 2001 and 2000:

<Table>
<Caption>
                                                           Three months ended
                                                               December 31
                                                         -----------------------
                                                          2001           2000
                                                        ---------      ---------

<S>                                                     <C>           <C>
Shares issued:
    Employee Stock Ownership Plan                          69,961         48,738
    Direct Stock Purchase Plan                            133,402        105,010
    Outside Directors Stock-for-Fee Plan                      577            605
    Long-Term Incentive Plan                               32,031           --
    Equity Offering                                          --        6,741,500
                                                        ---------     ----------
      Total shares issued                                 235,971      6,895,853
                                                        =========     ==========
</Table>

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 the remainder of fiscal 2002.

We have short-term committed credit facilities totaling $318.0 million. One
short-term unsecured credit facility is for $300.0 million with an option to
increase the amount by $100.0 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 and P-2 by Moody's. At December 31, 2001, $189.1 million of
commercial paper was outstanding. We have a second facility in place for $18.0
million. At December 31, 2001, $18.0 million was outstanding under this credit
facility. These credit facilities are negotiated at least annually and are used
for working capital purposes.

Our Woodward Marketing subsidiary has an uncommitted demand credit facility for
$125.0 million which is used for its non-regulated business. Atmos Energy
Marketing, LLC, our wholly-owned subsidiary, is the sole guarantor of all
amounts outstanding under this facility. At December 31, 2001, no amount was
outstanding under this credit facility. Related letters of credit totaling $48.6
million reduced the amount available under this facility. This facility is used
for working capital purposes.

We also have unsecured short-term uncommitted credit lines from two banks
totaling $40.0 million. No amounts were outstanding under these credit
facilities at December 31, 2001. The uncommitted lines are renewed or
renegotiated at least annually with varying terms and we pay no fee for the
availability of the lines. Borrowings under these lines are made on a when- and
as-available basis at the discretion of the banks. These facilities are also
used for working capital purposes.



                                       23
<PAGE>


In addition, Woodward Marketing has up to $100.0 million of credit available
from Atmos for its non-regulated business. At December 31, 2001, $91.8 million
was outstanding. This intercompany facility is subordinated in terms of
repayment to the $125.0 million uncommitted demand credit facility described
above.

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 are also in the
process of filing applications for approval to issue securities with five state
utility commissions. Obtaining all the required state regulatory approvals is
expected to take from three to six months. The registration statement was
declared effective by the Securities and Exchange Commission on January 30,
2002. Once it is approved by the various state utility commissions, we will be
authorized to "take securities off the shelf" and issue them to investors and
lenders. The proceeds are planned to be used for general corporate purposes,
including acquisitions, debt repayment and other business-related matters. The
shelf registration statement will provide us with greater flexibility in our
financing options.

The following tables provide information about contractual obligations and
commercial commitments at December 31, 2001.

<Table>
<Caption>
                                                             Payments Due by Period
                                         ---------------------------------------------------------------------
                                                        Less than                                     After 5
                                           Total          1 year       1-3 years      4-5 years        years
                                         ---------      ---------      ---------      ---------      ---------
                                                               (In thousands)

<S>                                      <C>            <C>            <C>            <C>            <C>
CONTRACTUAL OBLIGATIONS

Long Term Debt                           $ 699,470      $  20,413      $  36,774      $  27,424      $ 614,859
Capital Lease Obligations                    6,630            876          1,752          1,276          2,726
Operating Leases                            66,467          9,250         16,713         15,624         24,880
                                         ---------      ---------      ---------      ---------      ---------
Total Contractual
    Obligations                          $ 772,567      $  30,539      $  55,239      $  44,324      $ 642,465
                                         =========      =========      =========      =========      =========
</Table>

<Table>
<Caption>
                                                             Payments Due by Period
                                         ---------------------------------------------------------------------
                                                        Less than                                     After 5
                                           Total          1 year       1-3 years      4-5 years        years
                                         ---------      ---------      ---------      ---------      ---------
                                                               (In thousands)

<S>                                      <C>            <C>            <C>            <C>            <C>
OTHER COMMERCIAL
    COMMITMENTS

Lines of Credit                          $ 318,000      $ 318,000      $    --        $    --        $    --
</Table>

One short-term unsecured credit facility for $300.0 million included in the
total lines of credit above serves as a backup liquidity facility for our
commercial paper program. Any amounts outstanding on our commercial paper reduce
the amount available under this facility.



                                       24
<PAGE>


Risk Management and Trading Activities

We conduct our risk management activities through both our utility and
non-regulated segments. The following table shows our risk management assets and
liabilities by segment at December 31, 2001.

<Table>
<Caption>
                                                    Utility      Non-Regulated       Total
                                                   ---------     -------------     ---------
                                                                (In thousands)

<S>                                                <C>             <C>             <C>
Assets from risk management
    activities, current                            $    --         $  69,601       $  69,601

Assets from risk management
    activities, noncurrent                              --            30,374          30,374
Liabilities from risk management
    activities, current                              (25,314)        (56,244)        (81,558)
Liabilities from risk management
    activities, noncurrent                              --            (9,521)         (9,521)
                                                   ---------       ---------       ---------
Net assets (liabilities)                           $ (25,314)      $  34,210       $   8,896
                                                   =========       =========       =========
</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 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.

To conduct our risk management and trading activities, our non-regulated segment
uses natural gas storage, transportation and requirements contracts, forwards,
over-the-counter and exchange-traded options, futures and swap contracts.

The mark-to-market method is used to account for these activities, as prescribed
in EITF Issue No. 98-10 and EITF Issue 00-17. Under these methods, 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 management activities" on the condensed consolidated balance sheet.
Current period changes in the assets and liabilities from risk management
activities are recognized as net gains or losses on the condensed 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.


                                       25
<PAGE>

The following table reflects the reasons for the change in fair value of our
non-regulated energy trading contract activities for the quarter ending December
31, 2001 (in thousands).

<Table>
<S>                                                                 <C>
      Fair value of contracts at September 30, 2001                 $ 28,349
          Contracts realized/settled                                  10,568
          Fair value of new contracts                                  3,623
          Changes in fair value in valuation
            techniques/assumptions                                        --
          Other changes in value                                      (8,330)
                                                                    --------
      Fair value of contracts at December 31, 2001                  $ 34,210
                                                                    ========
</Table>

The fair value of our non-regulated energy trading contracts for the quarter
ending December 31, 2001, is segregated below, by time period and fair value
source.

<Table>
<Caption>
                                                 Fair Value of Contracts at December 31, 2001
                                     ----------------------------------------------------------------------
                                       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                $ (40,066)      $ (3,405)       $    --      $    --       $ (43,471)
Prices provided by
    other external sources               67,977          5,738            655          167          74,537
Prices based on models
    and other valuation
    methods                              (3,957)         6,995            106           --           3,144
                                      ---------       --------        -------      -------       ---------
Total Fair Value                      $  23,954       $  9,328        $   761      $   167       $  34,210
                                      =========       ========        =======      =======       =========
</Table>



                                       26
<PAGE>
RESULTS OF OPERATIONS

Three Months Ended December 31, 2001, Compared with Three Months Ended December
31, 2000

Operating revenues decreased by 39 percent to $271.3 million for the three
months ended December 31, 2001 from $442.8 million for the three months ended
December 31, 2000. The most significant factors contributing to the decrease in
operating revenues were a 23 percent decrease in average sales price due to the
decreased cost of gas and a 22 percent decrease in sales volumes due to warmer
weather. During the quarter ended December 2001, temperatures were 29 percent
warmer than in the corresponding quarter of the prior year and were 11 percent
warmer than the 30-year normal for the quarter, adjusted for service areas with
weather normalized operations. The total volume of gas sold for the three months
ended December 31, 2001 was 41.0 billion cubic feet compared with 52.5 billion
cubic feet for the three months ended December 31, 2000. However, the decrease
in sales volumes was partially offset by the additional sales volumes related to
the Louisiana Gas Service operations acquired in July 2001. The average sales
price per Mcf sold decreased $1.89 or 23 percent to $6.33 primarily due to a
decrease in the average cost of gas. The average cost of gas per Mcf sold
decreased 37 percent to $3.95 for the three months ended December 31, 2001 from
$6.29 for the three months ended December 31, 2000. However, the decrease in
operating revenues was partially offset by increased revenues from the Louisiana
Gas Service acquisition in July 2001 as well as the impact of rate increases in
Colorado and West Texas.

Gross profit decreased slightly to $109.4 million for the three months ended
December 31, 2001 from $109.9 million for the three months ended December 31,
2000. The decrease in gross profit was due to the decrease in volumes sold to
weather sensitive customers mostly offset by the additional gross profit from
the Louisiana Gas Service acquisition in July 2001 and the impact of rate
increases discussed previously. Changes



                                       27
<PAGE>

in the cost of gas do not directly affect gross profit because the fluctuations
in gas prices are passed through to the customer.

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. For the three months ended December 31, 2001, Woodward Marketing had
income of $7.2 million in gas trading margin.

Operating expenses increased to $73.1 million for the three months ended
December 31, 2001 from $61.0 million for the three months ended December 31,
2000. Operation and maintenance expense increased due primarily to the addition
of $9.2 million relating to the Louisiana Gas Service acquisition in July 2001
and an increase of $3.2 million in pension costs. A decrease in the provision
for doubtful accounts of $7.1 million partially offset this increase.
Depreciation and amortization increased $4.7 million due to the addition of the
assets from the Louisiana Gas Service acquisition in July 2001.

Operating income decreased 11 percent for the three months ended December 31,
2001 to $43.4 million from $48.9 million for the three months ended December 31,
2000. The decrease in operating income resulted primarily from the increase in
operating expenses described above partially offset by income from our gas
trading margin.

Miscellaneous income (expense) increased $7.8 million to $5.4 million for the
three months ended December 31, 2001 compared to $(2.4) million for the three
months ended December 31, 2000. This increase was due to income of $5.9 million
recognized related to our weather insurance policy and an increase of $1.6
million in net recoveries related to our performance based-ratemaking
mechanisms.

Interest expense increased $3.7 million, or 31 percent, for the three months
ended December 31, 2001 compared with the three months ended December 31, 2000
due primarily to the interest expense on the $350.0 million debt offering in May
2001.

Net income decreased for the three months ended December 31, 2001 by $2.4
million to $20.6 million from $23.0 million for the three months ended December
31, 2000. This decrease in net income resulted primarily from the decrease in
operating income discussed above and the increase in interest expense partially
offset by an increase in miscellaneous income.

UTILITY AND NON-REGULATED OPERATING DATA

Our utility business is composed of our five regulated utility divisions: Atmos
Energy Louisiana Gas Division, Energas Division, Greeley Gas Division, United
Cities Gas Division, Western Kentucky Gas Division and Shared Services. The
non-regulated business includes gas marketing and energy management services,
operation of natural gas storage fields, construction and operation of
electrical power generating plants and associated facilities and non-regulated
industrial sales. The following table of operating statistics summarizes data of
the utility and non-regulated segments for the three-month periods ended
December 31, 2001 and 2000. For further information regarding operating results
of the segments, see Note 5 of notes to condensed consolidated financial
statements.



                                       28
<PAGE>


                            ATMOS ENERGY CORPORATION
                        CONSOLIDATED OPERATING STATISTICS



<Table>
<Caption>
                                                       Three months ended
                                                           December 31
                                                   -----------------------------
                                                      2001               2000
                                                   -----------       -----------

<S>                                                <C>               <C>
METERS IN SERVICE, end of period
    Residential                                      1,249,414           977,410
    Commercial                                         123,286           105,375
    Public authority and other                           7,359             7,428
    Industrial (including agricultural)                 13,152            14,277
                                                   -----------       -----------
      Total meters                                   1,393,211         1,104,490
                                                   ===========       ===========
HEATING DEGREE DAYS
    Actual (weighted average)                            1,215             1,713
    Percent of normal                                       89%              126%

SALES VOLUMES - MMcf (1)
    Residential                                         22,832            28,813
    Commercial                                          11,018            13,266
    Public authority and other                           1,999             2,883
    Industrial (including agricultural)                  5,108             7,585
                                                   -----------       -----------
      Total                                             40,957            52,547
Transportation volumes - MMcf (1)                       16,068            15,498
                                                   -----------       -----------
Total throughput - MMcf (1)                             57,025            68,045
                                                   ===========       ===========
OPERATING REVENUES (000's)
Gas sales revenues
    Residential                                    $   157,928       $   249,834
    Commercial                                          68,596           110,628
    Public authority and other                          11,154            22,080
    Industrial (including agricultural)                 21,621            49,320
                                                   -----------       -----------
      Total gas sales revenues                         259,299           431,862
Transportation revenues                                  8,799             6,738
Other revenues                                           3,244             4,190
                                                   -----------       -----------
Total operating revenues                           $   271,342       $   442,790
                                                   ===========       ===========
Cost of gas                                        $   161,977       $   330,820
                                                   ===========       ===========

Average gas sales revenues per Mcf                 $      6.33       $      8.22
Average transportation revenue per Mcf             $       .55       $       .43
Average cost of gas per Mcf sold                   $      3.95       $      6.29
</Table>

(1)      Volumes are reported as metered in million cubic feet (MMcf).



                                       29
<PAGE>

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes from the information provided in Item 7A of
our Annual Report on Form 10-K for the year ended September 30, 2001.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

See Note 2 of notes to condensed consolidated financial statements herein for a
description of legal proceedings.

Item 5.  Other Information

On February 13, 2002, the Company and EquiServe Trust Company, N.A. as Rights
Agent executed the Second Amendment to the Rights Agreement, dated as of
November 12, 1997, between the Company and the Rights Agent. The purpose of this
amendment was to convert the Agreement from a full common share rights plan to a
fractional common share rights plan.

The amended Agreement provides that, under certain circumstances, each right
entitles the registered holder to purchase from the Company one-tenth of one
share of common stock at a purchase price of $8.00 per one-tenth of a share,
subject to adjustment. Under the Agreement before it was amended, under these
circumstances each right entitled the holder to purchase one share of common
stock at a purchase price of $80 per share, subject to adjustment. The amendment
to the Agreement does not impact the dilutive effect of the Rights Agreement.
For example, the Agreement still provides that upon the occurrence of certain
events, a holder would be entitled to purchase $160 worth of common stock for a
purchase price of $80.

This description of the Second Amendment to Rights Agreement is qualified in its
entirety by reference to the Second Amendment, a copy of which is attached
hereto as Exhibit 4.

Item 6.  Exhibits and Reports on Form 8-K

         (a) Exhibits

         A list of exhibits required by Item 601 of Regulation S-K and filed as
         part of this report is set forth in the Exhibits Index, which
         immediately precedes such exhibits.

         (b) Reports on Form 8-K

         None.



                                       30
<PAGE>

                                   SIGNATURES

Pursuant to the requirements 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)



Date:  February 14, 2002                By: /s/ F.E. MEISENHEIMER
                                            ---------------------
                                                  F.E. Meisenheimer
                                            Vice President and Controller
                                              (Chief Accounting Officer
                                            and duly authorized signatory)



                                       31
<PAGE>

                                 EXHIBITS INDEX
                                    Item 6(a)


<Table>
<Caption>
 Exhibit
 Number                           Description
 -------                          -----------

<S>           <C>
  4           Second Amendment to Rights Agreement dated as of February 13, 2002, between
              the Company and EquiServe Trust Company, N.A., as Rights Agent

  10.1(a)     Seventh Amendment to Credit Agreement, effective as of September
              30, 2001, among Woodward Marketing, L.L.C., Bank of America, N.A.,
              BNP Paribas and Atmos Energy Marketing, LLC

  10.1(b)     Eighth Amendment to Credit Agreement, effective as of October 31,
              2001, among Woodward Marketing, L.L.C., Bank of America, N.A., BNP
              Paribas and Atmos Energy Marketing, LLC

  10.2(a)     Credit Agreement, dated to be effective as of December 1, 2001,
              among Woodward Marketing, L.L.C., Fortis Capital Corp. and BNP
              Paribas

  10.2(b)     Guaranty, effective as of December 1, 2001, by Atmos Energy
              Marketing, LLC, in favor of Fortis Capital Corp.

  10.2(c)     First Amendment to Guaranty, effective as of January 31, 2002,
              among Atmos Energy Marketing, LLC and Fortis Capital Corp.

  12          Computation of ratio of earnings to fixed charges

  15          Letter regarding unaudited interim financial information
</Table>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>3
<FILENAME>d94293ex4.txt
<DESCRIPTION>2ND AMENDMENT TO RIGHTS AGREEMENT
<TEXT>
<PAGE>
                                                                       EXHIBIT 4

                      SECOND AMENDMENT TO RIGHTS AGREEMENT

                  This Second Amendment to Rights Agreement (this "Second
Amendment") is entered into by and among Atmos Energy Corporation, a Texas and
Virginia corporation (the "Company"), and EquiServe Trust Company, N.A., a
national association with its principal place of business in Massachusetts and
the successor to the stock transfer business of Fleet National Bank (formerly
known as BankBoston, N.A) (the "Rights Agent"), on this 13th day of February
2002, at the direction of the Company.

                  WHEREAS, the Company and the Rights Agent have entered into
that certain Rights Agreement, dated November 12, 1997 (the "Rights Agreement");
and

                  WHEREAS, the Company and the Rights Agent have entered into
that that certain First Amendment, dated as of August 11, 1999, to the Rights
Agreement; and

                  WHEREAS, on February 12, 2002, the Board of Directors of the
Company determined to amend the Rights Agreement and directed the Rights Agent
to enter into this Second Amendment.

                  NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto do hereby agree as
follows:

                  1.       The Rights Agreement is hereby amended as follows:

                           (a) All references in the Rights Agreement to
         BankBoston, N.A. shall hereafter be deemed to be references to its
         successor with respect to this Rights Agreement, EquiServe Trust
         Company, N.A.

                           (b) The recital of the Rights Agreement is hereby
         amended to read in its entirety as follows:

                                    "WHEREAS, on November 12, 1997 (the "Rights
                  Dividend Declaration Date"), the Board of Directors of the
                  Company authorized and declared a dividend distribution of one
                  Right (as hereinafter defined) for each share of common stock,
                  no par value, of the Company (the "Common Stock") outstanding
                  at the close of business on May 10, 1998 (the "Record Date"),
                  and has authorized the issuance of one Right (as such number
                  may hereinafter be adjusted pursuant to the provisions of
                  Section 11(p) hereof)



<PAGE>

                  for each share of Common Stock of the Company issued between
                  the Record Date (whether originally issued or delivered from
                  the Company's treasury) and the Distribution Date (as
                  hereinafter defined), each Right initially representing the
                  right to purchase one share of Common Stock, upon the terms
                  and subject to the conditions hereinafter set forth (the
                  "Rights");

                                    WHEREAS, on August 11, 1999 the Company and
                  the Rights Agent entered into that certain First Amendment to
                  this Agreement; and

                                    WHEREAS, the Board of Directors of the
                  Company has authorized the Company to enter into that certain
                  Second Amendment to the Rights Agreement, which amendment
                  shall provide that each Right shall hereafter represent the
                  right to purchase one-tenth of one share of Common Stock, upon
                  the terms and subject to the conditions hereinafter set forth,
                  and such other amendments as are provided for in that certain
                  Second Amendment."

                           (c) Section 1(b.1) of the Rights Agreement is hereby
         amended to read in its entirety as follows:


                               "(b.1) "Adjusted Exercise Price" shall have the
                  meaning set forth in Section 11(a)(ii) hereof."

                           (d) The second sentence of Section 4(a) of the Rights
         Agreement is hereby amended to read in its entirety as follows:

                               "Subject to the provisions of Section 11 and
                  Section 22 hereof, the Rights Certificates, whenever
                  distributed, shall be dated as of the Record Date and on their
                  face shall entitle the holders thereof to purchase such number
                  of one-tenths of a share of Common Stock as shall be set forth
                  therein at the price set forth therein (such exercise price
                  per one-tenth of a share, the "Purchase Price"), but the
                  amount and type of securities purchasable upon the exercise of
                  each Right and the Purchase Price thereof shall be subject to
                  adjustment as provided herein."

                           (e) Section 7(a) of the Rights Agreement is hereby
         amended to read in its entirety as follows:

                               "(a) Subject to Section 7(e) hereof, at any time
                  after the Distribution Date, the registered holder of any
                  Rights Certificate may




                                       2
<PAGE>

                  exercise the Rights evidenced thereby (except as otherwise
                  provided herein including, without limitation, the
                  restrictions on exercisability set forth in Section 9(c),
                  Section 11(a)(iii) and Section 23(a) hereof) in whole or in
                  part upon surrender of the Rights Certificate, with the form
                  of election to purchase and the certificate on the reverse
                  side thereof duly executed, to the Rights Agent at the
                  principal office or offices of the Rights Agent designated for
                  such purpose, together with payment of the aggregate Purchase
                  Price with respect to the total number of one-tenths of a
                  share of Common Stock (or other securities, cash or other
                  assets, as the case may be) as to which such surrendered
                  Rights are then exercisable, at or prior to the earlier of (i)
                  5:00 P.M., Boston, Massachusetts time, on May 10, 2008 or such
                  later date as may be established by the Board of Directors
                  prior to the expiration of the Rights (such date, as it may be
                  extended by the Board, the "Final Expiration Date"), or (ii)
                  the time at which the Rights are redeemed as provided in
                  Section 23 hereof (the earlier of (i) and (ii) being herein
                  referred to as the "Expiration Date")."

                           (f) Section 7(b) of the Rights Agreement is hereby
         amended to read in its entirety as follows:

                               "(b) The Purchase Price for each one-tenth of a
                  share of Common Stock pursuant to the exercise of a Right
                  shall initially be $8.00 (or the equivalent of $80 per share
                  of Common Stock), and shall be subject to adjustment from time
                  to time as provided in Section 11 and Section 13(a) hereof and
                  shall be payable in accordance with paragraph (c) below."

                           (g) The first two sentences of Section 7(c) of the
         Rights Agreement are hereby amended to read in their entirety as
         follows:

                               "(c) Upon receipt of a Rights Certificate
                  representing exercisable Rights, with the form of election to
                  purchase and the certificate duly executed, accompanied by
                  payment, with respect to each Right so exercised, of the
                  Purchase Price (or, after the occurrence of a Section
                  11(a)(ii) Event or a Section 13 Event, the Adjusted Exercise
                  Price) for the number of one-tenths of a share of Common Stock
                  (or other shares, securities, cash or other assets, as the
                  case may be) to be purchased as set forth below and an amount
                  equal to any applicable transfer tax, the Rights Agent shall,
                  subject to Section 20(k) hereof, thereupon promptly (i) (A)
                  requisition from any transfer agent of the shares of Common
                  Stock (or make available, if the Rights Agent is the transfer
                  agent for such shares) certificates for the total number of
                  shares of Common Stock to be purchased and the Company hereby
                  irrevocably authorizes its transfer agent to comply with all
                  such requests, or (B) if the Company shall have




                                       3
<PAGE>

                  elected to deposit the total number of shares of Common Stock
                  issuable upon exercise of the Rights hereunder with a
                  depositary agent, requisition from the depositary agent
                  depositary receipts representing such number of shares of
                  Common Stock as are to be purchased (in which case
                  certificates for the shares of Common Stock represented by
                  such receipts shall be deposited by the transfer agent with
                  the depositary agent) and the Company will direct the
                  depositary agent to comply with such request, (ii) requisition
                  from the Company the amount of cash, if any, to be paid in
                  lieu of fractional shares in accordance with Section 14
                  hereof, (iii) after receipt of such certificates or depositary
                  receipts, cause the same to be delivered to or upon the order
                  of the registered holder of such Rights Certificate,
                  registered in such name or names as may be designated by such
                  holder, and (iv) after receipt thereof, deliver such cash, if
                  any, to or upon the order of the registered holder of such
                  Rights Certificate. The payment of the Purchase Price or the
                  Adjusted Exercise Price (as such amounts may be reduced
                  pursuant to Section 11(a)(iii) hereof) shall be made in cash
                  or by certified bank check or bank draft payable to the order
                  of the Company. "

                           (h) Section 9(a) of the Rights Agreement is hereby
         amended to read in its entirety as follows:

                               "(a) The Company covenants and agrees that it
                  will cause to be reserved and kept available out of its
                  authorized and unissued shares of Common Stock and/or other
                  securities or out of its authorized and issued shares held in
                  its treasury, the number of shares of Common Stock and/or
                  other securities that, as provided in this Agreement, will be
                  sufficient to permit the exercise in full of all outstanding
                  Rights after the Distribution Date but prior to a Section
                  11(a)(ii) Event."

                           (i) Section 9(d) of the Rights Agreement is hereby
         amended to read in its entirety as follows:

                               "(d) The Company covenants and agrees that
                  it will take all such action as may be necessary to ensure
                  that all shares of Common Stock and/or other securities
                  delivered upon exercise of Rights shall, at the time of
                  delivery of the certificates for such shares (subject to
                  payment of the Purchase Price for each one-tenth of a share of
                  Common Stock to be purchased or, after a Section 11(a)(ii)
                  Event, the Adjusted Exercise Price), be duly and validly
                  authorized and issued and fully paid and nonassessable."

                           (j) The first sentence of Section 10 of the Rights
         Agreement is hereby amended to read in its entirety as follows:



                                       4
<PAGE>
                               "Each person in whose name any certificate for
                  shares of Common Stock and/or other securities, as the case
                  may be, is issued upon the exercise of Rights shall for all
                  purposes be deemed to have become the holder of record of such
                  shares of Common Stock and/or other securities, as the case
                  may be, represented thereby on, and such certificate shall be
                  dated, the date upon which the Rights Certificate evidencing
                  such Rights was duly surrendered and payment of the Purchase
                  Price or, if applicable, the Adjusted Exercise Price (and all
                  applicable transfer taxes) was made; provided, however, that
                  if the date of such surrender and payment is a date upon which
                  the Common Stock (or other securities, as the case may be)
                  transfer books of the Company are closed, such Person shall be
                  deemed to have become the record holder of such shares
                  (fractional or otherwise) on, and such certificate shall be
                  dated, the next succeeding Business Day on which the Common
                  Stock (or other securities, as the case may be) transfer books
                  of the Company are open."

                           (k) The first sentence of Section 11(a)(i) of the
         Rights Agreement is hereby amended to read in its entirety as follows:

                               "(a)(i) In the event the Company shall at any
                  time after the date of this Agreement (A) declare a dividend
                  on the Common Stock payable in shares of Common Stock, (B)
                  subdivide the outstanding Common Stock, (C) combine the
                  outstanding Common Stock into a smaller number of shares, or
                  (D) issue any shares of its capital stock in a
                  reclassification of the Common Stock (including any such
                  reclassification in connection with a consolidation or merger
                  in which the Company is the continuing or surviving
                  corporation), except as otherwise provided in this Section
                  11(a) and Section 7(e) hereof, the Purchase Price in effect at
                  the time of the record date for such dividend or of the
                  effective date of such subdivision, combination or
                  reclassification, and the number and kind of shares of Common
                  Stock or capital stock, as the case may be, issuable on such
                  date, shall be proportionately adjusted so that the holder of
                  any Right exercised after such time shall be entitled to
                  receive, upon payment of the Purchase Price or, if applicable,
                  the Adjusted Exercise Price, then in effect, the aggregate
                  number and kind of shares of Common Stock, or capital stock,
                  as the case may be, which, if such Right had been exercised
                  immediately prior to such date and at a time when the Common
                  Stock transfer books of the Company were open, such holder
                  would have owned upon such exercise and been entitled to
                  receive by virtue of such dividend, subdivision, combination
                  or reclassification; provided, however, that if the record
                  date for any such dividend, subdivision, combination or
                  reclassification shall occur prior to the Distribution Date,
                  the Company shall make an appropriate adjustment to the
                  Purchase Price (taking into




                                       5
<PAGE>

                  account any additional Rights which may be issued as a result
                  of such dividend, subdivision, combination or
                  reclassification), in lieu of adjusting (as described above)
                  the number of shares of Common Stock (or other capital shares,
                  as the case may be) issuable upon exercise of the Rights."

                           (l) Section 11(a)(ii) of the Rights Agreement is
         hereby amended to read in its entirety as follows:

                               "(ii) In the event (A) any Person (other than the
                  Company, any Subsidiary of the Company, any employee benefit
                  plan of the Company or of any Subsidiary of the Company, or
                  any Person or entity organized, appointed or established by
                  the Company for or pursuant to the terms of any such plan),
                  alone or together with its Affiliates and Associates, shall,
                  at any time after the Rights Dividend Declaration Date, become
                  an Acquiring Person, unless the event causing the 15%
                  threshold to be crossed is a transaction set forth in Section
                  13(a) hereof, or is an acquisition of shares of Common Stock
                  pursuant to a tender offer or an exchange offer for all
                  outstanding shares of Common Stock at a price and on terms
                  determined by at least a majority of the members of the Board
                  of Directors who are not officers of the Company and who are
                  not representatives, nominees, Affiliates or Associates of an
                  Acquiring Person, after receiving advice from one or more
                  investment banking firms, to be (i) at a price which is fair
                  to shareholders (taking into account all factors which such
                  members of the Board deem relevant, including, without
                  limitation, prices which could reasonably be achieved if the
                  Company or its assets were sold on an orderly basis designed
                  to realize maximum value) and (ii) otherwise in the best
                  interests of the Company and its shareholders (a "Qualified
                  Offer"), or (B) the Board of Directors of the Company shall
                  declare any Person to be an Adverse Person, upon a
                  determination that such Person, alone or together with its
                  Affiliates and Associates, has, at any time after the Rights
                  Dividend Declaration Date, become the Beneficial Owner of an
                  amount of Common Stock which the Board of Directors determines
                  to be substantial (which amount shall in no event be less than
                  10% of the shares of Common Stock then outstanding) and a
                  determination by at least a majority of the Board of Directors
                  who are not officers of the Company, after reasonable inquiry
                  and investigation, including consultation with such persons as
                  such directors shall deem appropriate, that (i) such
                  Beneficial Ownership by such Persons is intended to cause the
                  Company to repurchase the Common Stock beneficially owned by
                  such Person or to cause pressure on the Company to take action
                  or enter into a transaction or series of transactions intended
                  to provide such Person with short-term financial gain under
                  circumstances where the Board of Directors determines that the
                  best long-term interests of the Company and its




                                       6
<PAGE>

                  shareholders would not be served by taking such action or
                  entering into such transactions or series of transactions at
                  that time or (ii) such Beneficial Ownership is causing or
                  reasonably likely to cause a material adverse impact
                  (including, but not limited to, causing, or being reasonably
                  likely to cause, the Company to become a subsidiary of a
                  registered holding company under the Public Utility Holding
                  Company Act of 1935, as amended) on the business or prospects
                  of the Company, then, promptly following the occurrence of
                  such event, proper provision shall be made so that each holder
                  of a Right (except as provided below and in Section 7(e)
                  hereof) shall thereafter have the right to receive, upon
                  exercise thereof by payment (in lieu of the payment required
                  to be made pursuant to Section 7 to exercise a Right) of an
                  amount equal to the product of (x) the number of one-tenths of
                  a share of Common Stock that would otherwise be issuable upon
                  exercise of a Right after the Distribution Date if no Section
                  11(a)(ii) Event or Section 13 Event had occurred and (y) ten
                  times the then current Purchase Price for one-tenth of a share
                  of Common Stock that would have been payable in accordance
                  with the terms of this Agreement if such Right had been
                  exercised immediately prior to the first occurrence of a
                  Section 11(a)(ii) Event or Section 13 Event, such number of
                  whole shares of Common Stock of the Company (in lieu of the
                  number of one-tenths of a share of Common Stock for which such
                  Right would have been exercisable after the Distribution Date
                  and prior to the first occurrence of a Section 11(a)(ii) Event
                  or Section 13 Event) as shall equal the result obtained by (x)
                  multiplying the then-current Purchase Price for one-tenth of a
                  share of Common Stock immediately prior to the first
                  occurrence of a Section 11(a)(ii) Event or Section 13 Event by
                  ten times the number of one-tenths of a share of Common Stock
                  for which a Right would have been exercisable after the
                  Distribution Date and immediately prior to the first
                  occurrence of a Section 11(a)(ii) Event or Section 13 Event
                  and (y) dividing that product by 50% of the Current Market
                  Price (determined pursuant to Section 11(d) hereof) per share
                  of Common Stock on the date of such first occurrence (such
                  number of shares, the "Adjustment Shares"). The exercise price
                  of a Right determined pursuant to the immediately preceding
                  sentence at the time of the exercise of the Right, after
                  giving effect to any adjustments in the Purchase Price
                  pursuant to this Section 11 but subject to Section 11(a)(iii),
                  is referred to in this Agreement as the "Adjusted Exercise
                  Price.""

                           (m) The first two sentences of Section 11(a)(iii) of
         the Rights Agreement are hereby amended to read in their entirety as
         follows:

                               "(iii) In the event that the number of shares of
                  Common Stock which are authorized by the Company's Articles of
                  Incorporation,




                                       7
<PAGE>

                  but which are not outstanding or reserved for issuance for
                  purposes other than upon exercise of the Rights, are not
                  sufficient to permit the exercise in full of the Rights in
                  accordance with the foregoing subparagraph (ii) of this
                  Section 11(a), the Company shall: (A) determine the value of
                  the Adjustment Shares issuable upon the exercise of a Right
                  (the "Current Value"), and (B) with respect to each Right
                  (subject to Section 7(e) hereof), make adequate provision to
                  substitute for the Adjustment Shares, upon the exercise of a
                  Right and payment of the Adjusted Exercise Price, (1) cash,
                  (2) a reduction in the Adjusted Exercise Price, (3) Common
                  Stock or other equity securities of the Company (including,
                  without limitation, shares, or units of shares, of preferred
                  stock which the Board has deemed to have essentially the same
                  value or economic rights as shares of Common Stock (such
                  shares of preferred stock being referred to as "Common Stock
                  Equivalents")), (4) debt securities of the Company, (5) other
                  assets, or (6) any combination of the foregoing, having an
                  aggregate value equal to the Current Value (less the amount of
                  any reduction in the Adjusted Exercise Price), where such
                  aggregate value has been determined by the Board based upon
                  the advice of a nationally recognized investment banking firm
                  selected by the Board; provided, however, that if the Company
                  shall not have made adequate provision to deliver value
                  pursuant to clause (B) above within thirty (30) days following
                  the later of (x) the first occurrence of a Section 11(a)(ii)
                  Event and (y) the date on which the Company's right of
                  redemption pursuant to Section 23(a) expires (the later of (x)
                  and (y) being referred to herein as the "Section 11(a)(ii)
                  Trigger Date"), then the Company shall be obligated to
                  deliver, upon the surrender for exercise of a Right and
                  without requiring payment of the Adjusted Exercise Price,
                  shares of Common Stock (to the extent available) and then, if
                  necessary, cash, which shares and/or cash have an aggregate
                  value equal to the Spread. For purposes of the preceding
                  sentence, the term "Spread" shall mean the excess of (i) the
                  Current Value over (ii) the Adjusted Exercise Price."

                           (n) Section 11(f) of the Rights Agreement is hereby
         amended to read in its entirety as follows:

                               "(f) If as a result of an adjustment made
                  pursuant to Section 11(a)(ii) or Section 13(a) hereof, the
                  holder of any Right thereafter exercised shall become entitled
                  to receive any shares of capital stock other than Common
                  Stock, thereafter the number of such other shares so
                  receivable upon exercise of any Right and the Purchase Price
                  thereof shall be subject to adjustment from time to time in a
                  manner and on terms as nearly equivalent as practicable to the
                  provisions with respect to the Common Stock contained in
                  Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and
                  (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof
                  with




                                       8
<PAGE>

                  respect to the Common Stock shall apply on like terms to any
                  such other shares; provided, however, that the Company shall
                  not be liable for its inability to reserve and keep available
                  for issuance upon exercise of the Rights pursuant to Section
                  11(a)(ii) a number of shares of Common Stock greater than the
                  number then authorized by the Company's Articles of
                  Incorporation but not outstanding or reserved for other
                  purposes."

                           (o) Section 11(h) of the Rights Agreement is hereby
         amended to read in its entirety as follows:

                               "(h) Unless the Company shall have exercised its
                  election as provided in Section 11(i), upon each adjustment of
                  the Purchase Price as a result of the calculations made in
                  Sections 11(b) and (c), each Right outstanding immediately
                  prior to the making of such adjustment shall thereafter
                  evidence the right to purchase, at the adjusted Purchase
                  Price, that number of one-tenths of a share of Common Stock
                  (calculated to the nearest one ten-thousandth) obtained by (i)
                  multiplying (x) the number of one-tenths of a share covered by
                  a Right immediately prior to this adjustment, by (y) the
                  Purchase Price in effect immediately prior to such adjustment
                  of the Purchase Price, and (ii) dividing the product so
                  obtained by the Purchase Price in effect immediately after
                  such adjustment of the Purchase Price."

                           (p) The first two sentences of Section 11(i) of the
         Rights Agreement are hereby amended to read in their entirety as
         follows:

                               "(i) The Company may elect on or after the date
                  of any adjustment of the Purchase Price to adjust the number
                  of Rights, in lieu of any adjustment in the number of
                  one-tenths of a share of Common Stock purchasable upon the
                  exercise of a Right. Each of the Rights outstanding after the
                  adjustment in the number of Rights shall be exercisable for
                  the number of one-tenths of a share of Common Stock for which
                  a Right was exercisable immediately prior to such adjustment."

                           (q) Section 11(j) of the Rights Agreement is hereby
         amended to read in its entirety as follows:

                               "(j) Irrespective of any adjustment or change in
                  the Purchase Price or the number of one-tenths of a share of
                  Common Stock issuable upon the exercise of the Rights, the
                  Rights Certificates theretofore and thereafter issued may
                  continue to express the Purchase Price per one-tenth of a
                  share and the number of one-tenths of a share which were
                  expressed in the initial Rights Certificates issued
                  hereunder."



                                       9
<PAGE>

                           (r) Section 11(k) of the Rights Agreement is hereby
         amended to read in its entirety as follows:

                               "(k) Before taking any action that would cause an
                  adjustment reducing the Purchase Price below the then stated
                  value, if any, of the number of one-tenths of a share of
                  Common Stock issuable upon exercise of the Rights, the Company
                  shall take any corporate action which may, in the opinion of
                  its counsel, be necessary in order that the Company may
                  validly and legally issue fully paid and nonassessable such
                  number of one-tenths of a share of Common Stock at such
                  adjusted Purchase Price."

                           (s) Section 13(a) of the Rights Agreement is hereby
         amended to read in its entirety as follows:

                               "(a) In the event that, following the Stock
                  Acquisition Date, directly or indirectly, (x) the Company
                  shall consolidate with, or merge with and into, any other
                  Person (other than a Subsidiary of the Company in a
                  transaction which complies with Section 11(o) here-of), and
                  the Company shall not be the continuing or surviving
                  corporation of such consolidation or merger, (y) any Person
                  (other than a Subsidiary of the Company in a transaction which
                  complies with Section 11(o) hereof) shall consolidate with, or
                  merge with or into, the Company, and the Company shall be the
                  continuing or surviving corporation of such consolidation or
                  merger and, in connection with such consolidation or merger,
                  all or part of the outstanding shares of Common Stock shall be
                  changed into or exchanged for stock or other securities of any
                  other Person or cash or any other property, or (z) the Company
                  shall sell or otherwise transfer (or one or more of its
                  Subsidiaries shall sell or otherwise transfer), in one
                  transaction or a series of related transactions, assets, cash
                  flow or earning power aggregating more than 50% of the assets,
                  cash flow or earning power of the Company and its Subsidiaries
                  (taken as a whole) to any Person or Persons (other than the
                  Company or any Subsidiary of the Company in one or more
                  transactions each of which complies with Section 11(o)
                  hereof), then, and in each such case (except as may be
                  contemplated by Section 13(d) hereof), proper provision shall
                  be made so that: (i) each holder of a Right, except as
                  provided in Section 7(e) hereof, shall thereafter have the
                  right to receive, upon the exercise thereof at the then
                  current Adjusted Exercise Price in accordance with the terms
                  of this Agreement, such number of validly authorized and
                  issued, fully paid, non-assessable and freely tradeable shares
                  of Common Stock of the Principal Party (as such term is
                  hereinafter defined), not subject to any liens, encumbrances,
                  rights of first refusal or other adverse claims, as shall be
                  equal to the result



                                       10
<PAGE>

                  obtained by (1) multiplying the then current Adjusted Exercise
                  Price by the number of one-tenths of a share of Common Stock
                  for which a Right is exercisable immediately prior to the
                  first occurrence of a Section 13 Event (or, if a Section
                  11(a)(ii) Event has occurred prior to the first occurrence of
                  a Section 13 Event, multiplying the number of such one-tenths
                  of a share for which a Right was exercisable immediately prior
                  to the first occurrence of a Section 11(a)(ii) Event by the
                  Adjusted Exercise Price), and dividing that product by (2) 50%
                  of the Current Market Price (determined pursuant to Section
                  11(d) hereof) per share of the Common Stock of such Principal
                  Party on the date of consummation of such Section 13 Event;
                  (ii) such Principal Party shall thereafter be liable for, and
                  shall assume, by virtue of such Section 13 Event, all the
                  obligations and duties of the Company pursuant to this
                  Agreement; (iii) the term "Company" shall thereafter be deemed
                  to refer to such Principal Party, it being specifically
                  intended that the provisions of Section 11 hereof shall apply
                  only to such Principal Party following the first occurrence of
                  a Section 13 Event; (iv) such Principal Party shall take such
                  steps (including, but not limited to, the reservation of a
                  sufficient number of shares of its Common Stock) in connection
                  with the consummation of any such transaction as may be
                  necessary to assure that the provisions hereof shall
                  thereafter be applicable, as nearly as reasonably may be, in
                  relation to its shares of Common Stock thereafter deliverable
                  upon the exercise of the Rights; and (v) the provisions of
                  Section 11(a)(ii) hereof (except the provisions setting forth
                  the procedure for determining the Adjusted Exercise Price)
                  shall be of no effect following the first occurrence of any
                  Section 13 Event."

                           (t) The first sentence of Section 22 of the Rights
         Agreement is hereby amended to read in its entirety as follows:

                               "Notwithstanding any of the provisions of this
                  Agreement or of the Rights to the contrary, the Company may,
                  at its option, issue new Rights Certificates evidencing Rights
                  in such form as may be approved by the Board to reflect any
                  adjustment or change in the Purchase Price or the Adjusted
                  Exercise Price and the number or kind or class of shares or
                  other securities or property purchasable under the Rights
                  Certificates made in accordance with the provisions of this
                  Agreement."

                           (u) The address of the Rights Agent in Section 25 of
         the Rights Agreement is hereby amended to read in its entirety as
         follows:

                                    EquiServe Trust Company, N.A.
                                    150 Royall Street
                                    Canton, MA  02021



                                       11
<PAGE>

                           (v) Exhibit A to the Rights Agreement, the Form of
         Rights Certificate, is hereby amended as follows:

                           i.  The second paragraph of Exhibit A (Form of Rights
                               Certificate) is hereby amended to read in its
                               entirety as follows:

                               " This certifies that _____________________, or
                           registered assigns, is the registered owner of the
                           number of Rights set forth above, each of which
                           entitles the owner thereof, subject to the terms,
                           provisions and conditions of the Rights Agreement,
                           dated as of November 12, 1997, as amended (the
                           "Rights Agreement"), between Atmos Energy
                           Corporation, a Texas and Virginia corporation (the
                           "Company"), and EquiServe Trust Company, N.A., a
                           national association with its principal place of
                           business in Massachusetts (the "Rights Agent"), to
                           purchase from the Company at any time prior to 5:00
                           P.M. (Boston, Massachusetts time) on May 10, 2008
                           (unless such date is extended prior thereto by the
                           Board of Directors) at the office or offices of the
                           Rights Agent designated for such purpose, or its
                           successors as Rights Agent, one-tenth of one fully
                           paid, non-assessable share of Common Stock of the
                           Company, no par value, at a purchase price of $8.00
                           per one-tenth of one share (the "Purchase Price"),
                           upon presentation and surrender of this Rights
                           Certificate with the Form of Election to Purchase and
                           related Certificate duly executed. All capitalized
                           terms which are not defined herein shall have the
                           meanings ascribed to them in the Rights Agreement.
                           The number of Rights evidenced by this Rights
                           Certificate (and the number of one-tenths of a share
                           of Common Stock which may be purchased upon exercise
                           thereof) set forth above, and the Purchase Price per
                           share set forth above, are the number and Purchase
                           Price as of February 13, 2002, based on the Common
                           Stock as constituted at such date. The Company
                           reserves the right to require prior to the occurrence
                           of a Triggering Event that a number of Rights be
                           exercised so that only whole shares of Common Stock
                           will be issued."

                           ii. The first sentence of the sixth paragraph of
                               Exhibit A (Form of Rights Certificate) is
                               hereby amended to read in its entirety as
                               follows:



                                       12
<PAGE>

                               " This Rights Certificate, with or without other
                           Rights Certificates, upon surrender at the principal
                           office or offices of the Rights Agent designated for
                           such purpose, may be exchanged for another Rights
                           Certificate or Rights Certificates of like tenor and
                           date evidencing Rights entitling the holder to
                           purchase a like aggregate number of one-tenths of a
                           share of Common Stock as the Rights evidenced by the
                           Rights Certificate or Rights Certificates surrendered
                           shall have entitled such holder to purchase."

                           iii. The eighth paragraph of Exhibit A (Form of
                                Rights Certificate) is hereby amended to read in
                                its entirety as follows:

                                "No fractional shares of Common Stock will be
                           issued upon the exercise of any Right or Rights
                           evidenced hereby, if in lieu thereof a cash payment
                           is made, as provided in the Rights Agreement."

                           (w) Exhibit A to the Rights Agreement, the Form of
         Election to Purchase, is hereby amended as follows:

                           i.   The first paragraph of Exhibit A (Form of
                                Election to Purchase) is hereby amended to read
                                in its entirety as follows:

                                "The undersigned hereby irrevocably elects to
                           exercise _______________ Rights represented by this
                           Rights Certificate to purchase the number of
                           one-tenths of a share of Common Stock issuable upon
                           the exercise of the Rights (or such other securities
                           of the Company or of any other person which may be
                           issuable upon the exercise of the Rights) and
                           requests that certificates for such shares be issued
                           in the name of and delivered to:"

                           (x) Exhibit B to the Rights Agreement, the Summary of
         Rights to Purchase Common Stock, is hereby amended as follows:


                           i.   The second sentence of the first paragraph of
                                Exhibit B is hereby amended to read in its
                                entirety as follows:

                                "Each Right entitles the registered holder to
                           purchase from the Company one-tenth of a share of
                           Common Stock at a Purchase Price of $8.00 per share,
                           subject to adjustment."



                                       13
<PAGE>

                           ii.  The first sentence of the sixth paragraph of
                                Exhibit B is hereby amended to read in its
                                entirety as follows:

                                "In the event that the Board of Directors
                           determines that a person is an Adverse Person or a
                           person becomes an Acquiring Person (except pursuant
                           to an offer for all outstanding shares of Common
                           Stock which the independent directors, who are not
                           associated with an Acquiring Person, determine to be
                           fair to shareholders and otherwise in the best
                           interests of the Company and its shareholders (a
                           "Qualified Offer")), each holder of a Right will
                           thereafter have the right to receive, upon exercise
                           of the Right at an exercise price equal to ten times
                           the Purchase Price multiplied by the number of
                           one-tenths of a share of Common Stock subject to the
                           Right immediately before such time (the "Adjusted
                           Exercise Price"), that number of shares of Common
                           Stock (or, in certain circumstances, cash, property
                           or other securities of the Company) having a value
                           equal to two times the Adjusted Exercise Price of the
                           Right."

                           iii. The first sentence of the seventh paragraph of
                                Exhibit B is hereby amended to read in its
                                entirety as follows:

                                "For example, at a Purchase Price of $8.00 per
                           Right, each Right not owned by an Acquiring Person or
                           Adverse Person (or by certain related parties)
                           following an event set forth in the preceding
                           paragraph would entitle its holder to purchase $160
                           worth of Common Stock (or other consideration, as
                           noted above) for $80."

                           iv.  The first sentence of the eighth paragraph of
                                Exhibit B is hereby amended to read in its
                                entirety as follows:

                                "In the event that, at any time following the
                           Stock Acquisition Date, (i) the Company engages in a
                           merger or other business combination transaction in
                           which the Company is not the surviving corporation,
                           (ii) the Company engages in a merger or other
                           business combination transaction in which the Company
                           is the surviving corporation and the Common Stock of
                           the Company is changed or exchanged or (iii) 50% or
                           more of the Company's assets, cash flow or earning
                           power is sold or transferred, each holder of a Right
                           (except Rights which previously have been voided as
                           set forth above) shall thereafter have the right to
                           receive, upon exercise of the Right at the Adjusted
                           Exercise Price, common stock



                                       14
<PAGE>

                           of the acquiring company having a value equal to two
                           times the Adjusted Exercise Price of the Right."

                           v.   The ninth paragraph of Exhibit B is hereby
                                amended to read in its entirety as follows:

                                "The Purchase Price or Adjusted 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 (i) in the event of a stock
                           dividend on, or a subdivision, combination or
                           reclassification of, the Common Stock, (ii) if
                           holders of the Common Stock are granted certain
                           rights or warrants to subscribe for Common Stock or
                           convertible securities at less than the current
                           market price of the Common Stock or (iii) upon the
                           distribution to holders of the Common Stock of
                           evidences of indebtedness or assets (excluding
                           regular quarterly cash dividends) or of subscription
                           rights or warrants (other than those referred to
                           above)."

                           vi.  The second sentence of the tenth paragraph of
                                Exhibit B is hereby amended to read in its
                                entirety as follows:

                                "No fractional shares are required to be issued
                           and, in lieu thereof, an adjustment in cash may be
                           made based on the market price of the Common Stock on
                           the last trading date prior to the date of exercise."

         2. Except as amended by this Second Amendment, the Rights Agreement
shall continue in full force and effect as originally executed and delivered.

         3. Any reference in the Rights Agreement to the "Agreement" shall refer
to the Rights Agreement as amended by this Second Amendment.

         4. All capitalized terms used herein and not otherwise defined shall
have the meanings assigned to those terms in the Rights Agreement.

         5. This Second Amendment shall be governed and construed in accordance
with the laws of the State of Texas.

         6. This Second Amendment may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute by one and the
same instrument.



                                       15
<PAGE>

                  IN WITNESS WHEREOF, the parties have executed this Second
Amendment as of the date written above.



Attest:                                     ATMOS ENERGY CORPORATION



By:  /s/ SHIRLEY A. HINES                   By: /s/ LOUIS P. GREGORY
     --------------------------------           --------------------------------
     Name:  Shirley A. Hines                    Name:  Louis P. Gregory
     Title: Corporate Secretary                 Title: Senior Vice President
                                                       and General Counsel



Attest:                                     EQUISERVE TRUST COMPANY, N.A.




By: /s/ ERIKA ILLINGWORTH                   By: /s/ JOSHUA P. MCGINN
     --------------------------------           --------------------------------
     Name:  Erika Illingworth                   Name:  Joshua P. McGinn
     Title: Account Manager                     Title: Senior Account Manager





                                       16

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1(A)
<SEQUENCE>4
<FILENAME>d94293ex10-1a.txt
<DESCRIPTION>7TH AMENDMENT TO CREDIT AGREEMENT
<TEXT>
<PAGE>
                                                                EXHIBIT 10.1 (a)


                      SEVENTH AMENDMENT TO CREDIT AGREEMENT


         This SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
entered into effective as of September 30, 2001, among WOODWARD MARKETING,
L.L.C., a Delaware limited liability company (the "Borrower"), BANK OF AMERICA,
N. A. ("Bank of America"), as a Bank, as an Issuing Bank, and as Agent for the
Banks, BNP PARIBAS, a bank organized under the laws of France ("BNP Paribas"),
and Atmos Energy Marketing, LLC (the "Guarantor").

         WHEREAS, Borrower and Banks entered into that certain Credit Agreement,
dated to be effective as of August 9, 2000, as amended by that certain First
Amendment to Credit Agreement and Guaranty of Atmos Energy Marketing, LLC dated
as of September 29, 2000, that certain Second Amendment to Credit Agreement
dated as of November 3, 2000, that certain Third Amendment to Credit Agreement
dated as of December 5, 2000, that certain Fourth Amendment to Credit Agreement
dated as of December 22, 2000, that certain Fifth Amendment to Credit Agreement
dated as of December 31, 2000, and that certain Sixth Amendment to Credit
Agreement dated as of June 29, 2001 (as amended, modified, supplemented,
extended and replaced from time to time, the "Credit Agreement"); and

         WHEREAS, all Obligations (as defined in the Credit Agreement) are
guaranteed by the Guarantor pursuant to a Second Amended And Restated Guaranty
of Atmos Energy Marketing, LLC executed by the Guarantor, entered into effective
as of December 22, 2000, in favor of the Banks (the "Guaranty Agreement"); and

         WHEREAS, the Obligations are secured by security interests in the
Collateral (as defined in the Credit Agreement) granted to Agent for the benefit
of the Banks pursuant to the Security Agreements (as defined in the Credit
Agreement) and pursuant to the Nations Funds Security Agreement (as defined in
the Credit Agreement), each executed by Borrower (collectively, the "Security
Agreements"); and

         WHEREAS, the parties hereto desire to amend the Credit Agreement as set
forth herein.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Borrower, Bank of America, BNP Paribas and the Guarantor agree
as follows:

         1. The definition of "Expiration Date" set forth in Section 1.01 of the
Credit Agreement is deleted in its entirety and replaced with the following
definition:

            "Expiration Date" means the earliest to occur of:

                  (a)      October 31, 2001; or



SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 1
(Woodward Marketing, L.L.C.)
<PAGE>

                  (b)      the date demand for payment is made by the Agents; or

                  (c)      the date an Event of Default occurs.

         2. The definition of "Maturity Date" set forth in Section 1.01 of the
Credit Agreement is deleted in its entirety and replaced with the following
definition:

            "Maturity Date" means January 15, 2002.

         3. The definition of "Responsible Officer" set forth in Section 1.01 of
the Credit Agreement, Certain Defined Terms, is deleted in its entirety and
replaced with the following:

            "Responsible Officer" means any of the following: J.D. Woodward III,
Ronald W. Bahr or Randy W. Randel.

         4. Renewal; Continued Effect. Except as set forth above, the Credit
Agreement shall continue in full force and effect.

         5. Representations. To induce the Agent and the Banks to enter into
this Amendment, Borrower ratifies and confirms each representation and warranty
set forth in the Credit Agreement as if such representations and warranties were
made on even date herewith, and further represents and warrants (a) that no
material adverse change has occurred in the financial condition or business
prospects of Borrower since the date of the last financial statements delivered
to the Banks, (b) that no Event of Default exists and no event or condition
exists or has occurred which with passage of time, or notice, or both, would
become an Event of Default (a "Default"), and (c) that Borrower is fully
authorized to enter into this Amendment. BORROWER ACKNOWLEDGES THAT THE CREDIT
AGREEMENT PROVIDES FOR A CREDIT FACILITY THAT IS COMPLETELY OPTIONAL ON THE PART
OF THE BANKS AND THAT THE BANKS HAVE ABSOLUTELY NO DUTY OR OBLIGATION TO ADVANCE
ANY REVOLVING LOAN OR TO ISSUE ANY LETTER OF CREDIT. BORROWER REPRESENTS AND
WARRANTS TO THE BANKS THAT BORROWER IS AWARE OF THE RISKS ASSOCIATED WITH
CONDUCTING BUSINESS UTILIZING AN UNCOMMITTED FACILITY.

         6. Conditions Precedent. As a condition to Agent and the Banks entering
into this Amendment, no Default or Event of Default shall exist on the date
hereof, and Agent and the Banks must have received executed originals of each of
the following documents and instruments, in form and substance satisfactory to
Agent and the Banks:

            (a)      this Amendment, duly executed by Borrower; and

            (b)      such other documents or certificates as Agent may
                     reasonably request.


SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 2
(Woodward Marketing, L.L.C.)
<PAGE>

         7. Ratification of Security Agreements. Borrower ratifies and confirms
the Security Agreements, and acknowledges and agrees that references to the
Credit Agreement in such Security Agreements are hereby amended to refer to the
Credit Agreement as amended by this Amendment and that in all other respects
such Security Agreements shall continue in full force and effect, and that
pursuant to such Security Agreements Borrower has granted and hereby confirms
and grants to Agent for the benefit of the Banks a continuing first and prior
security interest in the Collateral to secure payment and performance of all
Obligations.

         8. Guaranty Ratification. Atmos Energy Marketing, LLC ratifies and
confirms the SECOND AMENDED AND RESTATED GUARANTY OF ATMOS ENERGY MARKETING, LLC
and acknowledges and agrees that such Guaranty Agreement shall continue in full
force and effect, and that pursuant to the Guaranty Agreement, the Guarantor has
guaranteed and continues to guaranty the full payment and performance of all
Obligations under the Credit Agreement, as amended from time to time.

         9. Notes Amendment and Ratification. The Borrower ratifies and confirms
the Promissory Notes issued to Bank of America and BNP Paribas and acknowledges
and agrees that such Promissory Notes shall continue in full force and effect,
and shall be "Notes" as defined in the Credit Agreement, as amended hereby.

         10. Miscellaneous.

             (a) Severability. In case any of the provisions of this Amendment
shall for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Amendment shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein.

             (b) Capitalized Terms.  Except as otherwise defined herein,
capitalized terms shall have the meanings specified in the Credit Agreement.

             (c) Execution in Counterparts. This Amendment may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any party hereto may execute this Amendment by signing
one or more counterparts.

             (d) Governing Law. This Amendment shall be construed in accordance
with and governed by the laws of the State of California (without reference to
principles of conflicts of laws), provided, however, that Agent, Banks and all
Agent-Related Persons shall retain all rights under federal law.

             (e) Rights of Third Parties. All provisions herein are imposed
solely and exclusively for the benefit of Borrower, Agent, Banks and all
Agent-Related Persons, and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with this Amendment or any of
the other Loan Documents.



SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 3
(Woodward Marketing, L.L.C.)
<PAGE>

             (f) COMPLETE AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER
WRITTEN AGREEMENTS ENTERED INTO AMONG THE PARTIES REPRESENT THE FINAL AGREEMENT
AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.




SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 4
(Woodward Marketing, L.L.C.)
<PAGE>


                  Executed as of the day and year first above written



                                            BORROWER:


                                            WOODWARD MARKETING, L.L.C.,
                                            a Delaware limited liability company


                                            By: /s/ RONALD W. BAHR
                                               ---------------------------------
                                            Name:  Ronald W. Bahr
                                            Title: Senior Vice President


                                            BANKS:

                                            BANK OF AMERICA, N. A.,
                                            as Agent

                                            By: /s/ IRENE C. RUMMEL
                                               ---------------------------------
                                            Name:  Irene C. Rummel
                                            Title: Principal

                                            BANK OF AMERICA, N. A.,
                                            as a Bank and Issuing Bank

                                            By: /s/ IRENE C. RUMMEL
                                               ---------------------------------
                                            Name:  Irene C. Rummel
                                            Title: Principal

                                            BNP PARIBAS,
                                            as a Bank

                                            By: /s/ EDWARD K. CHIN
                                               ---------------------------------
                                            Name:  Edward K. Chin
                                            Title: Director

                                            By: /s/ KEITH COX
                                               ---------------------------------
                                            Name:  Keith Cox
                                            Title: Director



SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 5
(Woodward Marketing, L.L.C.)
<PAGE>


                                            GUARANTOR:



                                            ATMOS ENERGY MARKETING, LLC


                                            By: /s/ LAURIE M. SHERWOOD
                                               ---------------------------------
                                            Name:  Laurie M. Sherwood
                                            Title: Vice President and Treasurer



SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 6
(Woodward Marketing, L.L.C.)






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1(B)
<SEQUENCE>5
<FILENAME>d94293ex10-1b.txt
<DESCRIPTION>8TH AMENDMENT TO CREDIT AGREEMENT
<TEXT>
<PAGE>
                                                                EXHIBIT 10.1 (b)



                      EIGHTH AMENDMENT TO CREDIT AGREEMENT

         This EIGHTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into effective as of October 31, 2001, among WOODWARD MARKETING, L.L.C., a
Delaware limited liability company (the "Borrower"), BANK OF AMERICA, N. A.
("Bank of America"), as a Bank, as an Issuing Bank, and as Agent for the Banks,
BNP PARIBAS, a bank organized under the laws of France ("BNP Paribas"), and
Atmos Energy Marketing, LLC (the "Guarantor").

         WHEREAS, Borrower and Banks entered into that certain Credit Agreement,
dated to be effective as of August 9, 2000, as amended by that certain First
Amendment to Credit Agreement and Guaranty of Atmos Energy Marketing, LLC dated
as of September 29, 2000, that certain Second Amendment to Credit Agreement
dated as of November 3, 2000, that certain Third Amendment to Credit Agreement
dated as of December 5, 2000, that certain Fourth Amendment to Credit Agreement
dated as of December 22, 2000, that certain Fifth Amendment to Credit Agreement
dated as of December 31, 2000, that certain Sixth Amendment to Credit Agreement
dated as of June 29, 2001, that certain Seventh Amendment to Credit Agreement
dated as of September 30, 2001 (as amended, modified, supplemented, extended and
replaced from time to time, the "Credit Agreement"); and

         WHEREAS, all Obligations (as defined in the Credit Agreement) are
guaranteed by the Guarantor pursuant to a Second Amended And Restated Guaranty
of Atmos Energy Marketing, LLC executed by the Guarantor, entered into effective
as of December 22, 2000, in favor of the Banks (the "Guaranty Agreement"); and

         WHEREAS, the Obligations are secured by security interests in the
Collateral (as defined in the Credit Agreement) granted to Agent for the benefit
of the Banks pursuant to the Security Agreements (as defined in the Credit
Agreement) and pursuant to the Nations Funds Security Agreement (as defined in
the Credit Agreement), each executed by Borrower (collectively, the "Security
Agreements"); and

         WHEREAS, the parties hereto desire to amend the Credit Agreement as set
forth herein.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Borrower, Bank of America, BNP Paribas and the Guarantor agree
as follows:

         1. The definition of "Expiration Date" set forth in Section 1.01 of the
Credit Agreement is deleted in its entirety and replaced with the following
definition:



SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 1
(Woodward Marketing, L.L.C.)
<PAGE>

            "Expiration Date" means the earliest to occur of:

                  (a)      November 30, 2001; or

                  (b)      the date demand for payment is made by the Agents; or

                  (c)      the date an Event of Default occurs.

         2. The definition of "Maturity Date" set forth in Section 1.01 of the
Credit Agreement is deleted in its entirety and replaced with the following
definition:

            "Maturity Date" means February 15, 2002.

         3. Renewal; Continued Effect. Except as set forth above, the Credit
Agreement shall continue in full force and effect.

         4. Representations. To induce the Agent and the Banks to enter into
this Amendment, Borrower ratifies and confirms each representation and warranty
set forth in the Credit Agreement as if such representations and warranties were
made on even date herewith, and further represents and warrants (a) that no
material adverse change has occurred in the financial condition or business
prospects of Borrower since the date of the last financial statements delivered
to the Banks, (b) that no Event of Default exists and no event or condition
exists or has occurred which with passage of time, or notice, or both, would
become an Event of Default (a "Default"), and (c) that Borrower is fully
authorized to enter into this Amendment. BORROWER ACKNOWLEDGES THAT THE CREDIT
AGREEMENT PROVIDES FOR A CREDIT FACILITY THAT IS COMPLETELY OPTIONAL ON THE PART
OF THE BANKS AND THAT THE BANKS HAVE ABSOLUTELY NO DUTY OR OBLIGATION TO ADVANCE
ANY REVOLVING LOAN OR TO ISSUE ANY LETTER OF CREDIT. BORROWER REPRESENTS AND
WARRANTS TO THE BANKS THAT BORROWER IS AWARE OF THE RISKS ASSOCIATED WITH
CONDUCTING BUSINESS UTILIZING AN UNCOMMITTED FACILITY.

         5. Conditions Precedent. As a condition to Agent and the Banks entering
into this Amendment, no Default or Event of Default shall exist on the date
hereof, and Agent and the Banks must have received executed originals of each of
the following documents and instruments, in form and substance satisfactory to
Agent and the Banks:

            (a)      this Amendment, duly executed by Borrower; and

            (b)      such other documents or certificates as Agent may
                     reasonably request.

         6. Ratification of Security Agreements. Borrower ratifies and confirms
the Security Agreements, and acknowledges and agrees that references to the
Credit Agreement in such Security Agreements are hereby amended to refer to the
Credit Agreement as amended by this Amendment and that in all other respects
such Security Agreements shall continue in full force and effect, and that
pursuant to such Security Agreements Borrower has granted and hereby



SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 2
(Woodward Marketing, L.L.C.)
<PAGE>

confirms and grants to Agent for the benefit of the Banks a continuing first and
prior security interest in the Collateral to secure payment and performance of
all Obligations.

         7. Guaranty Ratification. Atmos Energy Marketing, LLC ratifies and
confirms the SECOND AMENDED AND RESTATED GUARANTY OF ATMOS ENERGY MARKETING, LLC
and acknowledges and agrees that such Guaranty Agreement shall continue in full
force and effect, and that pursuant to the Guaranty Agreement, the Guarantor has
guaranteed and continues to guaranty the full payment and performance of all
Obligations under the Credit Agreement, as amended from time to time.

         8. Notes Amendment and Ratification. The Borrower ratifies and confirms
the Promissory Notes issued to Bank of America and BNP Paribas and acknowledges
and agrees that such Promissory Notes shall continue in full force and effect,
and shall be "Notes" as defined in the Credit Agreement, as amended hereby.

         9. Miscellaneous.

            (a) Severability. In case any of the provisions of this Amendment
shall for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Amendment shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein.

            (b) Capitalized Terms.  Except as otherwise defined herein,
capitalized terms shall have the meanings specified in the Credit Agreement.

            (c) Execution in Counterparts. This Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Amendment by signing one
or more counterparts.

            (d) Governing Law. This Amendment shall be construed in accordance
with and governed by the laws of the State of California (without reference to
principles of conflicts of laws), provided, however, that Agent, Banks and all
Agent-Related Persons shall retain all rights under federal law.

            (e) Rights of Third Parties. All provisions herein are imposed
solely and exclusively for the benefit of Borrower, Agent, Banks and all
Agent-Related Persons, and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with this Amendment or any of
the other Loan Documents.

            (f) COMPLETE AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER WRITTEN
AGREEMENTS ENTERED INTO AMONG THE PARTIES REPRESENT THE FINAL AGREEMENT AMONG
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.




SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 3
(Woodward Marketing, L.L.C.)
<PAGE>


                  Executed as of the day and year first above written


                                            BORROWER:


                                            WOODWARD MARKETING, L.L.C.,
                                            a Delaware limited liability company


                                            By: /s/ RONALD W. BAHR
                                               ---------------------------------
                                            Name:  Ronald W. Bahr
                                            Title: Senior Vice President


                                            BANKS:

                                            BANK OF AMERICA, N. A.,
                                            as Agent

                                            By: /s/ IRENE C. RUMMEL
                                               ---------------------------------
                                            Name:  Irene C. Rummel
                                            Title: Principal

                                            BANK OF AMERICA, N. A.,
                                            as a Bank and Issuing Bank

                                            By: /s/ IRENE C. RUMMEL
                                               ---------------------------------
                                            Name:  Irene C. Rummel
                                            Title: Principal

                                            BNP PARIBAS,
                                            as a Bank

                                            By: /s/ EDWARD K. CHIN
                                               ---------------------------------
                                            Name:  Edward K. Chin
                                            Title: Director

                                            By: /s/ KEITH COX
                                               ---------------------------------
                                            Name:  Keith Cox
                                            Title: Director



SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 4
(Woodward Marketing, L.L.C.)
<PAGE>


                                            GUARANTOR:



                                            ATMOS ENERGY MARKETING, LLC


                                            By: /s/ LAURIE M. SHERWOOD
                                               ---------------------------------
                                            Name:  Laurie M. Sherwood
                                            Title: Vice President and Treasurer



SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 5
(Woodward Marketing, L.L.C.)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2(A)
<SEQUENCE>6
<FILENAME>d94293ex10-2a.txt
<DESCRIPTION>CREDIT AGREEMENT
<TEXT>
<PAGE>
                                                                EXHIBIT 10.2 (a)


                                CREDIT AGREEMENT

                  DATED TO BE EFFECTIVE AS OF DECEMBER 1, 2001

                                      AMONG

                           WOODWARD MARKETING, L.L.C.,
                                  AS BORROWER,

                              FORTIS CAPITAL CORP.,
                     AS AGENT, AN ISSUING BANK, AND A BANK,

                                  BNP PARIBAS,
                         AS AN ISSUING BANK, AND A BANK

                                       AND

                     THE OTHER FINANCIAL INSTITUTIONS WHICH
                            MAY BECOME PARTIES HERETO

                         THIS AGREEMENT PROVIDES FOR AN
                   UNCOMMITTED FACILITY WITH A DEMAND FEATURE.
                 ALL ADVANCES AND ISSUANCES OF LETTERS OF CREDIT
                   ARE DISCRETIONARY ON THE PART OF THE BANKS
                     IN THEIR SOLE AND ABSOLUTE DISCRETION.
                THE BANKS MAY MAKE DEMAND FOR PAYMENT AT ANY TIME
                     IN THEIR SOLE AND ABSOLUTE DISCRETION.

<PAGE>
                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                    Page
                                                                                    ----
<S>                                                                                 <C>
ARTICLE I             DEFINITIONS.....................................................1

         1.01     Certain Defined Terms...............................................1
         1.02     Other Interpretive Provisions......................................25
         1.03     Accounting Principles..............................................26

ARTICLE II            THE CREDITS....................................................26

         2.01     Amounts and Terms of Uncommitted Line (Excluding Overdraft Line)...26
         2.02     Loan Accounts......................................................28
         2.03     Procedure for Borrowing............................................29
         2.04     Conversion and Continuation Elections..............................30
         2.05     Optional Prepayments...............................................31
         2.06     Mandatory Prepayments of Loans; Mandatory Commitment Reductions....31
         2.07     Repayment..........................................................32
         2.08     Interest...........................................................32
         2.09     Agent Fees.........................................................33
         2.10     Computation of Fees and Interest...................................33
         2.11     Payments by the Borrower...........................................34
         2.12     Payments by the Banks to Agent.....................................34
         2.13     Sharing of Payments, Etc...........................................35
         2.14     The Election of One Bank to Continue Funding.......................35
         2.15     Payments from Guarantor and Liquidation of Collateral..............36

ARTICLE III           THE LETTERS OF CREDIT..........................................36

         3.01     The Letter of Credit Lines.........................................36
         3.02     Issuance, Amendment and Renewal of Letters of Credit...............38
         3.03     Risk Participations, Drawings, Reducing Letters of Credit and
                    Reimbursements...................................................40
         3.04     Repayment of Participations........................................42
         3.05     Role of the Issuing Banks..........................................43
         3.06     Obligations Absolute...............................................44
         3.07     Cash Collateral Pledge.............................................45
         3.08     Letter of Credit Fees..............................................46
         3.09     Uniform Customs and Practice.......................................46
         3.10     BofA Letter of Credit..............................................46

ARTICLE IV            TAXES, YIELD PROTECTION AND ILLEGALITY.........................46

         4.01     Taxes..............................................................46
         4.02     Illegality.........................................................47
         4.03     Increased Costs and Reduction of Return............................48
         4.04     Funding Losses.....................................................49
         4.05     Inability to Determine Rates.......................................49
</Table>



                                      -i-
<PAGE>
                                TABLE OF CONTENTS
                                  (continued)

<Table>
<Caption>
                                                                                    Page
                                                                                    ----
<S>                                                                                 <C>
         4.06     Reserves on Offshore Rate Loans....................................50
         4.07     Certificates of Banks..............................................50
         4.08     Substitution of Banks..............................................50
         4.09     Survival...........................................................50

ARTICLE V             CLOSING ITEMS..................................................51

         5.01     Matters to be Satisfied Upon Execution of Agreement................51

ARTICLE VI            REPRESENTATIONS AND WARRANTIES.................................53

         6.01     Existence and Power................................................53
         6.02     Authorization; No Contravention....................................53
         6.03     Governmental Authorization.........................................53
         6.04     Binding Effect.....................................................54
         6.05     Litigation.........................................................54
         6.06     No Default.........................................................54
         6.07     ERISA Compliance...................................................54
         6.08     Use of Proceeds; Margin Regulations................................55
         6.09     Title to Properties................................................55
         6.10     Taxes..............................................................55
         6.11     Financial Condition................................................55
         6.12     Environmental Matters..............................................56
         6.13     Regulated Entities.................................................56
         6.14     No Burdensome Restrictions.........................................56
         6.15     Copyrights, Patents, Trademarks and Licenses, Etc..................56
         6.16     Subsidiaries.......................................................56
         6.17     Insurance..........................................................56
         6.18     Full Disclosure....................................................57

ARTICLE VII           AFFIRMATIVE COVENANTS..........................................57

         7.01     Financial Statements...............................................57
         7.02     Certificates; Other Information....................................58
         7.03     Notices............................................................58
         7.04     Preservation of Corporate Existence, Etc...........................59
         7.05     Maintenance of Property............................................60
         7.06     Insurance..........................................................60
         7.07     Payment of Obligations.............................................60
         7.08     Compliance with Laws...............................................60
         7.09     Compliance with ERISA..............................................60
         7.10     Inspection of Property and Books and Records.......................61
         7.11     Environmental Laws.................................................61
         7.12     Use of Proceeds....................................................61
         7.13     Collateral Position Audit..........................................61
         7.14     Payments to Bank Blocked Account...................................61
</Table>


                                      -ii-
<PAGE>

                                TABLE OF CONTENTS
                                  (continued)

<Table>
<Caption>
                                                                                    Page
                                                                                    ----
<S>                                                                                 <C>
         7.15     Financial Covenants................................................62
         7.16     Separate Operations................................................64
         7.17     Post-Closing Matters...............................................64

ARTICLE VIII          NEGATIVE COVENANTS.............................................64

         8.01     Limitation on Liens................................................64
         8.02     Consolidations and Mergers.........................................66
         8.03     Limitation on Indebtedness.........................................66
         8.04     Transactions with Affiliates.......................................66
         8.05     Use of Proceeds....................................................66
         8.06     Contingent Obligations.............................................67
         8.07     Restricted Payments................................................67
         8.08     ERISA..............................................................67
         8.09     Change in Business.................................................67
         8.10     Accounting Changes.................................................67
         8.11     Net Position.......................................................67
         8.12     Loans and Investments..............................................68
         8.13     Change of Management...............................................68
         8.14     Deposit Accounts...................................................68
         8.15     Risk Management Policy.............................................68

ARTICLE IX            EVENTS OF DEFAULT..............................................69

         9.01     Event of Default...................................................69
         9.02     Remedies...........................................................71
         9.03     Rights Not Exclusive...............................................71

ARTICLE X             AGENT..........................................................72

         10.01    Appointment and Authorization......................................72
         10.02    Delegation of Duties...............................................72
         10.03    Liability of Agent.................................................73
         10.04    Reliance by Agent..................................................73
         10.05    Notice of Default..................................................74
         10.06    Credit Decision....................................................74
         10.07    Indemnification....................................................74
         10.08    Agent in Individual Capacity.......................................75
         10.09    Successor Agent....................................................75
         10.10    Withholding Tax....................................................76
         10.11    Collateral Matters.................................................77
         10.12    Monitoring Responsibility..........................................78

ARTICLE XI            MISCELLANEOUS..................................................78

         11.01    Amendments and Waivers.............................................78
         11.02    Notices............................................................78
         11.03    No Waiver; Cumulative Remedies.....................................79
</Table>



                                     -iii-
<PAGE>

                                TABLE OF CONTENTS
                                  (continued)

<Table>
<Caption>
                                                                                    Page
                                                                                    ----
<S>                                                                                 <C>
         11.04    Costs and Expenses.................................................79
         11.05    Indemnity..........................................................79
         11.06    Payments Set Aside.................................................80
         11.07    Successors and Assigns.............................................80
         11.08    Assignments, Participations, Etc...................................80
         11.09    Set-off............................................................83
         11.10    Automatic Debits of Fees...........................................83
         11.11    Notification of Addresses, Lending Offices, Etc....................83
         11.12    Bank Blocked Account Charges and Procedures........................83
         11.13    Counterparts.......................................................84
         11.14    Severability.......................................................84
         11.15    No Third Parties Benefited.........................................84
         11.16    Governing Law and Jurisdiction.....................................84
         11.17    Waiver of Jury Trial...............................................85
         11.18    Discretionary Facility.............................................86
         11.19    Entire Agreement...................................................86
</Table>


                                      -iv-

<PAGE>
                                CREDIT AGREEMENT

         This CREDIT AGREEMENT (the "Agreement") is entered into effective as of
December 1, 2001, among WOODWARD MARKETING, L.L.C., a Delaware limited liability
company (the "Borrower"), FORTIS CAPITAL CORP., a Connecticut corporation
("Fortis"), as a Bank, as an Issuing Bank, and as Agent for the Banks, BNP
PARIBAS, a bank organized under the laws of France ("BNP Paribas"), as a Bank
and an Issuing Bank, and each other financial institution which may become a
party hereto (collectively the "Banks").

         WHEREAS, Banks and the Borrower desire to enter into this facility to
provide for an "uncommitted borrowing base demand credit facility" such facility
to be in an aggregate amount of up to $125,000,000, including an uncommitted
Letter of Credit facility to facilitate the Borrower's purchase of natural gas,
an uncommitted advance facility for the Borrower's working capital requirements
related to the purchase of natural gas, and an uncommitted overdraft line, all
as set forth below.

         NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

         1.01 Certain Defined Terms. The following terms have the following
meanings:

              "Account" has the meaning stated in the New York Uniform
Commercial Code.

              "Account Debtor" means a Person who is obligated to the Borrower
under an Account of the Borrower.

              "Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of a Person, or of any
business or division of a Person, (b) the acquisition of in excess of 50% of the
capital stock, partnership interests or equity of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger or consolidation or
any other combination with another Person (other than a Person that is a
Subsidiary); provided, however, that the relevant Borrower or the Subsidiary is
the surviving entity.

              "Adjusted Pro Rata Share" means, as to any Bank at any particular
time, the percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of (a) an amount equal to such Bank's Uncommitted
Line Portion plus, in the


<PAGE>

case of Fortis, the amount of advances made in excess of the Borrowing Base
Advance Cap under the Overdraft Line and/or to fund the Obligations of the
Borrower under the Overdraft Line and in the case of BNP Paribas, the amount of
advances made in excess of the Borrowing Base Advance Cap to fund Obligations of
the Borrower under Swap Contracts, divided by (b) the combined total of the
Uncommitted Line Portion of all the Banks plus, in the case of Fortis, the
amount of advances made in excess of the Borrowing Base Advance Cap under the
Overdraft Line and/or in the case of BNP Paribas, to fund Obligations of the
Borrower under Swap Contracts.

              "Advance Maturity Date" means the maturity date of advances made
hereunder which for Base Rate Loans will be the earliest to occur of (a) written
demand by Agent, or (b) 30 days from the date of the Borrowing, and for Offshore
Rate Loans will be the earliest to occur of (i) written demand by Agent, or (ii)
30 days from the date of the Borrowing, or (iii) the end of the Interest Period
for such Offshore Rate Loan.

              "Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. A Person shall be deemed to control another Person if
the controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract, or otherwise.

              "Agent" means Fortis in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 10.09.

              "Agent-Related Persons" means Fortis and any successor agent
arising under Section 10.09, together with their respective Affiliates and the
officers, directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.

              "Agent's Payment Office" means the address for payments set forth
on Schedule 11.02 hereto in relation to Agent, or such other address as Agent
may from time to time specify.

              "Agreement" means this Credit Agreement.

              "Applicable Margin" means:

              (a)           with respect to Base Rate Loans, one-half percent
                            (0.50%); and

              (b)           with respect to Offshore Rate Loans, two and
                            one-half percent (2.50%).

              "Approving Banks" has the meaning set forth in Section 2.14.

              "Assignee" has the meaning specified in Subsection 11.08(a).



                                      -2-
<PAGE>
              "Atmos Support Agreement" means an agreement of Atmos Energy
Corporation to provide certain support for Borrower and its operations, such
agreement to be in form and substance acceptable to Agent.

              "Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.

              "Bank Blocked Account" means Fortis' account no. 323373461
maintained with Chase into which collections from the Borrower's Accounts will
be deposited pursuant to Section 7.14.

              "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978,
as amended (11 U.S.C. Section 101, et seq.).

              "Banks" shall initially mean Fortis and BNP Paribas. At such time
as additional lending institutions are added to this Agreement, either through
an amendment to this Agreement or through an Assignment and Acceptance in
accordance with Subsection 11.08(a) hereof, the term "Bank" shall mean Fortis,
BNP Paribas and each such additional lending institution. References to the
"Banks" shall include Fortis, including in its capacity as an Issuing Bank; for
purposes of clarification only, to the extent that Fortis may have any rights or
obligations in addition to those of the Banks due to its status as an Issuing
Bank and as Agent, Fortis' status as such will be specifically referenced.

              "Base Rate" means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; or (b) the per annum rate of interest
established by Chase from time to time at its principal office in New York City
as its "prime rate" or "base rate" for U.S. dollar loans (with any change in
such prime rate or base rate to become effective as and when such prime rate or
base rate changes). (The "prime rate" or "base rate" is a rate set by Chase
based upon various factors including Chase's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above or below such announced rate.)

              "Base Rate Loan" means any Loan bearing interest based upon the
Base Rate.

              "BNP Paribas" means BNP Paribas, a bank organized under the laws
of France.

              "BofA Letter of Credit" means the Letter of Credit Issued by the
Issuing Banks for the account of the Borrower to Bank of America, N.A. in
connection with the closing of the transactions contemplated by this Agreement.



                                      -3-
<PAGE>

              "Borrower" means Woodward Marketing, L.L.C., a Delaware limited
liability company.

              "Borrowing" means a borrowing hereunder consisting of Revolving
Loans made to the Borrower on the same day by the Banks under Article II.

              "Borrowing Base Advance Cap" means at any time an amount equal to
the least of:

              (a)    $125,000,000.00;

              (b)    the Borrowing Base Sub-Cap; or

              (c)    the sum of:

                     (i) the amount of Cash Collateral and other liquid
         investments which are acceptable to the Banks in their sole discretion
         and which are subject to a first perfected security interest in favor
         of Agent, as collateral agent for the Banks, and which have not been
         used in determining availability for any other advance (other than
         advances made under the Borrowing Base Line) or Letter of Credit
         Issuance; plus

                     (ii) 90% of Borrower's equity in BNP Paribas Commodity
         Futures, Inc. accounts from and after the date that a tri-party
         agreement with respect to such accounts is entered into among Borrower,
         Agent and BNP Paribas Commodity Futures, Inc., to the extent such
         equity is not being used in determining availability for any other
         advance (other than advances made under the Borrowing Base Line) or
         Letter of Credit Issuance; plus

                     (iii) 90% of the amount of Tier I Accounts which are not
         being used in determining availability for any other advance (other
         than advances made under the Borrowing Base Line) or Letter of Credit
         Issuance, net of deductions, offsets and counterclaims; plus

                     (iv) 85% of the amount of Tier II Accounts and which are
         not being used in determining availability for any other advance (other
         than advances made under the Borrowing Base Line) or Letter of Credit
         Issuance, net of deductions, offsets and counterclaims; plus

                     (v) 85% of the amount of Tier I Unbilled Accounts which are
         not being used in determining availability for any other advance (other
         than advances made under the Borrowing Base Line) or Letter of Credit
         Issuance; plus



                                      -4-
<PAGE>
                     (vi) 80% of the amount of Tier II Unbilled Accounts which
         are not being used in determining availability for any other advance
         (other than advances made under the Borrowing Base Line) or Letter of
         Credit Issuance; plus

                     (vii) 80% of the amount of Eligible Inventory which are not
         being used in determining availability for any other advance (other
         than advances made under the Borrowing Base Line) or Letter of Credit
         Issuance; plus

                     (viii) 80% of the amount of Eligible Exchange Receivables
         which are not being used in determining availability for any other
         advance (other than advances made under the Borrowing Base Line) or
         Letter of Credit Issuance; plus

                     (ix) 80% of the amount of Undelivered Product Value; less

                     (x) the amounts which would be subject to a so-called
         "First Purchaser Lien" as defined in Texas Bus. & Com. Code Section
         9.343, comparable laws of the states of Oklahoma, Kansas, Wyoming or
         New Mexico, or any other comparable law, unless a Letter of Credit
         secures payment of all amounts subject to such First Purchaser Lien;
         less

                     (xi) 125% of the mark to market amounts owed to BNP Paribas
         and/or its Affiliates under Swap Contracts; and

                     (xii) 100% of Borrower's Unrealized Mark-to-Market Losses
         as of the date of determination of the Borrowing Base Advance Cap.

              In no event shall any amounts described in (c)(i) through (c)(xi)
above which may fall into more than one of such categories be counted more than
once when making the calculation under this definition.

              "Borrowing Base Collateral Position Report" means a report
detailing all Collateral which has been or is being used in determining
availability for an advance or letter of credit issuance under the Borrowing
Base Line, such report to be in the form attached hereto as Exhibit E.

              "Borrowing Base Line" means the uncommitted line of credit for the
purpose of (a) providing working capital and to fund payments to suppliers of
Product; (b) to provide for Letters of Credit to secure suppliers of Product;
and (c) to fund payments due to Fortis under the Overdraft Line or any Swap
Contract.

              "Borrowing Base Sub-Cap" means, initially, an amount equal to
$50,000,000.00; provided, however, that Borrower may elect from time to time any
of $50,000,000.00, $60,000,000.00, $70,000,000.00, $75,000,000.00,
$80,000,000.00, $90,000,000.00, $95,000,000.00, $100,000,000.00,
$110,000,000.00, $120,000,000.00 or




                                      -5-
<PAGE>

$125,000,000.00 as the Borrowing Base Sub-cap; provided, however, that
Borrower's Net Working Capital and Tangible Net Worth at the time of election
are greater than, or equal to, the amounts specified below:

              (a) If Borrower elects $125,000,000.00, Borrower's Net Working
Capital must be at least $25,000,000.00 and Tangible Net Worth must be at least
$26,000,000.00; or

              (b) If Borrower elects $120,000,000.00, Borrower's Net Working
Capital must be at least $24,000,000.00 and Tangible Net Worth must be at least
$25,000,000.00; or

              (c) If Borrower elects $110,000,000.00, Borrower's Net Working
Capital must be at least $22,000,000.00 and Tangible Net Worth must be at least
$23,000,000.00; or

              (d) If Borrower elects $100,000,000.00, Borrower's Net Working
Capital must be at least $20,000,000.00 and Tangible Net Worth must be at least
$21,000,000.00; or

              (e) If Borrower elects $95,000,000.00, Borrower's Net Working
Capital must be at least $19,000,000.00 and Tangible Net Worth must be at least
$20,000,000.00; or

              (f) If Borrower elects $90,000,000.00, Borrower's Net Working
Capital must be at least $18,000,000.00 and Tangible Net Worth must be at least
$19,000,000.00; or

              (g) If Borrower elects $80,000,000.00, Borrower's Net Working
Capital must be at least $16,000,000.00 and Tangible Net Worth must be at least
$17,000,000.00; or

              (h) If Borrower elects $75,000,000.00, Borrower's Net Working
Capital must be at least $15,000,000.00 and Tangible Net Worth must be at least
$16,000,000.00; or

              (i) If Borrower elects $70,000,000.00, Borrower's Net Working
Capital must be at least $14,000,000.00 and Tangible Net Worth must be at least
$15,000,000.00; or

              (j) If Borrower elects $60,000,000.00, Borrower's Net Working
Capital must be at least $12,000,000.00 and Tangible Net Worth must be at least
$13,000,000.00; or



                                      -6-
<PAGE>
              (k) If Borrower elects $50,000,000.00, Borrower's Net Working
Capital must be at least $10,000,000.00 and Tangible Net Worth must be at least
$11,000,000.00.

              Borrower shall elect which Borrowing Base Sub-Cap is in effect
from time to time by delivering to Agent a written notice of such election,
together with a Compliance Certificate in the form of Exhibit C which is
attached hereto but modified to include a certification that upon the
effectiveness of such election, no Default or Event of Default will exist.

              "Borrowing Date" means any date on which a Borrowing occurs under
Section 2.03.

              "Business Day" (a) with respect to all matters other than those
related to Offshore Rate Loans, means any day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York, are authorized, or
required, by law to close and (b) means, for purposes of determining business
days in connection with Offshore Rate Loans, any day on which transactions are
made in the applicable offshore dollar interbank market other than a Saturday,
Sunday or other day on which commercial banks in New York, New York, are
authorized or required, by law to close.

              "Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any Bank or of any corporation controlling a Bank.

              "Capital Stock" means capital stock, membership interest, equity
interest or other obligations or securities of, or any interest in, any Person.

              "Cash Collateral" means currency issued by the United States and
Marketable Securities which have been Cash Collateralized for the benefit of the
Banks.

              "Cash Collateralize" means to pledge and deposit with or deliver
to Agent, for the benefit of Agent, the Issuing Banks and the Banks, Cash
Collateral as collateral for the Obligations pursuant to documentation in form
and substance satisfactory to Agent (which documents are hereby consented to by
the Banks). The Borrower hereby grants Agent, for the benefit of Agent, the
Issuing Banks and the Banks, a security interest in all such Cash Collateral.
Cash Collateral shall be maintained in the Bank Blocked Account.

              "Change of Control" means the sale, pledge, hypothecation,
assignment or other transfer of more than twenty-five percent (25%) of the
Capital Stock or other ownership rights in the Borrower without the prior
written consent of the Banks, except for any such sale, pledge, hypothecation,
assignment or other transfer of the Capital Stock or other ownership rights in
the Borrower to Atmos Energy Marketing LLC.



                                      -7-
<PAGE>

              "Chase" means The Chase Manhattan Bank (or any successor).

              "Closing Date" means the date on which all conditions precedent
set forth in Section 5.01 are satisfied or waived by all Banks.

              "Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.

              "Collateral" means all assets of the Borrower including, without
limitation, all accounts, equipment, chattel paper, inventory, natural gas in
transit, instruments, contract rights, the Bank Blocked Account, stock,
partnership interests, and general intangibles, whether presently existing or
hereafter acquired or created and the proceeds thereof.

              "Collateral Position" means the total availability under the
Borrowing Base Advance Cap.

              "Collateralized L/C Line" means that certain uncommitted line of
credit in an amount of up to $15,000,000.00 for the purpose of providing Cash
Collateralized Letters of Credit with tenors not to exceed 90 days.

              "Compliance Certificate" means a certificate, in form attached
hereto as Exhibit C, whereby the Borrower certifies that it is in compliance
with this Agreement.

              "Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or without
recourse, (a) with respect to any Indebtedness, lease, dividend, letter of
credit or other obligation (the "primary obligations") of another Person (which
obligations and Person are referred to herein as the "primary obligation" and
the "primary obligor," respectively), including any obligation of that Person
(i) to purchase, repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide funds for the payment or discharge
of any such primary obligation, or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (iv)
otherwise to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation"); (b) with
respect to any Surety Instrument (other than any Letter of Credit) issued for
the account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any materials, supplies
or other property from, or to obtain the services of, another Person if the
relevant contract or other related document or obligation requires that payment
for such materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or



                                      -8-
<PAGE>

other property is ever made or tendered, or such services are ever performed or
tendered; or (d) in respect of any swap contract.

              "Contractual Obligation" means, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.

              "Conversion/Continuation Date" means any date on which, under
Section 2.04, the Borrower (a) converts Loans of one Type to another Type, or
(b) continues such Loans as Loans of the same Type, but with a new Interest
Period.

              "Conversion to Single Funding Bank Date" has the meaning specified
in Section 2.14.

              "Credit Extension" means and includes (a) the making of any Loans
hereunder, and (b) the Issuance of any Letters of Credit hereunder.

              "Current Assets" means those assets of the Borrower and its
consolidated subsidiaries which would in accordance with GAAP be classified as
current assets of a corporation conducting a business the same as or similar to
the businesses of the Borrower and its consolidated subsidiaries.

              "Current Liabilities" means Indebtedness of the Borrower and its
consolidated subsidiaries which would in accordance with GAAP be classified as
current liabilities of a corporation conducting a business the same as or
similar to the businesses of the Borrower and its consolidated subsidiaries.

              "Declining Bank" has the meaning specified in Section 2.14.

              "Default" means any event or circumstance which, with the giving
of notice, the lapse of time, or both, would constitute an Event of Default.

              "Default Rate" has the meaning specified in Subsection 2.08(a).

              "Documentary L/Cs" means a Letter of Credit which is intended at
the time of Issuance to be drawn upon and excludes standby letters of credit.

              "Dollar Advance Cap" means a cap upon Revolving Loans under the
Borrowing Base Line with the following limits:

              (a) $50,000,000.00 at such times as the Borrowing Base Sub-Cap is
$125,000,000.00;

              (b) $48,000,000.00 at such times as the Borrowing Base Sub-Cap is
$120,000,000.00;



                                      -9-
<PAGE>

              (c) $44,000,000.00 at such times as the Borrowing Base Sub-Cap is
$110,000,000.00; and

              (d) $40,000,000.00 at such times as the Borrowing Base Sub-Cap is
$100,000,000.00; and

              (e) $38,000,000.00 at such times as the Borrowing Base Sub-Cap is
$95,000,000.00; and

              (f) $36,000,000.00 at such times as the Borrowing Base Sub-Cap is
$90,000,000.00; and

              (g) $32,000,000.00 at such times as the Borrowing Base Sub-Cap is
$80,000,000.00; and

              (h) $30,000,000.00 at such times as the Borrowing Base Sub-Cap is
$75,000,000.00; and

              (i) $28,000,000.00 at such times as the Borrowing Base Sub-Cap is
$70,000,000.00; and

              (j) $24,000,000.00 at such times as the Borrowing Base Sub-Cap is
$60,000,000.00; and

              (k) $20,000,000.00 at such times as the Borrowing Base Sub-Cap is
$50,000,000.00.

              "Dollars," and "$" each mean lawful money of the United States.

              "Effective Amount" means (a) with respect to any Loans on any
date, the aggregate outstanding principal amount thereof after giving effect to
any Borrowings and prepayments or repayments of Loans occurring on such date;
and (b) with respect to any outstanding L/C Obligations on any date, the amount
of such L/C Obligations on such date after giving effect to any Issuances of
Letters of Credit occurring on such date and any other changes in the aggregate
amount of the L/C Obligations as of such date, including changes as a result of
expiration or cancellation, any reimbursements of outstanding unpaid drawings
under any Letters of Credit or any reductions in the maximum amount available
for drawing under Letters of Credit taking effect on such date.

              "Eligible Accounts" means, at the time of any determination
thereof, each of the Borrower's Accounts as to which the following requirements
have been fulfilled to the satisfaction of the Banks:



                                      -10-
<PAGE>

              (a) Such Account (if for an amount in excess of $750,000.00)
either (i) is the result of a sale to a Tier I or Tier II Account Party, or (ii)
is secured by letters of credit in form acceptable to the Banks in their sole
discretion and issued by banks approved by the Banks in their sole discretion;

              (b) Borrower has lawful and absolute title to such Account;

              (c) Such Account is a valid, legally enforceable obligation of the
Person who is obligated under such Account for goods actually delivered to such
Account Debtor in the ordinary course of the Borrower's business;

              (d) Such Account shall have excluded therefrom any portion that is
subject to any dispute, offset, counterclaim or other claim or defense on the
part of the Account Debtor or to any claim on the part of the Account Debtor
denying liability under such Account; provided, however, that in the event that
the portion that is subject to any such dispute, counterclaim or other claim or
defense is secured with a Letter of Credit, such portion secured by the Letter
of Credit shall not be excluded;

              (e) Such Account is not evidenced by any chattel paper, promissory
note or other instrument;

              (f) Such Account is subject to a fully perfected first priority
security interest (or properly filed and acknowledged assignment, in the case of
U.S. government contracts, if any) in favor of Agent pursuant to the Loan
Documents, prior to the rights of, and enforceable as such against, any other
Person, and such Account is not subject to any security interest or Lien in
favor of any Person other than the Liens of the Banks pursuant to the Loan
Documents;

              (g) Such Account shall have excluded therefrom any portion which
is not payable in Dollars in the U.S.;

              (h) Such Account has been due and payable for 15 days or less (or
30 days or less, if the Account Debtor is a governmental entity) from the date
of the invoice and no extension or indulgence has been granted extending the due
date beyond a 15 day period (or 30 days, as the case may be), except if such
Account by its terms provides for a 15 day payment period, then such Account
shall be eligible for up to 30 days from the date of invoice, or as otherwise
approved by Banks in writing; and

              (i) No Account Debtor in respect of such Account is (i) an
Affiliate of the Borrower, or (ii) incorporated in or primarily conducting
business in any jurisdiction outside of the U.S., unless such Account Debtor and
the Account is approved in writing by the Banks; provided, however, that as long
as Atmos Energy Corporation maintains an S&P rating of BBB+ or better, and such
Accounts would otherwise qualify as Eligible Accounts, Accounts of Atmos Energy
Corporation (and its Subsidiaries and Affiliates that have been approved by
Agent as Tier I Account Debtors) may be included as Tier I




                                      -11-
<PAGE>

Accounts to the extent that such Accounts do not exceed 50% of Borrower's total
Accounts.

              "Eligible Assignee" means (a) a commercial bank organized under
the laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $100,000,000.00; (b) a commercial bank organized
under the laws of any other country which is a member of the Organization for
Economic Cooperation and Development (the "OECD"), or a political subdivision of
any such country, and having a combined capital and surplus of at least
$100,000,000.00, provided, however, that such bank is acting through a branch or
agency located in the United States; and (c) a Person that is primarily engaged
in the business of commercial lending and that is (i) a Subsidiary of a Bank (or
bank referred to in the preceding clauses (a) or (b)), (ii) a Subsidiary of a
Person of which a Bank (or bank referred to in the preceding clauses (a) or (b))
is a Subsidiary, or (iii) a Person of which a Bank (or bank referred to in the
preceding clauses (a) or (b)) is a Subsidiary.

              "Eligible Broker" means any broker approved in writing by Agent
and the Banks.

              "Eligible Commodity Futures Accounts" means an account or accounts
with an Eligible Broker, in which Agent is granted a first and prior security
interest as Agent for the Banks pursuant to Hedging Assignments which security
interest is subject only to the rights of the Eligible Broker under such
accounts.

              "Eligible Exchange Receivables" means all enforceable rights of
the Borrower to receive Product in exchange for the sale or trade of Product
previously delivered to the exchange debtor by the Borrower valued at an
independent posting and which (a) are evidenced by a written agreement
enforceable against the exchange debtor thereof, (b) are current pursuant to the
terms of the contract or invoice, (c) are subject to a perfected, first Lien in
favor of Agent for the benefit of the Banks subject only to Permitted Liens, and
no other Lien, charge, offset or claim, (d) are not the subject of a dispute
between the exchange debtor and the Borrower, (e) are valued at Platt's spot
market price or an independent posting acceptable to the Banks in their sole
discretion, (f) if arising pursuant to contracts involving an amount in excess
of $750,000, are contracts by exchangers pre-approved by the Banks in their sole
discretion, or contracts secured by letters of credit in form acceptable to the
Banks in their sole discretion and issued by banks approved by the Banks in
their sole discretion, and (g) have not been otherwise determined by the Banks
in their sole discretion to be unacceptable to them. The Product and Account
relating to or creating any Eligible Exchange Receivable shall not be
simultaneously included in any other availability calculation, including,
without limitation, Undelivered Product Value, Eligible Inventory or Eligible
Accounts.

              "Eligible Inventory" means, at the time of determination thereof,
all of the Borrower's inventory stored in terminals (and provided the Banks must
have approved all terminal owners) valued at the lower of cost or current market
(as referenced by a



                                      -12-
<PAGE>

published source acceptable to Banks in their sole discretion), and in all
instances as to which the following requirements have been fulfilled to the
satisfaction of the Banks:

              (a) The inventory is owned by the Borrower free and clear of all
Liens in favor of third parties, except Liens in favor of the Banks under the
Loan Documents and except for Permitted Liens;

              (b) The inventory has not been identified to deliveries with the
result that a buyer would have rights to the inventory that would be superior to
Agent's security interest for the benefit of the Banks, nor shall such inventory
have become the subject of a customer's ownership or Lien;

              (c) The inventory is in transit in the U.S. under the control and
ownership of the Borrower or is in a pipeline or a bill of lading has been
issued to Agent if such inventory is in the hands of a third party carrier or is
located in the U.S. at the locations described on Schedule 7.03(f), or at such
other place as has been specifically agreed to in writing by the Banks and the
Borrower; and

              (d) The inventory is subject to a fully perfected first priority
security interest in favor of Agent for the benefit of the Banks pursuant to the
Loan Documents.

              "Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.

              "Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters.

              "ERISA" means the Employee Retirement Income Security Act of 1974,
and regulations promulgated thereunder.

              "ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Borrower within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).

              "ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any
ERISA Affiliate from a Multiemployer Plan or




                                      -13-
<PAGE>

notification that a Multiemployer Plan is in reorganization; (d) the filing of a
notice of intent to terminate, the treatment of a Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e)
an event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon the Borrower or any
ERISA Affiliate.

              "Eurodollar Reserve Percentage" means for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal, rounded upward to
the next 1/100th of 1%) in effect on such day (whether or not applicable to any
Bank) under regulations issued from time to time by the FRB for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities").

              "Event of Default" means any of the events or circumstances
specified in Section 9.01.

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

              "Expiration Date" means the earliest to occur of:

              (a) February 28, 2002; or

              (b) the date demand for payment is made by Agent; or

              (c) the date an Event of Default occurs.

              "FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.

              "Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by Agent of the rates for the last transaction in
overnight Federal Funds arranged prior to 9:00 a.m. (New York City time) on that
day by each of three leading brokers of Federal Funds transactions in New York
City selected by Agent.



                                      -14-
<PAGE>
              "Fortis" means Fortis Capital Corp., a Connecticut corporation.

              "FRB" means the Board of Governors of the Federal Reserve System,
and any Governmental Authority succeeding to any of its principal functions.

              "Further Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholding or similar charges
(including, without limitation, net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any jurisdiction on account of
amount payable or paid pursuant to Section 4.01.

              "GAAP" means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of determination.

              "Governmental Authority" means any nation or government, any state
or other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.

              "Guarantor" means Atmos Energy Marketing LLC.

              "Guaranty" means a Guaranty Agreement, in form and substance
acceptable to the Banks in their sole discretion, which has been executed by
Guarantor and delivered to Agent for the benefit of the Banks.

              "Guaranty Obligation" has the meaning specified in the definition
of "Contingent Obligation."

              "Hedging Assignment" means a security agreement among Borrower,
Agent and an Eligible Broker relating to the collateral assignment to Agent, as
collateral agent for the Banks, of all sums owing from time to time to Borrower
with respect to an Eligible Commodities Futures Account, such agreement to be in
form and substance acceptable to the Banks in their sole discretion.

              "Honor Date" has the meaning specified in Subsection 3.03(b).

              "Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into




                                      -15-
<PAGE>

in the ordinary course of business on ordinary terms); (c) all non-contingent
reimbursement or payment obligations with respect to Surety Instruments; (d) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses; (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to property acquired by the Person (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property); (f) all
obligations with respect to capital leases; (g) all obligations with respect to
swap contracts; (h) all indebtedness referred to in clauses (a) through (g)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such indebtedness;
and (i) all Guaranty Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (g) above.

              "Indemnified Liabilities" has the meaning specified in Section
11.05.

              "Indemnified Person" has the meaning specified in Section 11.05.

              "Independent Auditor" has the meaning specified in Subsection
7.01(a).

              "Insolvency Proceeding" means, with respect to any Person (a) any
case, action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors, or (b)
any general assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.

              "Interest Payment Date" means, as to any Loan other than a Base
Rate Loan, the last day of each Interest Period applicable to such Loan and, as
to any Base Rate Loan, the fifth Business Day of each month.

              "Interest Period" means, as to any Offshore Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the Conversion/Continuation
Date on which the Loan is converted into or continued as an Offshore Rate Loan,
and ending on the date selected by the Borrower as the ending date thereof, not
to exceed a period of 30 days, in its Notice of Borrowing or Notice of
Conversion/Continuation;

                  provided, however, that:

              (a) if any Interest Period would otherwise end on a day that is
not a Business Day, that Interest Period shall be extended to the following
Business Day unless



                                      -16-
<PAGE>

the result of such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the preceding
Business Day;

              (b) any Interest Period pertaining to an Offshore Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar month at the
end of such Interest Period; and

              (c) no Interest Period shall extend beyond the Expiration Date.

              "IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.

              "Issuance Date" means the date on which any Letter of Credit is
actually Issued hereunder.

              "Issue" means, with respect to any Letter of Credit, to issue or
to extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding
meanings.

              "Issuing Banks" initially means Fortis and BNP Paribas, and in the
future means any Bank which Issues Letters of Credit hereunder, in such Bank's
capacity as an issuer of one or more Letters of Credit hereunder, together with
any replacement letter of credit issuer arising under Section 2.14.

              "L/C Advance" means each Bank's participation in any L/C Borrowing
or Reducing L/C Borrowing in accordance with (i) its Pro Rata Share with respect
to Letters of Credit Issued prior to the Conversion to Single Funding Bank Date
and (ii) its proportionate share, if any, as an Approving Bank with respect to
all Letters of Credit Issued thereafter.

              "L/C Amendment Application" means an application form for
amendment of outstanding standby or commercial documentary letters of credit as
shall at any time be in use at any Issuing Bank, as such Issuing Bank shall
request.

              "L/C Application" means an application form for Issuances of
standby or commercial documentary letters of credit as shall at any time be in
use at any Issuing Bank, as such Issuing Bank shall request.

              "L/C Borrowing" means an extension of credit resulting from either
a drawing under any Letter of Credit or a Reducing L/C Borrowing, which
extension of credit shall not have been reimbursed on the date when made nor
converted into a Borrowing of Revolving Loans under Subsection 3.03(c).



                                      -17-
<PAGE>

              "L/C Cap" means the maximum availability for Issuance of Letters
of Credit under the Borrowing Base Line which shall be an amount equal to the
total Effective Amount of L/C Obligations plus the Effective Amount of then
outstanding Loans not to exceed the Borrowing Base Advance Cap.

              "L/C Obligations" means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the amount of
all unreimbursed drawings under all Letters of Credit, including all outstanding
L/C Borrowings.

              "L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document relating to
any Letter of Credit, including, but not limited to, any Issuing Bank's standard
form documents for letter of credit issuances.

              "Lending Office" means, as to any Bank, the office or offices of
such Bank specified as its "Lending Office" on Schedule 11.02, or such other
office or offices as such Bank may from time to time notify the Borrower and
Agent.

              "Letters of Credit" means (a) any letters of credit (whether
standby letters of credit or commercial documentary letters of credit) Issued by
an Issuing Bank pursuant to Article III and (b) any Reducing Letters of Credit.

              "LIBOR" means the rate of interest per annum determined by Agent
as the rate at which dollar deposits in the approximate amount of Fortis'
Offshore Rate Loan for such Interest Period would be offered by Fortis' London
branch as stated on Telerate News Service Page 3750 as of 11:00 a.m. (London
time) two (2) Business Days prior to the Borrowing Date. If such interest rates
shall cease to be available from Telerate News Service, the LIBOR Rate shall be
determined from such financial reporting service or other information as shall
be mutually acceptable to Agent and the Borrower.

              "Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge, encumbrance, or lien, statutory or
other in respect of any property, including those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the Uniform Commercial Code or any comparable law.

              "Line" means either the Borrowing Base Line, or the Collateralized
L/C Line or the Overdraft Line.

              "Loan" means (a) any extension of credit by a Bank to the Borrower
under Article II or Article III in the form of a Revolving Loan or an L/C
Advance and (b) any Overdraft Advance. All Loans are demand in nature and
Borrower hereby acknowledges



                                      -18-
<PAGE>

and agrees the Banks' right to demand payment at any time and for any reason or
for no reason, and such right is absolute and unconditional.

              "Loan Documents" means this Agreement, the Notes, the Guaranty,
the Security Agreement, the L/C-Related Documents, Swap Contracts and all other
documents delivered to Agent or any Bank in connection herewith.

              "Lock Box" has the meaning specified in Section 7.14.

              "Long Position" means the aggregate number of MMBTUS of Product
which are either held in inventory by the Borrower or which the Borrower has
contracted to purchase (whether by purchase of a contract on a commodities
exchange or otherwise), or which the Borrower will receive on exchange or the
notional quantity under a swap contract including, without limitation, all
option contracts representing the obligation of the Borrower to purchase Product
at the option of a third party, and in each case, for which a fixed purchase
price has been set. Long Positions will be expressed as a positive number.

              "Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.

              "Mark-to-Market" means, the method of accounting used to account
for derivative commodity instruments entered into for trading purposes, in
accordance with EITF 98-10, "Accounting for Energy Trading and Risk Management
Activities" and any future open obligation.

              "Marketable Securities" means (a) certificates of deposit issued
by any bank with a Thomson Watch rating of B or better, (b) commercial paper
rated P-1, A-1 or F-1, (c) bankers acceptances rated prime, or (d) U.S.
Government obligations with tenors of 90 days or less.

              "Material Adverse Effect" means (a) a material adverse change in,
or a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Borrower or the Borrower
and its Subsidiaries taken as a whole, (b) a material impairment of the ability
of the Borrower to perform under any Loan Document and to avoid any Event of
Default, or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against the Borrower or any of its Subsidiaries.

              "Maturity Date" means May 29, 2002.

              "Multiemployer Plan" means a "multiemployer plan," within the
meaning of Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA
Affiliate makes, is making, or is obligated to make contributions or, during the
preceding three (3) calendar years, has made, or been obligated to make,
contributions.



                                      -19-
<PAGE>

              "Net Position" means the sum of all Long Positions and Short
Positions of the Borrower.

              "Net Position Report" means a report in form attached hereto as
Exhibit F.

              "Net Working Capital" means the excess of Current Assets (minus
all amounts due from employees, owners, Subsidiaries and Affiliates other than
Accounts of Atmos Energy Corporation and its Subsidiaries and Affiliates
permitted to be included as Eligible Accounts in the calculation of the
Borrowing Base Advance Cap and minus the amount of any Cash Collateral pledged
by the Borrower to secure a Letter of Credit under the Collateralized L/C Line)
over Current Liabilities (excluding the current portion of Subordinated Debt),
less investments in Capital Stock. In calculating Net Working Capital, the
amount of Subordinated Debt excluded from liabilities in such calculation shall
not exceed 50% of the resultant Net Working Capital.

              "Notes" means the promissory notes executed by the Borrower in
favor of a Bank pursuant to Subsection 2.02(b), in form approved by the Banks. A
Note will be issued by the Borrower to each entity that becomes a Bank hereunder
from time to time, but will not be issued to Participants of a Bank.

              "Notice of Borrowing" means the applicable notice in substantially
the form of Exhibit A.

              "Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.

              "Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document, owing by the Borrower to
any Bank, or any affiliate of any Bank, Agent, or any Indemnified Person,
whether direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising, including,
without limitation, all obligations of the Borrower under Revolving Loans,
Letters of Credit, the Overdraft Line and any Swap Contracts.

              "Offshore Effective Amount" means the product of the principal
amount of an Offshore Rate Loan or requested Offshore Rate Loan and the number
of days in the applicable Interest Period for such Offshore Rate Loan.

              "Offshore Rate" means, for any Interest Period, with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate of interest
per annum (rounded upward to the next 1/16th of 1%) determined by Agent as
follows:

              Offshore Rate =           LIBOR
                                  -----------------

                      1.00 - Eurodollar Reserve Percentage



                                      -20-
<PAGE>

              The Offshore Rate shall be adjusted automatically as to all
Offshore Rate Loans then outstanding as of the effective date of any change in
the Eurodollar Reserve Percentage.

              "Offshore Rate Loan" means a Loan that bears interest based on the
Offshore Rate.

              "Organization Documents" means (a) for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred shareholders of
such corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such
corporation, and (b) for any partnership, the partnership agreement, and all
other documents or filings as may be required by the Secretary of State (or
other applicable governmental agency) in the state of such partnership's
formation.

              "Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any other Loan
Documents.

              "Overdraft Advance" means any advance made hereunder by Fortis
under the Overdraft Line.

              "Overdraft Line" means that certain discretionary overdraft line
the Borrower maintains with Fortis in a maximum amount of $30,000,000.

              "Participant" has the meaning specified in Subsection 11.08(d).

              "PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under ERISA.

              "Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Borrower sponsors, maintains, or
to which it makes, is making, or is obligated to make contributions, or in the
case of a multiple employer plan (as described in Section 4064(a) of ERISA) has
made contributions at any time during the immediately preceding five (5) plan
years.

              "Performance/Financial L/C" means all performance and financial
standby Letters of Credit.

              "Permitted Liens" has the meaning specified in Section 8.01.



                                      -21-
<PAGE>

              "Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture or
Governmental Authority.

              "Plan" means an employee benefit plan (as defined in Section 3(3)
of ERISA) which the Borrower sponsors or maintains or to which the Borrower
makes, is making, or is obligated to make contributions and includes any Pension
Plan.

              "Product" means natural gas.

              "Pro Rata Share" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Uncommitted Line Portion divided by the combined total of
the Uncommitted Line of all the Banks.

              "Reducing Letters of Credit" means any letters of credit (whether
standby letters of credit or commercial documentary letters of credit) that (a)
are Issued by an Issuing Bank pursuant to Article III, and (b) specifically
provide that the amount available for drawing under such letters of credit will
be reduced, automatically and without any further amendment or endorsement to
such letters of credit, by the amount of any payment or payments made to the
beneficiary of such Letter of Credit by the Borrower if such payment or payments
(i) are made through such Issuing Bank and (ii) reference such letters of credit
by the letter of credit numbers thereof, notwithstanding the fact that such
payment or payments are not made pursuant to conforming and proper draws under
such letters of credit.

              "Reducing L/C Borrowing" means any extension of credit by the
Banks to the Borrower for the purpose of funding any payment or payments made to
the beneficiary of a Reducing Letter of Credit by the Borrower if such payment
or payments (a) are made through the Issuing Bank of such Reducing Letter of
Credit, (b) reference the Reducing Letter of Credit by the letter of credit
number thereof, and (c) are not made pursuant to a conforming and proper draws
under such Reducing Letter of Credit.

              "Replacement Bank" has the meaning specified in Section 4.08.

              "Reportable Event" means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.

              "Requirement of Law" means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.



                                      -22-
<PAGE>

              "Responsible Officer" means any of the following: J.D. Woodward
III, Ronald W. Bahr or Randy W. Randel.

              "Revolving Loan" has the meaning specified in Section 2.01.

              "Security Agreements" means a security agreement, in form and
substance acceptable to Agent and the Banks, duly executed by the Borrower and
delivered to Agent for the benefit of the Banks granting to Agent, as collateral
agent for the Banks, a first and prior security interest in and Lien upon the
Collateral, and all Hedging Assignments.

              "Short Position" means the aggregate number of MMBTUS of Product
which the Borrower has contracted to sell (whether by sale of a contract on a
commodities exchange or otherwise) or deliver on exchange or under a swap
contract, including, without limitation, all option contracts representing the
obligation of the Borrower to sell Product at the option of a third party and in
each case for which a fixed sales price has been set. Short Positions shall be
expressed as a negative number.

              "Subordinated Debt" means Indebtedness of the Borrower which has
been reported to the Banks and which has been subordinated to the Obligations
pursuant to a Subordination Agreement substantially in the form attached hereto
as Exhibit H.

              "Subsidiary" of a Person means any corporation, association,
partnership, joint venture, limited liability company or other business entity
of which more than 50% of the voting stock or other equity interests (in the
case of Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Borrower.

              "Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties, shipside bonds,
surety bonds and similar instruments.

              "Swap Contract" means any agreement entered into with BNP Paribas
or any Affiliate of BNP Paribas, whether or not in writing, relating to any
single transaction that is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap or option, bond,
note or bill option, interest rate option, forward foreign exchange transaction,
cap, collar or floor transaction, currency swap, cross-currency rate swap,
currency option or any other similar transaction (including any option to enter
into any of the foregoing) or any combination of the foregoing and, unless the
context clearly requires, any master agreement relating to or governing any or
all of the foregoing.

              "Tangible Net Worth" means (a) the sum of the Borrower's assets,
as determined in accordance with GAAP, less (b) the sum of the Borrower's
liabilities



                                      -23-
<PAGE>

excluding Subordinated Debt, as determined in accordance with GAAP, less (c) all
amounts due from employees, owners, Subsidiaries and Affiliates other than
Accounts permitted to be included as Eligible Accounts in the calculation of the
Borrowing Base Advance Cap, less (d) investments in Capital Stock, less (e) the
intangible assets of the Borrower, as determined in accordance with GAAP. In
calculating Tangible Net Worth, the amount of Subordinated Debt excluded from
liabilities in such calculation shall not exceed 50% of the resultant Tangible
Net Worth.

              "Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings, or similar
charges, and all liabilities with respect thereto, excluding, in the case of
each Bank and Agent, taxes imposed on or measured by each Bank's net income or
capital (with respect to franchise taxes or similar taxes) by the jurisdiction
(or any political subdivision thereof) under the laws of which such Bank or
Agent, as the case may be, is organized or maintains a lending office.

              "Tier I Account" means an Eligible Account with a Tier I Account
Party.

              "Tier II Account" means Eligible Accounts with a Tier II Account
Party.

              "Tier I Account Party" means an Account Debtor which is approved
by the Banks as a Tier I Account Party.

              "Tier I Unbilled Account" means Unbilled Eligible Accounts with a
Tier I Account Party.

              "Tier II Unbilled Account" means Unbilled Eligible Accounts with a
Tier II Account Party.

              "Tier II Account Party" means any Account Debtor approved by the
Banks as a Tier II Account Party.

              "Type" means either a Base Rate Loan or an Offshore Rate Loan.

              "Unbilled Eligible Accounts" means Accounts of the Borrower for
Product which has been delivered to an Account Debtor and which would be
Eligible Accounts but for the fact that such Accounts have not actually been
invoiced at such time.

              "Uncommitted Line" means the aggregate Line limits of all the
Banks as is set forth on Schedule 2.01.

              "Uncommitted Line Portion" means for each Bank the portion of each
of the Line limits assigned to such Bank as set forth on Schedule 2.01.



                                      -24-
<PAGE>

              "Undelivered Product Value" means the lesser of the (a) cost or
(b) current market value of Product purchased by the Borrower under the Letters
of Credit but which has not been physically delivered to the Borrower.
Undelivered Product Value cannot simultaneously be included in an Eligible
Exchange Receivable.

              "Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.

              "United States" and "U.S." each means the United States of
America.

              "Unrealized Mark-to-Market Losses" means, Borrower's unrealized
Mark-to-Market losses as of the day of determination of Borrower's Borrowing
Base Advance Cap to be reported on a Borrowing Base Collateral Position Report,
calculated net of unrealized Mark-to-Market profits. If a loss, deduct the
absolute value of that loss, if a profit the value equals zero.

         1.02 Other Interpretive Provisions.

              (a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.

              (b) The words "hereof," "herein," "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and Subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.

              (c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.

                  (i) The term "including" is not limiting and means "including
         without limitation."

                  (ii) In the computation of periods of time from a specified
         date to a later specified date, the word "from" means "from and
         including"; the words "to" and "until" each mean "to but excluding,"
         and the word "through" means "to and including."

              (d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as




                                      -25-
<PAGE>

including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation.

              (e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.

              (f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.

              (g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to Agent, the Banks, the
Borrower and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or Agent merely
because of Agent's or Banks' involvement in their preparation.

         1.03 Accounting Principles.

              (a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made in accordance with
GAAP, consistently applied.

              (b) References herein to "fiscal year" and "fiscal quarter" refer
to such fiscal periods of the Borrower.

                                   ARTICLE II

                                  THE CREDITS

         2.01 Amounts and Terms of Uncommitted Line (Excluding Overdraft Line).

              (a) Each Bank severally agrees, on an UNCOMMITTED AND ABSOLUTELY
DISCRETIONARY basis, and on the terms and conditions set forth herein, to
consider making Loans, from time to time, to the Borrower under the Borrowing
Base Line (each such loan, a "Revolving Loan") on any Business Day during the
period from the Closing Date to the Expiration Date, in an aggregate amount not
to exceed at any time outstanding (i) such Bank's Uncommitted Line Portion for
the Borrowing Base Line; or (ii) the Dollar Advance Cap; provided, however,
that, after giving effect to any Borrowing of Revolving Loans, the Effective
Amount of all outstanding Revolving Loans, plus the Effective Amount of all L/C
Obligations, shall not exceed the Borrowing Base Advance Cap. At no time shall
the Dollar Advance Cap be exceeded.



                                      -26-
<PAGE>
              (b) Amount and Terms of Overdraft Line. Fortis agrees, on an
UNCOMMITTED AND ABSOLUTELY DISCRETIONARY basis, and on the terms and conditions
set forth herein, to consider making overdraft advances under the Overdraft
Line, from time-to-time, for the benefit of the Borrower.

              (c) Advances Related to the Overdraft Line and Swap Contracts. In
addition to advances requested from time to time by the Borrower, in the event
that either (i) any amounts owing to Fortis or BNP Paribas or any of their
Affiliates under the Overdraft Line or any Swap Contract are not paid within two
(2) Business Days after such obligation arises; or (ii) Fortis or any of its
Affiliates have made an Overdraft Advance in the amount of a drawing under a
Letter of Credit which has not been timely reimbursed by the Borrower in
accordance with Subsection 3.03(b) of this Agreement and such amount has not
been paid by the Borrower within one (1) Business Day after such obligation
arises, then Fortis or BNP Paribas shall notify Agent of such failure to pay and
Agent (without the necessity of any instructions or request from the Borrower)
shall make a Revolving Loan in accordance with the provisions of Section 2.03 of
this Agreement under the Borrowing Base Line for any amounts due by the Borrower
to Fortis or BNP Paribas or any of their Affiliates under the Overdraft Line, or
any Swap Contract, and then apply the proceeds of such advance to pay to Fortis,
or BNP Paribas or any of their Affiliates (as the case may be) all amounts owed
to such Person under the Overdraft Line or such Swap Contract. Upon making any
such Revolving Loan, Agent shall send notice of such Revolving Loan to the
Borrower and the Banks. Any such advance shall initially be a Base Rate Loan. In
the event that any such advance made to fund Fortis or BNP Paribas or any of
their Affiliates, other than an advance to reimburse Fortis for an Overdraft
Advance made to fund a drawing under Letters of Credit or to fund Reducing L/C
Borrowings, results in an advance in excess of the Borrowing Base Advance Cap,
the Banks shall have no duty to fund their pro rata share of any excess
resulting from such advance made to repay amounts owing to Fortis or BNP Paribas
or any of their Affiliates under the Overdraft Line or any Swap Contract, but
Fortis' or BNP Paribas' or any of their Affiliates', as the case may be,
outstandings hereunder shall be deemed to be increased by the amount of such
excess. Notwithstanding the foregoing, the Banks other than Fortis shall have
the duty, however, to fund their pro rata share of all Overdraft Advances made
to fund drawings under Letters of Credit or to fund Reducing L/C Borrowings. In
the event any advance described above does exceed the Borrowing Base Advance
Cap, the Borrower shall pay to Agent, for the benefit of Fortis or BNP Paribas
or any of their Affiliates (as the case may be), the amount of such excess,
together with interest thereon, within one (1) Business Day after the date of
such advance and, notwithstanding anything to the contrary herein, the Banks
other than Fortis shall not share in such payment. Upon the event of an
Overdraft Advance, Borrower shall represent and warrant, as of the date such
advance is made, that (i) no Default or Event of Default has occurred and will
be continuing, nor will any thereof occur after giving effect to such advance;
(ii) that neither the Borrowing Base Advance Cap nor Collateral Position will be
exceeded after giving effect to such advance; and (iii) all of Borrower's
representations and warranties under the Agreement are true and correct as of
such date.




                                      -27-
<PAGE>

Notwithstanding any provisions to the contrary contained herein, on the date of
an Overdraft Advance and after giving effect to such Overdraft Advance, the
total of the Effective Amount of all Revolving Loans plus the Effective Amount
of all L/C Obligations plus the Effective Amount of such Overdraft Advance may
exceed the Borrowing Base Advance Cap by an amount of such Overdraft Advance,
provided, however, that the Borrower shall either (i) repay such Overdraft
Advance by the next Business Day, (ii) if there is availability under the
Borrowing Base Line as determined by the then current collateral position
report, some or all of such Overdraft Advance may become a Revolving Loan, or
(iii) combine (i) and (ii) to reduce the amount extended to the Borrower to not
exceed the Borrowing Base Advance Cap. Under no event shall the total of the
Effective Amount of all Revolving Loans plus the Effective Amount of all L/C
Obligations plus the Effective Amount of such Overdraft Advance exceed the
Borrowing Base Advance Cap on the next Business Day after the extension of such
Overdraft Advance.

         THE BORROWER ACKNOWLEDGES AND AGREES THAT THE BANKS HAVE ABSOLUTELY NO
DUTY TO FUND ANY REVOLVING LOAN REQUESTED BY THE BORROWER BUT WILL EVALUATE EACH
LOAN REQUEST AND IN EACH BANK'S ABSOLUTE AND SOLE DISCRETION WILL DECIDE WHETHER
TO FUND SUCH LOAN REQUEST. THE BORROWER FURTHER ACKNOWLEDGES AND AGREES THAT
FORTIS HAS ABSOLUTELY NO DUTY TO MAKE OR FUND ANY OVERDRAFT ADVANCE OR, IN THE
CASE OF BNP PARIBAS, TO ENTER INTO ANY SWAP CONTRACT, AND ANY OVERDRAFT ADVANCE
SHALL BE AT FORTIS' ABSOLUTE AND SOLE DISCRETION AND THAT BNP PARIBAS HAS
ABSOLUTELY NO DUTY TO ENTER INTO ANY SWAP CONTRACT, AND THE ENTERING INTO OF ANY
SWAP CONTRACT SHALL BE AT BNP PARIBAS' ABSOLUTE AND SOLE DISCRETION.

         2.02 Loan Accounts.

              (a) The Loans made by each Bank and the Letters of Credit Issued
by an Issuing Bank shall be evidenced by one or more accounts or records
maintained by Agent in the ordinary course of business. The accounts or records
maintained by Agent shall be conclusive absent manifest error of the amount of
the Loans made by the Banks to the Borrower and the Letters of Credit Issued for
the account of the Borrower hereunder, and the interest and payments thereon.
Any failure so to record or any error in doing so shall not, however, limit or
otherwise affect the Obligation of the Borrower hereunder to pay any amount
owing with respect to the Loans or any Letter of Credit.

              (b) Upon the request of any Bank made through Agent, the Loans
made by such Bank may be evidenced by one or more Notes, instead of loan
accounts. Each such Bank may endorse on the schedules annexed to its Note(s) the
date, amount and maturity of each Loan made by it and the amount of each payment
of principal made



                                      -28-
<PAGE>

by the Borrower with respect thereto. Each such Bank is irrevocably authorized
by the Borrower to endorse its Note(s) and each Bank's record shall be
conclusive absent manifest error; provided, however, that the failure of a Bank
to make, or an error in making, a notation thereon with respect to any Loan
shall not limit or otherwise affect the Obligations of the Borrower hereunder or
under any such Note to such Bank.

         2.03 Procedure for Borrowing.

              (a) Each Borrowing of Revolving Loans consisting only of Base Rate
Loans, if approved by the Banks in their sole discretion, shall be made upon the
Borrower's irrevocable written notice delivered to Agent and the Banks in the
form of a Notice of Borrowing (Revolving Loan), which notice must be received by
Agent and the Banks prior to 12:00 p.m. noon (New York City time) on the
Borrowing Date specifying the amount of the Borrowing. Each such Notice of
Borrowing shall be by electronic transfer or facsimile, confirmed immediately in
an original writing. Each Borrowing of Revolving Loans that includes any
Offshore Rate Loans, if approved by the Banks in their sole discretion, shall be
made upon the Borrower's irrevocable written notice delivered to Agent and the
Banks in the form of a Notice of Borrowing (which notice must be received by
Agent and the Banks prior to 12:00 p.m. noon (New York City time) three (3)
Business Days prior to the requested Borrowing Date), specifying the amount of
the Borrowing. Each such Notice of Borrowing shall be by electronic transfer or
facsimile, confirmed immediately in an original writing. Each requested Offshore
Rate Loan must have an Offshore Effective Amount of at least $15,000,000.

              (b) Agent will promptly notify each Bank of its receipt of any
Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Borrowing.

              (c) The Banks will advise Agent by 2:00 p.m. (New York City time)
on the requested Borrowing Date with respect to Base Rate Loans and three (3)
Business Days prior to the requested Borrowing Date with respect to Offshore
Rate Loans whether the Banks approve the Borrowing. If all the Banks approve
such Borrowing, then each Bank will make the amount of its Pro Rata Share of
such Borrowing available to Agent for the account of the Borrower at Agent's
Payment Office by 4:30 p.m. (New York City time) on the Borrowing Date requested
by the Borrower in funds immediately available to Agent. The proceeds of all
such Loans will then be made available to the Borrower by Agent at such office
by crediting the account of the Borrower on the books of Agent with the
aggregate of the amounts made available to Agent by the Banks and in like funds
as received by Agent. If any Bank gives Agent notice of its disapproval of such
Borrowing by 2:00 p.m. (New York City time) on the requested Borrowing Date, if
a Base Rate Loan, or three (3) Business Days prior to the requested Borrowing
Date if an Offshore Rate Loan, then Agent shall notify the Borrower no later
than 4:30 p.m. (New York City time) that one or more of the Banks have elected
not to fund such Borrowing and whether a Bank (or Banks) has (have) elected to
become the Approving Banks thereby triggering the Conversion to Single Funding
Bank Date.



                                      -29-
<PAGE>

              (d) An Overdraft Advance may be made by Fortis in its sole
discretion or, at Fortis' discretion, upon written request from the Borrower.

         2.04 Conversion and Continuation Elections.

              (a) Borrower may, upon irrevocable written notice to Agent in
accordance with Subsection 2.04(b):

                  (i) elect, as of any Business Day, in the case of Base Rate
         Loans, or as of the last day of the applicable Interest Period, in the
         case of any Offshore Rate Loan, to convert any such Loans into Loans of
         any other Type (provided, however, that the Offshore Effective Amount
         of each Offshore Rate Loan must be at least $15,000,000); or

                  (ii) elect, as of the last day of the applicable Interest
         Period, to continue any Revolving Loans having Interest Periods
         expiring on such day (provided, however, that the Offshore Effective
         Amount of each Offshore Rate Loan must be at least $15,000,000);

provided, however, that if at any time the aggregate amount of Offshore Rate
Loans in respect of any Borrowing is reduced, by payment, prepayment, or
conversion of part thereof, to have an Offshore Effective Amount of less than
$15,000,000, such Offshore Rate Loans shall automatically convert into Base Rate
Loans, and on and after such date the right of the Borrower to continue such
Loans as, and convert such Loans into, Offshore Rate Loans shall terminate.

              (b) Borrower shall deliver a Notice of Conversion/Continuation to
be received by Agent not later than 1:00 p.m. (New York City time) on the
Conversion/Continuation Date if the Loans are to be converted into Base Rate
Loans; and three (3) Business Day in advance of the Conversion/Continuation
Date, if the Loans are to be converted into or continued as Offshore Rate Loans,
specifying:

                  (i) the proposed Conversion/Continuation Date;

                  (ii) the aggregate amount of Loans to be converted or
         continued;

                  (iii) the Type of Loans resulting from the proposed conversion
         or continuation; and

                  (iv) other than in the case of conversions into Base Rate
         Loans, the duration of the requested Interest Period.

              (c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Borrower has failed to timely select a new Interest
Period to be



                                      -30-
<PAGE>

applicable to its Offshore Rate Loans, or if any Default or Event of Default
then exists, the Borrower shall be deemed to have elected to convert such
Offshore Rate Loans into Base Rate Loans effective as of the expiration date of
such Interest Period.

              (d) Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by the
Borrower, Agent will promptly notify each Bank of the details of any automatic
conversion. All conversions and continuations shall be made ratably according to
the respective outstanding principal amounts of the Loans, with respect to which
the notice was given, held by each Bank.

              (e) Unless the Banks otherwise agree, during the existence of a
Default or Event of Default, the Borrower may not elect to have a Loan converted
into or continued as an Offshore Rate Loan.

              (f) After giving effect to any Borrowing, conversion or
continuation of Loans, there may not be more than five (5) Interest Periods in
effect.

              (g) Agent will promptly notify, in writing, each Bank of the
amount of such Bank's Pro Rata Share of that Borrowing.

              (h) The Banks will advise Agent by 2:00 p.m. (New York City time)
on the requested Conversion/Continuation Date whether the Banks approve the
conversion/continuation. If any Bank gives Agent notice of its disapproval of
such conversion/continuation by 2:00 p.m. (New York City time) then Agent shall
notify the Borrower no later than 4:30 p.m. (New York City time) that one or
more of the Banks have elected not to convert/continue such Loan and whether
Bank(s) has (have) elected to become the Approving Bank(s) thereby triggering
the Conversion to Single Funding Bank Date.

         2.05 Optional Prepayments. The Borrower may, at any time or from time
to time, upon the Borrower's irrevocable written notice to Agent received prior
to 1:00 p.m. (New York City time) on the date of prepayment, prepay Loans in
whole or in part without premium except any amounts due by Borrower pursuant to
Article IV. Agent will promptly notify each Bank of its receipt of any such
prepayment, and of such Bank's Pro Rata Share of such prepayment.

         2.06 Mandatory Prepayments of Loans; Mandatory Commitment Reductions.
If on any date the Effective Amount of L/C Obligations exceeds the L/C Cap, the
Borrower shall Cash Collateralize on such date the outstanding Letters of Credit
in an amount equal to the excess above any such cap. If on any date after giving
effect to any Cash Collateralization made on such date pursuant to the preceding
sentence, the Effective Amount of all Revolving Loans then outstanding plus the
Effective Amount of all L/C Obligations exceeds the lesser of (a) the Collateral
Position or (b) the total Uncommitted Line, or if the Effective Amount of all
Revolving Loans under the Borrowing Base Line then outstanding, plus the
Effective Amount of all L/C Obligations



                                      -31-
<PAGE>

under such Line exceed the Borrowing Base Advance Cap, the Borrower shall
immediately, and without notice or demand, prepay the outstanding principal
amount of the Revolving Loans and L/C Advances by an amount equal to the
applicable excess.

         2.07 Repayment. The Borrower shall repay the principal amount of each
Revolving Loan to Agent on behalf of the Banks, on the Advance Maturity Date for
such Loan. The Borrower shall repay to Agent for the benefit of Fortis each
Overdraft Advance made under the Overdraft Line on the next Business Day after
such Overdraft Advance is made. Notwithstanding anything to the contrary
contained herein, the Banks other than Fortis shall not share in any payment
made with respect to the Overdraft Line. All amounts owing Fortis under the
Overdraft Line or BNP Paribas under any Swap Contract, to the extent such
amounts have not been repaid from the proceeds of a Revolving Loan, shall be
paid on demand, or if no demand is made, on the first (1st) Business Day after
the Borrower receives notice that such amount was advanced by or becomes owing
to Fortis or BNP Paribas.

         2.08 Interest.

              (a) Each Revolving Loan and Overdraft Advance (except for a
Revolving Loan made as a result of a drawing under a Letter of Credit or a
Reducing L/C Borrowing) shall bear interest on the outstanding principal amount
thereof from the applicable Borrowing Date at a floating rate per annum equal to
the Base Rate plus the Applicable Margin at all times such Loan is a Base Rate
Loan or at the Offshore Rate plus the Applicable Margin at all times such Loan
is an Offshore Rate Loan. Each Revolving Loan made as a result of a drawing
under a Letter of Credit or a Reducing L/C Borrowing, all amounts owing to
Fortis or any Affiliate of Fortis under the Overdraft Line or BNP Paribas with
respect to any Swap Contract, shall bear interest on the outstanding principal
amount thereof from the date funded at a floating rate per annum equal to the
Base Rate plus the Applicable Margin until such Loan has been outstanding for
more than two (2) Business Days and, thereafter, shall bear interest on the
outstanding principal amount thereof at a floating rate per annum equal to the
Base Rate, plus three percent (3.0%) per annum (the "Default Rate").

              (b) Interest on each Revolving Loan shall be paid upon demand, or
if no demand is made, shall be paid in arrears on each Interest Payment Date.
Interest on each Overdraft Advance shall be paid upon demand, or if no demand is
made, on the earlier to occur of the date of repayment of such Overdraft Advance
or the date such Overdraft Advance is due and payable.

              (c) Notwithstanding subsection (a) of this Section, if any amount
of principal of or interest on any Loan, or any other amount payable hereunder
or under any other Loan Document is not paid in full when due (whether at stated
maturity, by acceleration, demand or otherwise), the Borrower agrees to pay
interest on such unpaid principal or other amount, from the date such amount
becomes due until the date such amount is paid in full, and after as well as
before any entry of judgment thereon to the



                                      -32-
<PAGE>

extent permitted by law, payable on demand, at a fluctuating rate per annum
equal to the Default Rate.

              (d) Anything herein to the contrary notwithstanding, the
Obligations of the Borrower to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary to
the provisions of any law applicable to such Bank limiting the highest rate of
interest that may be lawfully contracted for, charged or received by such Bank,
and in such event the Borrower shall pay such Bank interest at the highest rate
permitted by applicable law.

              (e) Regardless of any provision contained in any Note or in any of
the Loan Documents, none of the Banks shall ever be deemed to have contracted
for or be entitled to receive, collect or apply as interest under any such Note
or any Loan Document, or otherwise, any amount in excess of the maximum rate of
interest permitted to be charged by applicable law, and, in the event that any
of the Banks ever receive, collect or apply as interest any such excess, such
amount which would be excessive interest shall be applied to the reduction of
the unpaid principal balance of the Note, and, if the principal balance of such
Note is paid in full, any remaining excess shall forthwith be paid to the
Borrower. In determining whether or not the interest paid or payable under any
specific contingency exceeds the highest lawful rate, the Borrower and such Bank
shall, to the maximum extent permitted under applicable law, (i) characterize
any non-principal payment as an expense, fee, or premium, rather than as
interest, (ii) exclude voluntary prepayments and the effect thereof, and (iii)
spread the total amount of interest throughout the entire contemplated term of
such Note so that the interest rate is uniform throughout such term; provided,
however, that if all Obligations under the Note and all Loan Documents are
performed in full prior to the end of the full contemplated term thereof, and if
the interest received for the actual term thereof exceeds the maximum lawful
rate, such Bank shall refund to the Borrower the amount of such excess, or
credit the amount of such excess against the aggregate unpaid principal balance
of such Bank's Note at the time in question.

         2.09 Agent Fees. In addition to certain fees described in Section 3.08,
the Borrower shall pay an Agent's fee to Fortis in accordance with a separate
letter agreement between Fortis and the Borrower.

         2.10 Computation of Fees and Interest.

              (a) All other computations of fees and interest shall be made on
the basis of a 360-day year and actual days elapsed (which results in more
interest being paid than if computed on the basis of a 365-day year). Interest
and fees shall accrue during each period during which interest or such fees are
computed from the first day thereof through the last day thereof.



                                      -33-
<PAGE>

              (b) Each determination of an interest rate by Agent shall be
conclusive and binding on the Borrower and the Banks in the absence of manifest
error.

         2.11 Payments by the Borrower.

              (a) All payments to be made by the Borrower shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by the Borrower shall be made to Agent for the account of
the Banks at Agent's Payment Office, and shall be made in dollars and in
immediately available funds, no later than 1:00 p.m. (New York City time) on the
date specified herein. Agent will promptly distribute to each Bank its Pro Rata
Share or Adjusted Pro Rata Share, as the case may be, of such payment in like
funds as received. Any payment received by Agent later than 1:00 p.m. (New York
City time) shall be deemed to have been received on the following Business Day
and any applicable interest or fee shall continue to accrue.

              (b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.

              (c) Unless Agent receives notice from the Borrower prior to the
date on which any payment is due to the Banks that the Borrower will not make
such payment in full as and when required, Agent may assume that the Borrower
has made such payment in full to Agent on such date in immediately available
funds and Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Borrower has not made such
payment in full to Agent, each Bank shall repay to Agent on demand such amount
distributed to such Bank, together with interest thereon at the Federal Funds
Rate for each day from the date such amount is distributed to such Bank until
the date repaid.

         2.12 Payments by the Banks to Agent. If and to the extent any Bank
shall not have made its full amount available to Agent in immediately available
funds and Agent in such circumstances has made available to the Borrower such
amount, that Bank shall on the Business Day following such Borrowing Date make
such amount available to Agent, together with interest at the Federal Funds Rate
for each day during such period. A notice of Agent submitted to any Bank with
respect to amounts owing under this Section 2.12 shall be conclusive, absent
manifest error. If such amount is so made available, such payment to Agent shall
constitute such Bank's Loan on the date of Borrowing for all purposes of this
Agreement. If such amount is not made available to Agent on the Business Day
following the Borrowing Date, Agent will notify the Borrower of such failure to
fund and, upon demand by Agent, the Borrower shall pay such amount to Agent for
Agent's account, together with interest thereon for each day elapsed since the
date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Loans comprising such Borrowing.



                                      -34-
<PAGE>
         2.13 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Pro Rata Share or Adjusted Pro Rata
Share, as the case may be at such time (other than payments to Fortis or BNP
Paribas with respect to advances made in excess of the Borrowing Base Advance
Cap as a result of payment under a Swap Contract or advances under the Overdraft
Line), such Bank shall immediately (a) notify Agent of such fact, and (b)
purchase from the other Banks such participations in the Loans made by them as
shall be necessary to cause such purchasing Bank to share the excess payment pro
rata with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from the purchasing Bank, such purchase
shall to that extent be rescinded and each other Bank shall repay to the
purchasing Bank the purchase price paid therefor, together with an amount equal
to such paying Bank's ratable share (according to the proportion of (i) the
amount of such paying Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Borrower agrees that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 11.09) with respect to
such participation as fully as if such Bank were the direct creditor of the
Borrower in the amount of such participation. Agent will keep records (which
shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments.

         2.14 The Election of One Bank to Continue Funding. If one or more Banks
(the "Declining Banks") do not approve a requested Revolving Loan or the
issuance or amendment of a requested Letter of Credit for reasons other than a
Default and the other Bank or Banks do approve such Revolving Loan or the
issuance or amendment of such Letter of Credit, Agent shall notify the Banks. If
the Bank or Banks which are not the Declining Banks desire, they may (on a pro
rata basis among the Banks that have elected to continue funding) make the full
amount of such requested Revolving Loan or issue or amend the requested Letter
of Credit irrespective of the Declining Banks' disapproval (in such case, the
Banks that elect to continue funding shall be referred to as the "Approving
Banks"). In such event, from such date (the "Conversion to Single Funding Bank
Date") forward (a) all subsequent Revolving Loans and Issuances of Letters of
Credit or Amendments to Letters of Credit that increase the face amount of a
Letter of Credit or extend the term of a Letter of Credit shall be made
unilaterally by the Approving Banks and no Letter of Credit thereafter Issued
shall be participated in by the Declining Banks, (b) all Banks' interests in the
Collateral and loan management decisions shall be pro-rata based on each Bank's
total Effective Amount of Revolving Loans, plus the Effective Amounts of such
Bank's L/C Obligations from time to time, and (c) the Approving Banks'
Uncommitted Line Portion shall be increased on the basis of each such advance
and Issuance of a Letter of Credit.



                                      -35-
<PAGE>
              NOTWITHSTANDING THE FOREGOING, HOWEVER, FOR PURPOSES OF ALLOCATING
REPAYMENTS PRIOR TO THE OCCURRENCE OF A DEFAULT HEREUNDER, THE ADJUSTED PRO RATA
SHARE OF THE UNCOMMITTED LINE OF EACH BANK SHALL REMAIN FIXED AT THE PERCENTAGE
HELD BY SUCH BANK THE DAY BEFORE THE CONVERSION TO SINGLE FUNDING BANK DATE,
WITHOUT RESPECT TO ANY CHANGES WHICH MAY SUBSEQUENTLY OCCUR IN SUCH BANK'S PRO
RATA SHARE OF THE UNCOMMITTED LINE EXCEPT THAT IN THE EVENT THAT OBLIGATIONS
BECOME OWING TO FORTIS OR BNP PARIBAS AND THEIR AFFILIATES AFTER SUCH DATE
PURSUANT TO THE OVERDRAFT LINE OR PURSUANT TO SWAP CONTRACTS AS A RESULT OF
CONTRACTS OR TRANSACTIONS EXISTING ON THE CONVERSION TO SINGLE FUNDING BANK
DATE, THE ADJUSTED PRO RATA SHARE OF EACH BANK SHALL BE RECALCULATED TO ACCOUNT
FOR THE INCREASE IN OBLIGATIONS THAT HAVE BECOME OWING TO FORTIS OR BNP PARIBAS
OR THEIR AFFILIATES UNTIL SUCH TIME, IF ANY, THAT ALL DECLINING BANKS ARE FULLY
REPAID. UPON THE OCCURRENCE OF A DEFAULT AND THEREAFTER, REPAYMENTS SHALL BE
ALLOCATED ACCORDING TO THE ADJUSTED PRO RATA SHARE OF THE OUTSTANDING BALANCES
HELD BY THE BANKS ON THE DATE OF DEFAULT EXCEPT THAT IN THE EVENT THAT
OBLIGATIONS BECOME OWING TO FORTIS OR BNP PARIBAS OR THEIR AFFILIATES AFTER SUCH
DATE PURSUANT TO THE OVERDRAFT LINE OR PURSUANT TO SWAP CONTRACTS AS A RESULT OF
CONTRACTS OR TRANSACTIONS EXISTING ON THE DATE OF SUCH DEFAULT, THE ADJUSTED PRO
RATA SHARE OF EACH BANK SHALL BE RECALCULATED TO ACCOUNT FOR THE INCREASE IN
OBLIGATIONS OWING TO FORTIS OR BNP PARIBAS OR THEIR AFFILIATES.

         2.15 Payments from Guarantor and Liquidation of Collateral.
Notwithstanding anything to the contrary contained herein, in the event
repayment is made to the Banks by Guarantor or pursuant to a liquidation of
Collateral, such repayment shall be shared by the Banks on the basis of each
Bank's then existing Adjusted Pro Rata Share rather than each Bank's Pro Rata
Share.

                                  ARTICLE III

                              THE LETTERS OF CREDIT

         3.01 The Letter of Credit Lines.

              (a) On an uncommitted basis and on the terms and conditions set
forth herein and if the Issuance of such Letter of Credit has been consented to
by the Banks in their sole discretion (i) each Issuing Bank agrees, (A) from
time to time on any Business Day during the period from the Closing Date to the
Expiration Date, to consider the Issuance of Letters of Credit for the account
of the Borrower under the Borrowing Base Line or the Collateralized L/C Line and
to consider whether to amend or renew Letters of Credit previously Issued by it,
in accordance with Subsections 3.02(b) and 3.02(c), and (B) to honor drafts
under the Letters of Credit; and (ii) the Banks shall participate in Letters of
Credit Issued for the account of the Borrower; provided, however, that the
Declining Bank shall not have any obligation to and shall not be deemed to have
participated in any Letters of Credit which are Issued on or after the
Conversion to Single



                                      -36-
<PAGE>

Funding Bank Date. Within the foregoing limits, and subject to the other terms
and conditions hereof including, without limitation, the approval of the Banks
in their sole discretion, the Borrower's ability to request that an Issuing Bank
Issue Letters of Credit shall be fully revolving, and, accordingly, the Borrower
may, during the foregoing period, request that an Issuing Bank Issue Letters of
Credit to replace Letters of Credit which have expired or which have been drawn
upon and reimbursed. Borrower acknowledges and agrees that the BofA Letter of
Credit is an Obligation under this Agreement.

              (b) Each Issuing Bank is under no obligation to consider the
Issuance of or to Issue any Letter of Credit unless all Banks shall have
consented to the Issuance of such Letter of Credit in their sole discretion. An
Issuing Bank is under no obligation to Issue any Letter of Credit if:

                  (i) any order, judgment or decree of any Governmental
         Authority or arbitrator shall by its terms purport to enjoin or
         restrain such Issuing Bank from Issuing such Letter of Credit, or any
         Requirement of Law applicable to such Issuing Bank or any request or
         directive (whether or not having the force of law) from any
         Governmental Authority with jurisdiction over such Issuing Bank shall
         prohibit, or request that such Issuing Bank refrain from, the issuance
         of letters of credit generally or such Letter of Credit in particular
         or shall impose upon such Issuing Bank with respect to such Letter of
         Credit any restriction, reserve or capital requirement (for which such
         Issuing Bank is not otherwise compensated hereunder) not in effect on
         the Closing Date, or shall impose upon such Issuing Bank any
         unreimbursed loss, cost or expense which was not applicable on the
         Closing Date and which such Issuing Bank in good faith deems material
         to it;

                  (ii) such Issuing Bank has received written notice from any
         Bank, any other Issuing Bank, Agent or the Borrower, on or prior to the
         Business Day prior to the requested date of Issuance of such Letter of
         Credit, that one or more of the applicable conditions contained in
         Article V is not then satisfied;

                  (iii) the expiry date of any requested Letter of Credit is
         after the earlier to occur of (A) 90 days after the date of Issuance of
         such Letter of Credit or (B) the Maturity Date, unless all the Banks
         have approved such expiry date in writing;

                  (iv) the expiry date of any such requested Letter of Credit is
         prior to the maturity date of any financial obligation to be supported
         by the requested Letter of Credit;

                  (v) such requested Letter of Credit is not in form and
         substance acceptable to such Issuing Bank, or the Issuance of a Letter
         of Credit shall violate any applicable policies of such Issuing Bank;



                                      -37-
<PAGE>

                  (vi) such Letter of Credit is for the purpose of supporting
         the Issuance of any letter of credit by any other Person;

                  (vii) such Letter of Credit is denominated in a currency other
         than Dollars; or

                  (viii) the amount of such requested Letter of Credit exceeds
         the Borrowing Base Advance Cap or Collateralized L/C Line limit.

         3.02 Issuance, Amendment and Renewal of Letters of Credit.

              (a) Each Letter of Credit which is Issued hereunder shall be
Issued upon the irrevocable written request of the Borrower pursuant to a Notice
of Borrowing (Letter of Credit) in the applicable form attached hereto as
Exhibit A received by an Issuing Bank (with a copy sent by the Borrower to Agent
and to the Banks) by no later than 5:00 p.m. (New York City time) on the date
one day prior to the proposed date of Issuance. Each such request for Issuance
of a Letter of Credit shall be by electronic transfer or facsimile, confirmed
immediately in an original writing or by electronic transfer, in the form of an
L/C Application, and shall specify in form and detail satisfactory to such
Issuing Bank: (i) the proposed date of Issuance of the Letter of Credit (which
shall be a Business Day); (ii) the face amount of the Letter of Credit; (iii)
the expiry date of the Letter of Credit; (iv) the name and address of the
beneficiary thereof; (v) the documents to be presented by the beneficiary of the
Letter of Credit in case of any drawing thereunder; (vi) the full text of any
certificate to be presented by the beneficiary in case of any drawing
thereunder; and (vii) such other matters as such Issuing Bank may require. Upon
receipt of such request, each of the Banks will notify Agent whether it consents
to the Issuance of such Letter of Credit by 2:00 p.m. (New York City time) on
the proposed date of Issuance. If any Bank fails to notify Agent that it
approves the Issuance of a Letter of Credit, Agent shall notify the Borrower and
such Issuing Bank by 3:00 p.m. (New York City time) on the proposed date of
Issuance, and the proposed Letter of Credit will not be Issued, unless one or
more of the Banks have elected to become Approving Banks thereby triggering the
Conversion to Single Funding Bank Date.

              (b) From time to time while a Letter of Credit is outstanding and
prior to the Expiration Date, an Issuing Bank will, upon the written request of
the Borrower received by such Issuing Bank (with a copy sent by the Borrower to
Agent and the Banks) prior to 12:00 p.m. noon (New York City time) on the
proposed date of amendment, consider the amendment of any Letter of Credit
Issued by it. Each such request for amendment of a Letter of Credit shall be
made by electronic transfer or facsimile, confirmed immediately in an original
writing or by electronic transfer, made in the form of an L/C Amendment
Application and shall specify in form and detail satisfactory to such Issuing
Bank and the Banks: (i) the Letter of Credit to be amended; (ii) the proposed
date of amendment of the Letter of Credit (which shall be a Business Day); (iii)
the nature of the proposed amendment; and (iv) such other matters as such




                                      -38-
<PAGE>

Issuing Bank may require. Such Issuing Bank shall be under no obligation to
amend any Letter of Credit. Agent will promptly notify the Banks of the receipt
by it of any L/C Application or L/C Amendment Application. No such amendment
will be made unless the Banks agree to such amendment. Upon receipt of such
notice by Agent to the Banks, each of the Banks will notify Agent whether it
consents to the amendment of such Letter of Credit by 2:00 p.m. (New York City
time). If all Banks fail to notify Agent that they approve the amendment of a
Letter of Credit, Agent shall notify the Borrower and such Issuing Bank by 3:00
p.m. (New York City time), and the Letter of Credit will not be amended;
provided, however, that if one or more Banks do not approve the amendment and
one or more Banks do approve such amendment, Agent shall notify all Banks and
the approving Banks may elect to become the Approving Banks and amend such
Letter of Credit, thereby triggering the Conversion to Single Funding Bank Date.

              (c) The Issuing Banks and the Banks agree that, while a Letter of
Credit is outstanding and prior to the Expiration Date, at the option of the
Borrower and upon the written request of the Borrower received by an Issuing
Bank (with a copy sent to Agent, the other Issuing Banks and the Banks) at least
one Business Day (or such shorter time as the Banks and the other Issuing Banks
may agree in a particular instance in their sole discretion) prior to the
proposed date of notification of renewal, if such renewal is approved by all the
Banks by 3:00 p.m. (New York City time) on the proposed date of notification of
renewal, such Issuing Bank shall be entitled to authorize the renewal of any
Letter of Credit Issued by it. Each such request for renewal of a Letter of
Credit made by the Borrower shall be made by electronic transfer or facsimile,
confirmed immediately in an original writing or by electronic transfer, in the
form of an L/C Amendment Application, and shall specify in form and detail
satisfactory to such Issuing Bank and the Banks: (i) the Letter of Credit to be
renewed; (ii) the proposed date of renewal of the Letter of Credit (which shall
be a Business Day); (iii) the revised expiry date of the Letter of Credit; and
(iv) such other matters as such Issuing Bank may require. The Issuing Banks
shall be under no obligation to renew any Letter of Credit. If any outstanding
Letter of Credit Issued by an Issuing Bank shall provide that it shall be
automatically renewed unless the beneficiary thereof receives notice from such
Issuing Bank that such Letter of Credit shall not be renewed, and if at the time
of renewal such Issuing Bank would be entitled to authorize the automatic
renewal of such Letter of Credit in accordance with this Subsection 3.02(c) upon
the request of the Borrower, then, provided no Bank has objected in writing to
such renewal, such Issuing Bank shall nonetheless be permitted to allow such
Letter of Credit to renew, and the Borrower and the Banks hereby authorize such
renewal, and, accordingly, such Issuing Bank shall be deemed to have received an
L/C Amendment Application from the Borrower requesting such renewal.

              (d) Any Issuing Bank may, at its election, deliver any notices of
termination or other communications to any Letter of Credit beneficiary or
transferee, and take any other action as necessary or appropriate, at any time
and from time to time,



                                      -39-
<PAGE>

in order to cause the expiry date of such Letter of Credit to be a date not
later than the Expiration Date.

              (e) This Agreement shall control in the event of any conflict with
any L/C-Related Document (other than any Letter of Credit).

              (f) Each Issuing Bank will also deliver to Agent a true and
complete copy of each Letter of Credit or amendment to or renewal of a Letter of
Credit Issued by it.

         3.03 Risk Participations, Drawings, Reducing Letters of Credit and
Reimbursements.

              (a) Immediately upon the Issuance of each Letter of Credit by an
Issuing Bank which is Issued prior to the Conversion to Single Funding Bank
Date, each Bank shall be deemed to, and hereby irrevocably and unconditionally
agrees to, purchase from such Issuing Bank a participation in such Letter of
Credit and each drawing or Reducing Letter of Credit Borrowing thereunder in an
amount equal to the product of (i) the Pro Rata Share of such Bank, times (ii)
the maximum amount available to be drawn under such Letter of Credit and the
amount of such drawing or Reducing Letter of Credit Borrowing, respectively. All
Letters of Credit Issued after the Conversion to Single Funding Bank Date shall
be participated in only by the Approving Banks. For purposes of Section 2.01,
each Issuance of a Letter of Credit shall be deemed to utilize the Uncommitted
Line Portion of each Bank by an amount equal to the amount of such
participation.

              (b) In the event of any request for a drawing under a Letter of
Credit Issued by an Issuing Bank by the beneficiary or transferee thereof, such
Issuing Bank will promptly notify the Borrower. Any notice given by an Issuing
Bank or Agent pursuant to this Subsection 3.03(b) may be oral if immediately
confirmed in writing (including by facsimile); provided, however, that the lack
of such an immediate confirmation shall not affect the conclusiveness or binding
effect of such notice. The Borrower shall reimburse an Issuing Bank prior to
5:00 p.m. (New York City time), on each date that any amount is paid by such
Issuing Bank under any Letter of Credit or to the beneficiary of a Reducing
Letter of Credit in the form of a Reducing L/C Borrowing (each such date, an
"Honor Date"), in an amount equal to the amount so paid by such Issuing Bank. In
the event the Borrower fails to reimburse such Issuing Bank for the full amount
of any drawing under any Letter of Credit or of any Reducing L/C Borrowing, as
the case may be, by 5:00 p.m. (New York City time) on the Honor Date, such
Issuing Bank will promptly notify Agent and Agent will promptly notify each Bank
thereof, and Fortis may, in its discretion, make an Overdraft Advance under the
Overdraft Line and reimburse such Issuing Bank for the amount of the drawing
under the Letter of Credit or Reducing L/C Borrowing, as the case may be. If
Fortis determines, in its sole discretion, not to make an Overdraft Advance,
then the Borrower shall be deemed to have requested that Revolving Loans be made
by the Banks to be disbursed to such Issuing Bank not later than one (1)
Business Day after



                                      -40-
<PAGE>

the Honor Date under such Letter of Credit, subject to the amount of the
unutilized portion of the Borrowing Base Line.

              (c) In the event of any request for a Reducing L/C Borrowing by
the Borrower in association with any Reducing Letter of Credit, the amount
available for drawing under such Reducing Letter of Credit will be reduced
automatically, and without any further amendment or endorsement to such Reducing
Letter of Credit, by the amount actually paid to such beneficiary,
notwithstanding the fact that the payment creating such Reducing L/C Borrowing
is not made pursuant to a conforming and proper draw under the corresponding
Reducing Letter of Credit; provided, however, that if any Bank has given the
Issuing Banks, Agent, the Borrower and each of the other Banks written notice
that such Bank objects to further Reducing L/C Borrowings at least three (3)
Business Days prior to the date the Borrower requests the Reducing L/C
Borrowing, then the relevant Issuing Bank will not make such Reducing L/C
Borrowing unless all Banks consent thereto.

              (d) Each Bank shall upon any notice pursuant to Subsection 3.03(b)
make available to Agent for the account of any Issuing Bank an amount in Dollars
and in immediately available funds equal to its Pro Rata Share of the amount of
the drawing or of the Reducing L/C Borrowing, as the case may be, whereupon the
participating Banks shall (subject to Subsection 3.03(e)) each be deemed to have
made a Revolving Loan to the Borrower in that amount. If any Bank so notified
fails to make available to Agent for the account of such Issuing Bank the amount
of such Bank's Pro Rata Share of the amount of the drawing or of the Reducing
L/C Borrowing, as the case may be, by no later than 3:00 p.m. (New York City
time) on the Business Day following the Honor Date, then interest shall accrue
on such Bank's obligation to make such payment, from the Honor Date to the date
such Bank makes such payment, at a rate per annum equal to the Federal Funds
Rate in effect from time to time during such period. Agent will promptly give
notice of the occurrence of the Honor Date, but failure of Agent to give any
such notice on the Honor Date or in sufficient time to enable any Bank to effect
such payment on such date shall not relieve such Bank from its obligations under
this Section 3.03.

              (e) With respect to any unreimbursed drawing or Reducing L/C
Borrowing, as the case may be, that is not converted into Revolving Loans in
whole or in part for any reason, the Borrower shall be deemed to have incurred
from the relevant Issuing Bank an L/C Borrowing in the amount of such drawing or
Reducing L/C Borrowing, as the case may be, which L/C Borrowing shall be due and
payable on demand (together with interest) and shall bear interest at a rate per
annum equal to the Default Rate, and each Bank's payment to such Issuing Bank
pursuant to Subsection 3.03(d) shall be deemed payment in respect of its
participation in such L/C Borrowing and shall constitute an L/C Advance from
such Bank in satisfaction of its participation obligation under this Section
3.03.



                                      -41-
<PAGE>

              (f) In the event that payment under any Letter of Credit Issued by
an Issuing Bank is drawn or purported to be drawn in a currency other than
United States Dollars, the amount of reimbursement to such Issuing Bank therefor
shall be calculated on the basis of such Issuing Bank's selling rate of exchange
in effect (for the date on which such Issuing Bank pays such draft or reimburses
any of its correspondents which paid such draft) for cable transfers to the
place where and in the currency in which such draft is payable. The Borrower
shall comply with any and all governmental exchange regulations now or hereafter
applicable to any foreign exchange, and shall indemnify and hold the Banks
harmless from any failure of the Borrower so to comply. If for any cause
whatsoever, there exists at the time in question no rate of exchange generally
current at such Issuing Bank for effective cable transfer of the sort above
provided for, the Borrower agrees to pay the Banks on demand an amount in United
States Dollars equivalent to the actual cost of settlement of such Issuing
Bank's obligation to the payor of the draft or acceptance or any holder thereof,
as the case may be, and however and whenever such settlement may be made by such
Issuing Bank.

              (g) Each Bank's obligation in accordance with this Agreement to
make the Revolving Loans or L/C Advances, as contemplated by this Section 3.03,
as a result of a drawing under a Letter of Credit or Reducing L/C Borrowing,
shall be absolute and unconditional and without recourse to the relevant Issuing
Bank and shall not be affected by any circumstance, including (i) any set-off,
counterclaim, recoupment, defense or other right which such Bank may have
against such Issuing Bank, the Borrower or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of a Default, an Event of Default
or a Material Adverse Effect; or (iii) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.

              (h) Notwithstanding the foregoing, each Revolving Loan and L/C
Advance made to fund payment of any Letter of Credit which was Issued or amended
on or after the Conversion to Single Funding Bank Date shall be made only by the
Approving Banks.

         3.04 Repayment of Participations.

              (a) Upon (and only upon) receipt by Agent for the account of an
Issuing Bank of immediately available funds from the Borrower (i) in
reimbursement of any payment made by such Issuing Bank under a Letter of Credit
or in connection with a Reducing L/C Borrowing with respect to which any Bank
has paid Agent for the account of such Issuing Bank for such Bank's
participation in the Letter of Credit pursuant to Section 3.03 or (ii) in
payment of interest thereon, Agent will pay to each Bank, in the same funds as
those received by Agent for the account of such Issuing Bank, the amount of such
Bank's Pro Rata Share of such funds, and such Issuing Bank shall receive the
amount of the Pro Rata Share of such funds of any Bank that did not so pay Agent
for the account of such Issuing Bank.



                                      -42-
<PAGE>

              (b) If Agent or an Issuing Bank is required at any time to return
to the Borrower, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by the
Borrower to Agent for the account of such Issuing Bank pursuant to Subsection
3.04(a) in reimbursement of a payment made under a Letter of Credit or in
connection with a Reducing L/C Borrowing or interest or fee thereon, each Bank
shall, on demand of such Issuing Bank, forthwith return to Agent or such Issuing
Bank the amount of its Pro Rata Share of any amounts so returned by Agent or
such Issuing Bank plus interest thereon from the date such demand is made to the
date such amounts are returned by such Bank to Agent or such Issuing Bank, at a
rate per annum equal to the Federal Funds Rate in effect from time to time.

         3.05 Role of the Issuing Banks.

              (a) Each Bank and the Borrower agree that, in paying any drawing
under a Letter of Credit Issued by an Issuing Bank or funding any Reducing L/C
Borrowing, such Issuing Bank shall not have any responsibility to obtain any
document (other than any sight draft or certificates expressly required by such
Letter of Credit, but with respect to Reducing Letter of Credit Borrowings, no
document of any kind need be obtained) or to ascertain or inquire as to the
validity or accuracy of any such document or the authority of the Person
executing or delivering any such document.

              (b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of any Issuing Bank shall be liable to
any Bank for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Banks; (ii) any action taken or omitted in
the absence of gross negligence or willful misconduct; or (iii) the due
execution, effectiveness, validity or enforceability of any L/C-Related
Document.

              (c) The Borrower hereby assumes all risks of the acts or omissions
of any beneficiary or transferee with respect to its use of any Letter of
Credit; provided, however, that this assumption is not intended to, and shall
not, preclude the Borrower pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of any Issuing Bank shall be liable or responsible for any of the
matters described in clauses (a) through (g) of Section 3.06; provided, however,
that anything in such clauses or elsewhere herein to the contrary
notwithstanding, that the Borrower may have a claim against an Issuing Bank, and
such Issuing Bank may be liable to the Borrower, to the extent, but only to the
extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the Borrower which the Borrower proves were caused by such Issuing
Bank's willful misconduct or gross negligence or such Issuing Bank's willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit. In furtherance and not in limitation
of the foregoing: (i) the Issuing Banks may accept documents that appear on




                                      -43-
<PAGE>

their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary; and (ii) the Issuing
Banks shall not be responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason.

         3.06 Obligations Absolute. The Obligations of the Borrower under this
Agreement and any L/C-Related Document to reimburse an Issuing Bank for a
drawing under a Letter of Credit or for a Reducing L/C Borrowing, and to repay
any L/C Borrowing and any drawing under a Letter of Credit or Reducing L/C
Borrowing converted into Revolving Loans, shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:

              (a) any lack of validity or enforceability of this Agreement or
any L/C-Related Document;

              (b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations of the Borrower in respect of
any Letter of Credit or any other amendment or waiver of or any consent to
departure from all or any of the L/C-Related Documents;

              (c) the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary or any transferee
of any Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), any Issuing Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by the
L/C-Related Documents or any unrelated transaction; (d) any draft, demand,
certificate or other document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any Letter of Credit;

              (e) any payment by any Issuing Bank under any Letter of Credit
against presentation of a draft or certificate that does not strictly comply
with the terms of any Letter of Credit; or any payment made by any Issuing Bank
under any Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of any Letter of Credit, including any arising in connection
with any Insolvency Proceeding;



                                      -44-
<PAGE>
              (f) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any other
guarantee, for all or any of the Obligations of the Borrower in respect of any
Letter of Credit; or

              (g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Borrower.

              Notwithstanding anything to the contrary in this Section 3.06 or
in the Continuing Agreement for Letters of Credit, the Issuing Banks shall not
be excused from liability to Borrower to the extent of any direct damages (as
opposed to consequential, indirect and punitive damages, claims in respect of
which are hereby waived by Borrower) suffered by Borrower that are caused by any
of the Issuing Bank's gross negligence or willful misconduct when determining
whether drafts and other documents presented under a Letter of Credit comply
with the terms thereof, provided, however, that the parties hereto expressly
agree that:

                  (i) the Issuing Banks may accept documents that appear on
         their face to be in substantial compliance with the terms of a Letter
         of Credit without responsibility for further investigation, regardless
         of any notice or information to the contrary, and may make payment upon
         presentation of documents that appear on their face to be in
         substantial compliance with the terms of such Letter of Credit;

                  (ii) the Issuing Banks shall have the right, in their sole
         discretion, to decline to accept documents and to make such payment if
         such documents are not in strict compliance with the terms of such
         Letter of Credit; and

                  (iii) this sentence shall establish the standard of care to be
         exercised by the Banks when determining whether drafts and other
         documents presented under a Letter of Credit comply with the terms
         thereof (and the parties hereto hereby waive, to the extent permitted
         by applicable law, any standard of care inconsistent with the
         foregoing).

         3.07 Cash Collateral Pledge. Upon the request of Agent, (i) if an
Issuing Bank has honored any full or partial drawing request on any Letter of
Credit and such drawing has resulted in an L/C Borrowing hereunder, or (ii) if,
as of the Expiration Date, any Letters of Credit may for any reason remain
outstanding and partially or wholly undrawn, the Borrower shall immediately Cash
Collateralize the L/C Obligations in an amount equal to such L/C Obligations.
Upon the occurrence of the circumstances described in Section 2.06 requiring the
Borrower to Cash Collateralize Letters of Credit, then, the Borrower shall
immediately Cash Collateralize the L/C Obligations in an amount equal to the
applicable excess. In addition, the Borrower shall Cash Collateralize any Letter
of




                                      -45-
<PAGE>

Credit to be Issued under the Collateralized L/C Line on or before such Letter
of Credit is actually Issued in an amount equal to such Letter of Credit.

         3.08 Letter of Credit Fees.

              (a) The Borrower shall pay to Agent for the account of each of the
Banks a letter of credit fee with respect to each of the Letters of Credit
Issued hereunder equal to the greater of (i) $700 or (ii) 1.50% per annum,
together with any related fees such as telecopy, facsimile and courier fees.

              (b) Such letter of credit fees as described in sub-paragraph (a)
above for each Letter of Credit, unless otherwise specified, shall be due and
payable monthly in arrears for the preceding quarter during which Letters of
Credit are outstanding, commencing on the first such quarterly date to occur
after the Closing Date.

         3.09 Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters of Credit.

         3.10 BofA Letter of Credit. Borrower hereby acknowledges and agrees
that the BofA Letter of Credit shall be deemed to be a Letter of Credit Issued
under this Agreement for all purposes.

                                   ARTICLE IV

                     TAXES, YIELD PROTECTION AND ILLEGALITY

         4.01 Taxes.

              (a) Any and all payments by the Borrower to each Bank or Agent
under this Agreement and any other Loan Document shall be made free and clear
of, and without deduction or withholding for, any Taxes. In addition, the
Borrower shall pay all Other Taxes.

              (b) If the Borrower shall be required by law to deduct or withhold
any Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Bank or Agent, then:

                  (i) the sum payable shall be increased as necessary so that
         after making all required deductions and withholdings (including
         deductions and withholdings applicable to additional sums payable under
         this Section) such Bank or Agent, as the case may be, receives and
         retains an amount equal to the sum it would have received and retained
         had no such deductions or withholdings been made;



                                      -46-
<PAGE>
                  (ii) the Borrower shall make such deductions and withholdings;

                  (iii) the Borrower shall pay the full amount deducted or
         withheld to the relevant taxing authority or other authority in
         accordance with applicable law; and

                  (iv) the Borrower shall also pay to each Bank or Agent for the
         account of such Bank, at the time interest is paid, Further Taxes in
         the amount that Bank specifies as necessary to preserve the after-tax
         yield the Bank would have received if such Taxes, Other Taxes or
         Further Taxes had not been imposed.

              (c) The Borrower agrees to indemnify and hold harmless each Bank
and Agent for the full amount of (i) Taxes, (ii) Other Taxes, and (iii) Further
Taxes in the amount that Agent or such Bank specifies as necessary to preserve
the after-tax yield Agent or such Bank would have received if such Taxes, Other
Taxes or Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes, Other Taxes or Further Taxes were
correctly or legally asserted, provided, however, that the Borrower shall not be
required to indemnify or hold harmless any Bank to the extent (but only to the
extent) of such Bank's gross negligence or willful misconduct. Payment under
this indemnification shall be made within 30 days after the date the Bank or
Agent makes written demand therefor.

              (d) Within 30 days after the date of any payment by the Borrower
of Taxes, Other Taxes or Further Taxes, the Borrower shall furnish Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to Agent.

              (e) If the Borrower is required to pay any amount to Agent or any
Bank pursuant to subsection (b) or (c) of this Section, then such Bank shall use
reasonable efforts (consistent with legal and regulatory restrictions) to change
the jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Borrower which may thereafter accrue, if such change in the
judgment of such Bank is not otherwise disadvantageous to such Bank.

         4.02 Illegality.

              (a) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for such Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by such Bank to the Borrower
through Agent, any obligation of that Bank to make Offshore Rate Loans shall be
suspended until the Bank notifies Agent and the Borrower that the circumstances
giving rise to such determination no longer exist.



                                      -47-
<PAGE>

              (b) If a Bank determines that it is unlawful to maintain any
Offshore Rate Loan, the Borrower shall, upon receipt of notice of such fact and
demand from such Bank (with a copy to Agent), prepay in full, without premium or
penalty, such Offshore Rate Loans of that Bank then outstanding, together with
interest accrued thereon either on the last day of the Interest Period thereof,
if the Bank may lawfully continue to maintain such Offshore Rate Loans to such
day, or immediately, if the Bank may not lawfully continue to maintain such
Offshore Rate Loan. If the Borrower is required to so prepay any Offshore Rate
Loan, then concurrently with such prepayment, the Borrower shall borrow from the
affected Bank, in the amount of such repayment, a Base Rate Loan.

         4.03 Increased Costs and Reduction of Return.

              (a) If any Bank determines that, due to either (i) the
introduction of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the Offshore
Rate or in respect of the assessment rate payable by any Bank to the FDIC for
insuring U.S. deposits) in or in the interpretation of any law or regulation or
(ii) the compliance by that Bank with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to such Bank of agreeing to make or
making, funding or maintaining any Offshore Rate Loans or participating in
Letters of Credit, or, in the case of an Issuing Bank, any increase in the cost
to such Issuing Bank of agreeing to issue, issuing or maintaining any Letter of
Credit or of agreeing to make or making, funding or maintaining any unpaid
drawing under any Letter of Credit, then the Borrower shall be liable for, and
shall from time to time, within 30 days of demand (with a copy of such demand to
be sent to Agent), pay to Agent for the account of such Bank, additional amounts
as are sufficient to compensate such Bank for such increased costs, provided,
however, that the Borrower shall not be required to pay any such amount to the
extent that such amount is reflected in changes in the Base Rate, the Offshore
Rate or other fees or charges of such Bank.

              (b) If any Bank shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Bank (or its Lending Office) or any corporation controlling the Bank with
any Capital Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Bank or any corporation controlling
the Bank and (taking into consideration such Bank's or such corporation's
policies with respect to capital adequacy and such Bank's desired return on
capital) determines that the amount of such capital is increased as a
consequence of its loans, credits or obligations under this Agreement, then,
within 30 days of demand of such Bank to the Borrower through Agent, the
Borrower shall pay to the Bank, from time to time as specified by the Bank,
additional amounts sufficient to compensate the Bank for such increase,
provided, however, that the Borrower shall not be



                                      -48-
<PAGE>

required to pay any such amount to the extent that such amount is reflected in
changes in the Base Rate.

         4.04 Funding Losses. The Borrower shall reimburse each Bank and hold
each Bank harmless from any loss or expense which the Bank may sustain or incur
as a consequence of:

              (a) the failure of the Borrower to make on a timely basis any
payment of principal of any Offshore Rate Loan;

              (b) the failure of the Borrower to borrow, continue or convert a
Loan after the Borrower has given (or are deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation;

              (c) the failure of the Borrower to make any prepayment in
accordance with any notice delivered under Section 2.06;

              (d) the prepayment (including prepayments made pursuant to Article
II but excluding prepayments made pursuant to Section 4.02) or other payment
(including after acceleration thereof) of an Offshore Rate Loan on a day that is
not the last day of the relevant Interest Period; or

              (e) the automatic conversion under Section 2.04 of any Offshore
Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period except any such automatic conversion resulting from prepayments
required by Section 4.02;

including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Borrower to the Banks under this Section and
under Section 4.03, each Offshore Rate Loan made by a Bank (and each related
reserve, special deposit or similar requirement) shall be conclusively deemed to
have been funded at the LIBOR used in determining the Offshore Rate for such
Offshore Rate Loan by a matching deposit or other borrowing in the interbank
eurodollar market for a comparable amount and for a comparable period, whether
or not such Offshore Rate Loan is in fact so funded.

         4.05 Inability to Determine Rates. If Agent and the Banks determine
that for any reason adequate and reasonable means do not exist for determining
the Offshore Rate for any requested Interest Period with respect to a proposed
Offshore Rate Loan, or that the Offshore Rate applicable pursuant to Subsection
2.08(a) for any requested Interest Period with respect to a proposed Offshore
Rate Loan does not adequately and fairly reflect the cost to the Banks of
funding such Loan, Agent will promptly so notify the Borrower and each Bank.
Thereafter, the obligation of the Banks to make or maintain Offshore Rate Loans,
as the case may be, hereunder shall be suspended until Agent upon



                                      -49-
<PAGE>

the instruction of the Banks revokes such notice in writing. Upon receipt of
such notice, the Borrower may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Borrower does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed by
the Borrower, in the amount specified in the applicable notice submitted by the
Borrower, but such Loans shall be made, converted or continued as Base Rate
Loans instead of Offshore Rate Loans.

         4.06 Reserves on Offshore Rate Loans. The Borrower shall pay to each
Bank, as long as such Bank shall be required under regulations of the FRB to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency funds or deposits (currently known as "Eurocurrency
liabilities"), additional costs on the unpaid principal amount of each Offshore
Rate Loan equal to the actual costs of such reserves allocated to such Loan by
the Bank (as determined by the Bank in good faith, which determination shall be
conclusive), payable on each date on which interest is payable on such Loan,
provided, however, that the Borrower shall have received at least 15 days' prior
written notice (with a copy to Agent) of such additional interest from the Bank.
If a Bank fails to give notice 15 days prior to the relevant Interest Payment
Date, such additional interest shall be payable 15 days from receipt of such
notice.

         4.07 Certificates of Banks. Together with any demand by a Bank for
reimbursement or compensation pursuant to this Article IV, such Bank shall
provide to the Borrower (with a copy to Agent) a certificate signed by an
authorized officer of the Bank (a) describing the event giving rise to such
demand, and (b) showing the method and detailed calculations (which may include
any reasonable averaging, attribution or allocation procedures) used by the Bank
to determine the amount demanded by the Bank. In calculating the amount of
costs, expenses, capital requirements or rate of reduction allocable to the
Borrower, such Bank shall use such reasonable methods as such Bank shall
determine. Such calculation and certification shall be conclusive and binding on
the Borrower in the absence of manifest error.

         4.08 Substitution of Banks. Upon the receipt by the Borrower from any
Bank (an "Affected Bank") of a claim for compensation under Section 4.03, the
Borrower may: (a) request the Affected Bank to use its best efforts to obtain a
replacement bank or financial institution satisfactory to the Borrower to
acquire and assume all or a ratable part of all of such Affected Bank's Loans
and Uncommitted Line Portion (a "Replacement Bank"); (b) request one or more of
the other Banks to acquire and assume all or part of such Affected Bank's Loans
and Uncommitted Line Portion; or (c) designate a Replacement Bank. Any such
designation of a Replacement Bank under clause (a) or (c) shall be subject to
the prior written consent of Agent (which consent shall not be unreasonably
withheld).

         4.09 Survival. The agreements and Obligations of the Borrower in this
Article IV shall survive the payment of all other Obligations.



                                      -50-
<PAGE>

                                   ARTICLE V

                                  CLOSING ITEMS

         5.01 Matters to be Satisfied Upon Execution of Agreement. At the time
the Banks execute this Agreement, unless otherwise waived by the Banks, Agent
shall have received all of the following, in form and substance satisfactory to
Agent and each Bank, and in sufficient copies for each Bank:

              (a) Loan Documents. This Agreement, the Notes, the Guaranty, the
Security Agreements, the Atmos Support Agreement, a Tri-party Agreement among
Borrower, Agent and each Eligible Broker, financing statements and financing
statement amendments and each other document or certificate executed in
connection with this Agreement, executed by each party thereto;

              (b) Resolutions; Incumbency. Copies of the resolutions of the
members of the Borrower authorizing the transactions contemplated hereby,
certified as of the Closing Date by the Secretary of the Borrower, and
certifying the names and true signatures of the officers of the Borrower
authorized to execute, deliver and perform, as applicable, this Agreement, and
all other Loan Documents to be delivered by the Borrower hereunder;

              (c) Organization Documents; Existence; Good Standing. The articles
or certificate of formation and the regulations of the Borrower as in effect on
the Closing Date, all certified by the Secretary of the Borrower as of the
Closing Date, and the articles or certificate of formation and the Bylaws or
regulations of Atmos Energy Corporation and Atmos Energy Marketing LLC as in
effect on the Closing Date, all certified by the Secretary of Atmos Energy
Corporation and Atmos Energy Marketing LLC as of the Closing Date together with
certificates of existence and good standing for the Borrower, Atmos Energy
Corporation and Atmos Energy Marketing LLC from the Secretary of State (or
similar, applicable Governmental Authority) of its state of incorporation and
each state where the general partner of the Borrower is qualified to do business
as a foreign corporation, certified as of, or reasonably close to, the Closing
Date;

              (d) Legal Opinions. Legal opinion of counsel to the Borrower and
counsel to Atmos Energy Marketing, L.L.C. each addressed to Agent and the Banks,
in form and substance acceptable to Agent and the Banks;

              (e) Payment of Fees. Evidence of payment by the Borrower of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, together with Attorney Costs of Agent to the extent
invoiced prior to or on the Closing Date, plus such additional amounts of
Attorney Costs as shall constitute Fortis' reasonable estimate of Attorney Costs
incurred or to be incurred by it through the closing proceedings (provided,
however, that such estimate shall not thereafter preclude final settling of
accounts between the Borrower and Agent); including any such costs,



                                      -51-
<PAGE>

fees and expenses arising under or referenced in Sections 2.09 and 11.04(a) and
all costs of the auditors and consultants retained by the Banks in connection
with the Obligations of the Borrower to Agent;

              (f) Certificate. A certificate signed by a Responsible Officer of
the Borrower, dated as of the Closing Date, stating to the best of such
officer's knowledge that:

                  (i) The representations and warranties contained in Article VI
         are true and correct on and as of such date, as though made on and as
         of such date; and

                  (ii) No Default or Event of Default exists or would result
         from the Credit Extension.

                  (iii) There has occurred since April 30, 2001, no event or
         circumstance that has resulted or could reasonably be expected to
         result in a Material Adverse Effect;

              (g) Insurance. Evidence of insurance required to be maintained by
the Borrower hereunder;

              (h) Filings. Evidence that all filings needed to perfect the
security interests granted by the Security Agreements have been completed or due
provision has been made therefor;

              (i) Payoff Letter. A fully executed original of a payoff letter
(the "Payoff Letter") in form and substance satisfactory to Agent and Bank of
America, N.A.;

              (j) Request to Issue BofA Letter of Credit. A written request of
the Borrower to Fortis to Issue the BofA Letter of Credit in the form required
by the Payoff Letter;

              (k) Service of Process Form. An acknowledgement letter from
Corporation Service Company as contemplated by Subsection 11.16(b);

              (l) Due Diligence. Agent shall have completed its business and
legal due diligence, including a Lien search of the Borrower, with results
satisfactory to Agent; and

              (m) Other Documents. Such other approvals, opinions, documents or
materials as Agent or any Bank may request.



                                      -52-
<PAGE>
                                   ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES

         The Borrower represents and warrants to Agent and each Bank that:

         6.01 Existence and Power. Each of the Borrower, its Subsidiaries and
Atmos Energy Marketing LLC:

              (a) is a limited liability company or corporation, as the case may
be, duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization;

              (b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on their
business and to execute, deliver, and perform their respective Obligations under
the Loan Documents;

              (c) is duly qualified as a foreign limited liability company or
corporation, as the case may be, and is licensed and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification or license; and

              (d) to the best knowledge of such Person, is in compliance with
all Requirements of Law.

         6.02 Authorization; No Contravention. The execution, delivery and
performance by the Borrower and Guarantor of each Loan Document to which such
Person is party, have been duly authorized, and do not and will not:

              (a) contravene the terms of the Organization Documents of such
Person;

              (b) conflict with or result in any breach or contravention of, or
the creation of any Lien under, any document evidencing any Contractual
Obligation to which such Person is a party or any order, injunction, writ or
decree of any Governmental Authority to which such Person or its property is
subject; or

              (c) to the best knowledge of the Borrower, violate any Requirement
of Law.

         6.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Borrower or
any of its Subsidiaries or Guarantor, as applicable, of any Loan Document.



                                      -53-
<PAGE>
         6.04 Binding Effect. This Agreement and each other Loan Document to
which the Borrower or any of its Subsidiaries or Guarantor is a party constitute
the legal, valid and binding obligations of such Person to the extent it is a
party thereto, enforceable against such Person in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by general principles of equity.

         6.05 Litigation. Except as specifically disclosed in Schedule 6.05,
there are no actions, suits or proceedings, pending, or to the knowledge of the
Borrower, or Guarantor threatened at law, in equity, in arbitration or before
any Governmental Authority, against the Borrower, or any of its Subsidiaries or
Guarantor or any of their respective properties which purport to affect or
pertain to this Agreement or any other Loan Document, or any of the transactions
contemplated hereby or thereby; and no injunction, writ, temporary restraining
order or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the execution, delivery
or performance of this Agreement or any other Loan Document, or directing that
the transactions provided for herein or therein not be consummated as herein or
therein provided.

         6.06 No Default. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Borrower. As of the Closing Date,
neither the Borrower nor any of its Subsidiaries are in default under or with
respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, could reasonably be expected to have a Material
Adverse Effect.

         6.07 ERISA Compliance. Except as specifically disclosed in Schedule
6.07:

              (a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of the
Borrower, nothing has occurred which would cause the loss of such qualification.
The Borrower and each ERISA Affiliate have made all required contributions to
any Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Code has been made with respect to any Plan.

              (b) There are no pending or, to the best knowledge of the
Borrower, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which have resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.

              (c) (i) To the Borrower's best knowledge, no ERISA Event has
occurred or is reasonably expected to occur; (ii) no Pension Plan has any
Unfunded




                                      -54-
<PAGE>

Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under Title IV of ERISA
with respect to any Pension Plan (other than premiums due and not delinquent
under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate
has incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has
engaged in a transaction that could be subject to Section 4069 or 4212(c) or
ERISA.

         6.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 7.12.
Neither the Borrower nor any Subsidiary is generally engaged in the business of
purchasing or selling Margin Stock or extending credit for the purpose of
purchasing or carrying Margin Stock.

         6.09 Title to Properties. The Borrower and each of its Subsidiaries
have good record and marketable title in fee simple to, or valid leasehold
interests in, all real property necessary or used in the ordinary conduct of
their respective businesses, except for such defects in title as could not,
individually or in the aggregate, have a Material Adverse Effect. As of the
Closing Date, the property of the Borrower and its Subsidiaries is subject to no
Liens, other than Permitted Liens.

         6.10 Taxes. The Borrower and its Subsidiaries have filed all Federal
and other material tax returns and reports required to be filed, and have paid
all Federal and other material taxes, assessments, fees and other governmental
charges shown thereon to be due and payable, and have paid all material taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets as due and payable, except those which are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP. There is no proposed tax
assessment against the Borrower or any of its Subsidiaries that would, if made,
have a Material Adverse Effect.

         6.11 Financial Condition.

              (a) The unaudited balance sheet of the Borrower dated as of
September 30, 2001:

                  (i) fairly presents the financial condition of the Borrower as
         of the date thereof; and

                  (ii) shows all material indebtedness and other liabilities,
         direct or contingent, of the Borrower and as of the date thereof,
         including liabilities for taxes, material commitments and Contingent
         Obligations.



                                      -55-
<PAGE>

              (b) Since September 30, 2001, there has been no Material Adverse
Effect.

         6.12 Environmental Matters. The Borrower conducts in the ordinary
course of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and as
a result thereof the Borrower has reasonably concluded that, except as
previously specifically disclosed in Schedule 6.12, such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

         6.13 Regulated Entities. Neither the Borrower, nor any Person
controlling the Borrower, or any of its Subsidiaries, is an "Investment Company"
within the meaning of the Investment Company Act of 1940. The Borrower is not
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, any state public utilities code,
or any other Federal or state statute or regulation limiting its ability to
incur Indebtedness.

         6.14 No Burdensome Restrictions. Neither the Borrower nor any of its
Subsidiaries is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document, or any Requirement of Law, which
could reasonably be expected to have a Material Adverse Effect.

         6.15 Copyrights, Patents, Trademarks and Licenses, Etc. To the
Borrower's best knowledge, the Borrower or its Subsidiaries own or are licensed
or otherwise have the right to use all of the patents, trademarks, service
marks, trade names, copyrights, contractual franchises, authorizations and other
rights that are reasonably necessary for the operation of their respective
businesses, without conflict with the rights of any other Person. To the
knowledge of the Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Borrower or any Subsidiary infringes upon
any rights held by any other Person. Except as specifically disclosed in
Schedule 6.05, no claim or litigation regarding any of the foregoing is pending
or threatened, and no patent, invention, device, application, principle or any
statute, law, rule, regulation, standard or code is pending or, to the knowledge
of the Borrower, proposed.

         6.16 Subsidiaries. The Borrower has no Subsidiaries other than those
specifically disclosed in part (a) of Schedule 6.16 hereto and have no equity
investments in any other corporation or entity other than those specifically
disclosed in part (b) of Schedule 6.16.

         6.17 Insurance. Except as specifically disclosed in Schedule 6.17, the
properties of the Borrower and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Borrower, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in



                                      -56-
<PAGE>

similar businesses and owning similar properties in localities where the
Borrower or such Subsidiary operates.

         6.18 Full Disclosure. To the Borrower's best knowledge, none of the
representations or warranties made by the Borrower or any of its Subsidiaries in
the Loan Documents as of the date such representations and warranties are made
or deemed made, and none of the statements contained in any exhibit, report,
statement or certificate furnished by or on behalf of the Borrower or any of its
Subsidiaries in connection with the Loan Documents (including the offering and
disclosure materials delivered by or on behalf of the Borrower to the Banks
prior to the Closing Date), contains any untrue statement of a material fact or
omits any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered.

                                  ARTICLE VII

                              AFFIRMATIVE COVENANTS

         So long as any Bank shall be continuing to consider making Revolving
Loans or Issuing Letters of Credit hereunder, or any Loan or other Obligation
shall remain unpaid or unsatisfied, or any Letter of Credit shall remain
outstanding:

         7.01 Financial Statements. The Borrower shall deliver to the Banks, in
form and detail satisfactory to the Banks:

              (a) as soon as available, but not later than 120 days after the
end of each fiscal year, a copy of the audited financial statements to include a
balance sheet as at the end of such year for the Borrower, with schedules and
the related statements of income or operations, members' capital and cash flows
for such year for the Borrower, setting forth in each case in comparative form
the figures for the previous fiscal year, and accompanied by the opinion of a
nationally-recognized independent public accounting firm ("Independent Auditor")
which report shall state that such financial statements present fairly the
financial position for the periods indicated in conformity with GAAP applied on
a basis consistent with prior years. Such opinion shall not be qualified or
limited because of a restricted or limited examination by the Independent
Auditor of any material portion of the Borrower's or any Subsidiary's records;
and

              (b) as soon as available, but not later than 45 days after the end
of each month, the Borrower prepared financial statements for the Borrower in
form acceptable to Banks.



                                      -57-
<PAGE>

         7.02 Certificates; Other Information. The Borrower shall furnish to
Agent and the Banks:

              (a) concurrently with the delivery of the financial statements
referred to in Subsections 7.01(a) and (b), a Compliance Certificate executed by
a Responsible Officer of the Borrower;

              (b) a Borrowing Base Collateral Position Report executed by a
Responsible Officer of the Borrower as of 15th and as of the last Business Day
of each month, in each case delivered within ten (10) days of such reporting
date;

              (c) on the tenth day of each month, a Net Position Report, as of
the last business day of the preceding month, certified by a Responsible Officer
of the Borrower;

              (d) promptly when available, such additional information regarding
the business, financial or corporate affairs of the Borrower or any Subsidiary
as Agent, at the request of any Bank, may from time to time reasonably request;
and

              (e) a quarterly report of inventory storage locations at each
quarter end.

         7.03 Notices. The Borrower shall promptly notify Agent and each Bank:

              (a) of the occurrence of any Default or Event of Default, and of
the occurrence or existence of any event or circumstance that could reasonably
be expected to become a Default or Event of Default;

              (b) of the occurrence of any event which could reasonably be
expected to cause a material impairment of the Collateral Position;

              (c) of the occurrence of any event which could reasonably be
expected to cause a Material Adverse Effect, including (i) breach or
non-performance of, or any default under, a material Contractual Obligation of
the Borrower or any Subsidiary; (ii) any material dispute, litigation,
investigation, proceeding or suspension between the Borrower or any Subsidiary
and any Governmental Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting the Borrower or any
Subsidiary, including pursuant to any applicable Environmental Laws;

              (d) of the occurrence of any of the following events affecting the
Borrower or any ERISA Affiliate (but in no event more than 10 days after the
Borrower receives notice or becomes aware of such event), and deliver to Agent
and each Bank a copy of any notice with respect to such event that is filed with
a Governmental Authority and any notice delivered by a Governmental Authority to
the Borrower or any ERISA Affiliate with respect to such event:



                                      -58-
<PAGE>
                  (i) an ERISA Event;

                  (ii) a material increase in the Unfunded Pension Liability of
         any Pension Plan;

                  (iii) the adoption of, or the commencement of contributions
         to, any Plan subject to Section 412 of the Code by the Borrower or any
         ERISA Affiliate; or

                  (iv) the adoption of any amendment to a Plan subject to
         Section 412 of the Code, if such amendment results in a material
         increase in contributions or Unfunded Pension Liability;

              (e) of any material change in accounting policies or financial
reporting practices by the Borrower; and

              (f) of any intended relocation of inventory or any intended new
location of inventory owned by the Borrower, at least ten (10) Business Days
prior to the date such inventory is to be stored at such location.

              Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer of the Borrower setting forth details of the
occurrence referred to therein, and stating what action the Borrower or any
affected Subsidiary proposes to take with respect thereto and at what time. Each
notice under Subsection 7.03(a) shall describe with particularity any and all
clauses or provisions of this Agreement or other Loan Document that have been
(or reasonably could be expected to be) breached or violated as therein
provided.

         7.04 Preservation of Corporate Existence, Etc. The Borrower shall, and
shall cause each of its Subsidiaries to:

              (a) preserve and maintain in full force and effect its existence
and good standing under the laws of its state or jurisdiction of organization;

              (b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business;

              (c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and

              (d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.



                                      -59-
<PAGE>
         7.05 Maintenance of Property. The Borrower shall maintain, and shall
cause each of its Subsidiaries to maintain, and preserve all its property which
is used or useful in its business in good working order and condition, ordinary
wear and tear excepted and make all necessary repairs thereto and renewals and
replacements thereof except in any case where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.

         7.06 Insurance. The Borrower shall maintain, and shall cause each of
its Subsidiaries to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons, including, without
limitation, marine cargo insurance, if appropriate. Agent, for the benefit of
the Banks, shall be named as an additional insured and loss payee under all such
polices, without liability for premiums or club calls.

         7.07 Payment of Obligations. The Borrower shall, and shall cause each
of its Subsidiaries to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities, including:

              (a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Borrower or such Subsidiary;

              (b) all lawful claims which, if unpaid, would by law become a Lien
upon its property unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by the Borrower or Subsidiary, and provided that at such time the
claim becomes a Lien (other than a lis pendens notice), it shall be promptly
paid; and

              (c) all indebtedness, as and when due and payable, but subject to
any subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.

         7.08 Compliance with Laws. The Borrower shall comply, and shall cause
each of its Subsidiaries to comply, with all Requirements of Law of any
Governmental Authority having jurisdiction over it or its business (including
the Federal Fair Labor Standards Act).

         7.09 Compliance with ERISA. The Borrower shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance with the
applicable provisions of ERISA, the Code and other federal or state law; (b)
cause each Plan which is qualified under Section 401(a) of the Code to maintain
such qualification; and (c) make all required contributions to any Plan subject
to Section 412 of the Code.



                                      -60-
<PAGE>

         7.10 Inspection of Property and Books and Records. The Borrower shall
maintain and shall cause each of its Subsidiaries to maintain proper books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of the Borrower and such Subsidiary.
The Borrower shall permit, and shall cause each of its Subsidiaries to permit
representatives and independent contractors of Agent or any Bank to visit and
inspect any of their respective properties, to examine their respective
corporate, financial and operating records, and make copies thereof or abstracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective directors, officers, and independent public accountants, all at
the expense of Agent or Bank causing such inspection and at such reasonable
times during normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to the Borrower; provided, however, that when an
Event of Default exists Agent or any Bank may do any of the foregoing at the
expense of the Borrower at any time during normal business hours and without
advance notice.

         7.11 Environmental Laws. The Borrower shall, and shall cause each of
its Subsidiaries to, conduct its operations and keep and maintain its property
in compliance in all material respects with all Environmental Laws.

         7.12 Use of Proceeds. The Borrower shall use the proceeds of the Loans
for the uses described in this Agreement and not in contravention of any
Requirement of Law or of any Loan Document restrictions on use of loan proceeds.

              The Borrower shall not use the proceeds of the Loan or any Letter
of Credit to acquire, directly or indirectly, any Margin Stock.

         7.13 Collateral Position Audit. At such times as Agent deems advisable,
the Borrower will allow Agent or an entity satisfactory to Agent to conduct a
thorough examination of the Collateral, and the Borrower will fully cooperate in
such examination. The Borrower will pay the costs and expenses of one such
examination each calendar year.

         7.14 Payments to Bank Blocked Account. The Borrower promptly, and from
time to time, shall (i) establish a lock box ("Lock Box") and shall notify in
writing and otherwise take such reasonable steps to ensure that all Account
Debtors under any of its Accounts forward payment in the form of cash, checks,
drafts or other similar items of payment directly to such Lock Box or directly
by wire transfer to the Bank Blocked Account and shall provide Banks with
reasonable evidence of such notification, and (ii) deposit and cause its
Subsidiaries to deposit or cause to be deposited all payments under such
Accounts to the Bank Blocked Account. In the event that any Account Debtor does
make any payment directly to the Borrower at the Lock Box or into any account
other than the Bank Blocked Account that Borrower maintains with Chase or any
other bank or financial institution acceptable to Agent, the Borrower shall
promptly deposit such amounts into the Bank Blocked Account. The Borrower and
each other Bank other than




                                      -61-
<PAGE>

Fortis acknowledge and agree that the Bank Blocked Account is owned by Fortis
and is under the exclusive dominion and control of Fortis. If Borrower desires
that funds be transferred from the Bank Blocked Account into Borrower's
operating account, Borrower shall request such a transfer by facsimile
transmission utilizing the form approved by Fortis and provided to Borrower for
such request. Although Fortis may from day to day transfer proceeds from such
account into the Borrower's operating account, Fortis has absolutely no duty to
make any such transfer and at any time may refuse to transfer any funds until
all Obligations have been satisfied. Fortis at any time may apply amounts
contained in the Bank Blocked Account toward satisfaction of the Obligations.

         7.15 Financial Covenants. The Borrower will, at all times, observe the
following financial covenants:

              (a) minimum Net Working Capital as follows:

                  (i)      $10,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $50,000,000.00 or less;

                  (ii)     $12,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $60,000,000.00 or less but greater
                           than $50,000,000.00;

                  (iii)    $14,000,000.00 at such time as the elected Borrowing
                           Base Sup-Cap is $70,000,000.00 or less but greater
                           than $60,000,000.00;

                  (iv)     $15,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $75,000,000.00 or less but greater
                           than $70,000,000.00;

                  (v)      $16,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $80,000,000.00 or less but greater
                           than $75,000,000.00;

                  (vi)     $18,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $90,000,000.00 or less but greater
                           than $80,000,000.00;

                  (vii)    $19,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $95,000,000.00 or less but greater
                           than $90,000,000.00;

                  (viii)   $20,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $100,000,000.00 or less but greater
                           than $95,000,000.00;



                                      -62-
<PAGE>

                  (ix)     $22,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $110,000,000.00 or less but greater
                           than $100,000,000.00;

                  (x)      $24,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $120,000,000.00 or less but greater
                           than $110,000,000.00; and

                  (xi)     $25,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $125,000,000.00 or less but greater
                           than $120,000,000.00.

              (b) minimum Tangible Net Worth as follows:

                  (i)      $11,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $50,000,000.00 or less;

                  (ii)     $13,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $60,000,000.00 or less but greater
                           than $50,000,000.00;

                  (iii)    $15,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $70,000,000.00 or less but greater
                           than $60,000,000.00;

                  (iv)     $16,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $75,000,000.00 or less but greater
                           than $70,000,000.00;

                  (v)      $17,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $80,000,000.00 or less but greater
                           than $75,000,000.00;

                  (vi)     $19,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $90,000,000.00 or less but greater
                           than $80,000,000.00;

                  (vii)    $20,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $95,000,000.00 or less but greater
                           than $90,000,000.00;

                  (viii)   $21,000,000.00 at such time as the elected Borrowing
                           Base Sub-Cap is $100,000,000.00 or less but greater
                           than $95,000,000.00;



                                      -63-
<PAGE>

                           (ix)     $23,000,000.00 at such time as the elected
                                    Borrowing Base Sub-Cap is $110,000,000.00 or
                                    less but greater than $100,000,000.00;

                           (x)      $25,000,000.00 at such time as the elected
                                    Borrowing Base Sub-Cap is $120,000,000.00 or
                                    less but greater than $110,000,000.00; and

                           (xi)     $26,000,000.00 at such time as the elected
                                    Borrowing Base Sub-Cap is $125,000,000.00 or
                                    less but greater than $120,000,000.00.

                  (c)      at all times, a ratio of total liabilities (excluding
                           the amount of Subordinated Debt that is included in
                           the calculation of Tangible Net Worth) to Tangible
                           Net Worth not to exceed 5.0:1.0; and

         In calculating the Net Working Capital coverages set forth above, the
amount of Subordinated Debt excluded in such calculation shall not exceed 50% of
the resultant Net Working Capital. In calculating the Tangible Net Worth
coverages set forth above, the amount of Subordinated Debt excluded in such
calculation shall not exceed 50% of the resultant Tangible Net Worth.

         7.16 Separate Operations. The Borrower will at all times maintain and
observe policies and procedures to insure that its operations are separate and
distinct from the operations of Borrower's Affiliates.

         7.17 Post-Closing Matters. On or before December 31, 2001, the Borrower
shall provide to the Banks certificates of existence and good standing from the
State of Delaware and each other state in which the Borrower conducts business.

                                  ARTICLE VIII

                               NEGATIVE COVENANTS

         So long as any Loan or other Obligation shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding, unless the Banks
waive compliance in writing:

         8.01 Limitation on Liens. The Borrower shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, make, create, incur, assume
or suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens"):

              (a) any Lien existing on property of the Borrower or any of its
Subsidiaries on the Closing Date and set forth in Schedule 8.01 securing
Indebtedness outstanding on such date;


                                      -64-
<PAGE>

              (b) any Lien created under any Loan Document;

              (c) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 7.07, provided, however,
that no notice of lien has been filed or recorded under the Code;

              (d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty and, with
respect to any such warehousemen's or landlord's lien, such liens only secure
accrued rental charges;

              (e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;

              (f) Liens on the property of the Borrower or its Subsidiaries
securing (i) the non-delinquent performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, (ii) contingent obligations
on surety and appeal bonds, and (iii) other non-delinquent obligations of a like
nature; in each case, incurred in the ordinary course of business; provided,
however, that all such Liens in the aggregate would not (even if enforced) cause
a Material Adverse Effect;

              (g) Liens consisting of judgment or judicial attachment liens;
provided, however, that the enforcement of such Liens is effectively stayed and
all such unstayed liens in the aggregate at any time outstanding for the
Borrower and its Subsidiaries do not exceed $100,000.00;

              (h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially interfere with the ordinary conduct of the business of the Borrower
and its Subsidiaries;

              (i) purchase money security interests (other than capital leases)
on any property acquired or held by the Borrower or its Subsidiaries in the
ordinary course of business, securing Indebtedness incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such property;
provided, however, that (i) any such Lien attaches to such property concurrently
with or within 20 days after the acquisition thereof, (ii) such Lien attaches
solely to the property so acquired in such transaction, (iii) the principal
amount of the debt secured thereby does not exceed 100% of the cost of such
property, and (iv) the principal amount of the Indebtedness secured by any and
all such purchase money security interests shall not at any time exceed
$100,000.00;

              (j) Liens of interest owners, including without limitation, Liens
arising as would be defined in Texas Bus. & Com. Code Section 9.343, comparable
laws




                                      -65-
<PAGE>

of the states of Oklahoma, Kansas, Wyoming or New Mexico, or other comparable
law; and

              (k) Liens not permitted by clause 8.01 (a), (b), (c), (d), (e),
(f), (g), (h) or (i), in an aggregate amount not to exceed $100,000.

              (l) Liens securing contractual obligations permitted by section
8.06.

         8.02 Consolidations and Mergers. The Borrower shall not suffer or
permit any of its Subsidiaries to, merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person.

         8.03 Limitation on Indebtedness. The Borrower shall not suffer or
permit any of its Subsidiaries to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:

              (a) Indebtedness incurred pursuant to or in accordance with, this
Agreement;

              (b) Indebtedness consisting of trade payables in the ordinary
course of business;

              (c) Indebtedness existing on the Closing Date, and described on
Schedule 8.01;

              (d) Indebtedness in respect of purchase money security interests
permitted by Section 8.01 hereof; and

              (e) Indebtedness in respect of Contingent Obligations permitted by
Section 8.06 hereof.

         8.04 Transactions with Affiliates. The Borrower shall not, and shall
not suffer or permit any of its Subsidiaries to, enter into any transaction with
any Affiliate of the Borrower, except upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Borrower or such
Subsidiary. Without limiting the foregoing, all sales of Product by Borrower to,
and purchases of Product by Borrower from, any Affiliate of Borrower shall be at
the market price on the day of sale, except for transactions made in connection
with Borrower's Index Sales Strategies which strategies shall have been approved
by the Banks prior to any such transactions.

         8.05 Use of Proceeds. The Borrower shall not suffer or permit any of
its Subsidiaries to, use any portion of the Loan proceeds or any Letter of
Credit, directly or



                                      -66-
<PAGE>

indirectly, (a) to purchase or carry Margin Stock, (b) to repay or otherwise
refinance indebtedness of the Borrower or others incurred to purchase or carry
Margin Stock, (c) to extend credit for the purpose of purchasing or carrying any
Margin Stock, or (d) to acquire any security in any transaction that is subject
to Section 13 or 14 of the Exchange Act.

         8.06 Contingent Obligations. The Borrower shall not suffer or permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any
Contingent Obligations except:

              (a) endorsements for collection or deposit in the ordinary course
of business;

              (b) swap contracts entered into in the ordinary course of business
as bona fide hedging transactions; and

              (c) Contingent Obligations of the Borrower and its Subsidiaries
existing as of the Closing Date and described on Schedule 8.07.

         8.07 Restricted Payments. The Borrower shall not suffer or permit any
of its Subsidiaries to, directly or indirectly declare or make, any distribution
of income or capital on account of any membership interest of the Borrower now
or hereafter in existence ("Distributions"), or set aside or otherwise deposit
or invest any sums for such purpose, except Distributions to its members, so
long as no Default or Event of Default has occurred or would result therefrom.

         8.08 ERISA. The Borrower shall not, nor suffer or permit any of its
ERISA Affiliates to: (a) engage in a prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan; or (b) engage in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.

         8.09 Change in Business. The Borrower shall not, nor suffer or permit
any of its Subsidiaries to, engage in any line of business different from the
line of business carried on by the Borrower and its Subsidiaries on the date
hereof.

         8.10 Accounting Changes. The Borrower shall not, nor suffer or permit
any of its Subsidiaries to, make any significant change in accounting treatment
or reporting practices, except as required by GAAP, or change the fiscal year of
the Borrower (except in connection with the acquisition of Borrower by Atmos
Energy Marketing LLC) or of any Subsidiary.

         8.11 Net Position. At no time will the Borrower allow its Net Position
to exceed 5,000,000 MMBTUS of natural gas. At no time will the Borrower allow
the sum of the following: (a) 25% of the Borrower's Net Position Value, plus (b)
Borrower's Transportation and Storage Exposure, plus (c) Borrower's




                                      -67-
<PAGE>

Below Index Sales Exposure, to exceed 33% of Borrower's Net Working Capital at
such time, where,

                  "Net Position Value" means Borrower's Net Position valued at
                  $3.00/MMBTU.

                  "Below Index Sales Exposure" means (the maximum volume of gas
                  required to be sold at below index prices multiplied by the
                  discount from index), minus (the net positive value of all
                  hedge contracts related to the utilization of the related
                  storage & transportation assets).

                  "Transportation and Storage Exposure" means the aggregate
                  contractual cost of transportation & storage contracts for a
                  term of in excess of 3 months.

         8.12 Loans and Investments. The Borrower shall not purchase or acquire,
or suffer or permit any Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any Acquisitions, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any Person
including any Affiliate of Borrower, except for:

              (a) investments in cash equivalents and Marketable Securities; and

              (b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business.

         8.13 Change of Management. Borrower shall not permit any Change of
Management. For purposes of this Section 8.13, "Change of Management" shall mean
that J. D. Woodward has ceased to act in his capacity as chief executive officer
of the Borrower.

         8.14 Deposit Accounts. Borrower shall not maintain any deposit accounts
with a bank or financial institution other than Chase with arrangements for such
deposit accounts to be owned and under the exclusive dominion and control of
Fortis, provided however, that Borrower may maintain operating and payroll
accounts with Bank of America, N.A., and provided, further, that Borrower may
maintain the Lock Box with Bank of America, N.A. which shall be pledged to
Agent, for the benefit of Agent, the Issuing Banks and the Banks.

         8.15 Risk Management Policy. The Borrower will not materially change
its risk management policies without the prior written consent of Agent and the
Banks. Borrower agrees that upon request by Agent, from time to time, the
Borrower and the Banks will review and evaluate Borrower's risk management
policies.



                                      -68-
<PAGE>

                                   ARTICLE IX

                                EVENTS OF DEFAULT

         9.01 Event of Default. Any of the following shall constitute an "Event
of Default":

              (a) Non-Payment. The Borrower fails to pay any amount payable
hereunder or under any other Loan Document when due including without limitation
such amounts as may come due as a result of a "demand" made by the Banks under
the Notes; or

              (b) Representation or Warranty. Any representation or warranty
made or deemed made herein, in any other Loan Document, or which is contained in
any certificate, document or financial or other statement by the Borrower, or
any Responsible Officer furnished at any time under this Agreement, or in or
under any other Loan Document, is incorrect or incomplete in any respect on or
as of the date made or deemed made; or

              (c) Covenant Defaults. The Borrower fails to perform or observe
any other term, covenant or agreement contained in any of the Loan Documents; or

              (d) Cross-Default. The Borrower or any Subsidiary of the Borrower
(i) fails to make any payment in respect of any Indebtedness or Contingent
Obligation having an aggregate principal amount (including undrawn committed or
available amounts and including amounts owing to all creditors under any
combined or syndicated credit arrangement) of more than $100,000.00 when due
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise); or (ii) fails to perform or observe any other material condition or
covenant, or any other event shall occur or condition exist, under any agreement
or instrument relating to any such Indebtedness or Contingent Obligation, if,
after expiration of any grace or cure period therein provided, the effect of
such failure, event or condition is to cause, or to permit the holder or holders
of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause such Indebtedness to be declared to be due and payable
prior to its stated maturity, or such Contingent Obligation to become payable or
cash collateral in respect thereof to be demanded, except to the extent that any
such amounts are in bona fide dispute in an aggregate amount not exceeding
$250,000 for which adequate reserves are maintained in accordance with GAAP; or

              (e) Insolvency; Voluntary Proceedings. The Borrower or any
Subsidiary of the Borrower (i) ceases or fails to be solvent, or generally fails
to pay, or admits in writing its inability to pay, its debts as they become due,
whether at stated maturity or otherwise; (ii) commences any Insolvency
Proceeding with respect to itself; or (iii) takes any action to effectuate or
authorize any of the foregoing; or



                                      -69-
<PAGE>

              (f) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Borrower or any Subsidiary of the
Borrower, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Borrower or any
Subsidiary or any of any of the Borrower's properties, and any such proceeding
or petition shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be released, vacated or fully
bonded within 60 days after commencement, filing or levy; (ii) the Borrower or
any Subsidiary of the Borrower admits the material allegations of a petition
against it in any Insolvency Proceeding, or an order for relief (or similar
order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the
Borrower or any Subsidiary of the Borrower acquiesces in the appointment of a
receiver, trustee, custodian, conservator, liquidator, mortgagee in possession
(or agent therefor), or other similar Person for itself or a substantial portion
of its property or business; or

              (g) ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Borrower under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$100,000.00; (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $100,000.00; or (iii) the Borrower or any
ERISA Affiliate shall fail to pay when due, any installment payment with respect
to its withdrawal liability under Section 4201 of ERISA under a Multiemployer
Plan in an aggregate amount in excess of $100,000.00; or

              (h) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Borrower or any Subsidiary of the Borrower, which such judgment, order, decree
or award is not effectively stayed pending appeal thereof, involving in the
aggregate a liability as to any single or related series of transactions,
incidents or conditions, to pay an amount of $250,000.00 or more; or

              (i) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Borrower or any Subsidiary of the Borrower which
does or would reasonably be expected to have a Material Adverse Effect; or

              (j) Change of Control. There occurs any Change of Control not
previously approved by the Banks; or

              (k) Adverse Change. There occurs a Material Adverse Effect; or

              (l) Guarantor Defaults. Guarantor fails in any material respect to
perform or observe any term, covenant or agreement in the Guaranty executed by
Guarantor; or the Guaranty is for any reason (other than satisfaction in full of
all Obligations and the termination of the Loans) partially (including with
respect to future advances) or wholly revoked or invalidated, or otherwise
ceases to be in full force and effect, or Guarantor or any other Person contests
in any manner the validity or



                                      -70-
<PAGE>

enforceability thereof or denies that it has any further liability or obligation
thereunder; or any event described at subsections (e) or (f) of this Section
occurs with respect to Guarantor.

IN NO EVENT SHALL ANY PROVISION OF THIS AGREEMENT PROVIDING FOR SPECIFIC EVENTS
OF DEFAULT BE CONSTRUED TO WAIVE, LIMIT OR OTHERWISE MODIFY THE DEMAND NATURE OF
THE LOANS WHICH MAY BE MADE PURSUANT TO THIS AGREEMENT, AND THE BORROWER HEREBY
ACKNOWLEDGES AND AGREES THAT THE BANKS' RIGHT TO DEMAND PAYMENT AT ANY TIME FOR
ANY REASON OR FOR NO REASON IS ABSOLUTE AND UNCONDITIONAL.

         9.02 Remedies. If any Event of Default occurs, Agent may and shall, at
the request of all of the Banks:

              (a) declare an amount equal to the maximum aggregate amount that
is or at any time thereafter may become available for drawing by the beneficiary
under any outstanding Letters of Credit (whether or not any beneficiary shall
have presented, or shall be entitled at such time to present, the drafts or
other documents required to draw under such Letters of Credit) to be immediately
due and payable, and declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Borrower; and

              (b) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law including, without limitation, seeking to lift the stay in effect under the
Proceeding; provided, however, that upon the occurrence of any event specified
in subsection (e) or (f) of Section 9.01, the obligation of each Bank to make
Loans and any obligation of an Issuing Bank to Issue Letters of Credit shall
automatically terminate and an amount equal to the maximum aggregate amount that
is or at any time thereafter may become available for drawing by the beneficiary
under any outstanding Letters of Credit (whether or not any beneficiary shall
have presented, or shall be entitled at such time to present, the drafts or
other documents required to draw under such Letters of Credit) together with the
unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable without further
act of Agent, any Issuing Bank or any Bank.

         9.03 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.



                                      -71-
<PAGE>

                                   ARTICLE X

                                      AGENT

         10.01 Appointment and Authorization.

              (a) Each Bank hereby irrevocably (subject to Section 10.09)
appoints, designates and authorizes Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall Agent have or be deemed to have any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent. Without
limiting the generality of the foregoing sentence, the use of the term "agent"
in this Agreement with reference to Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom and is intended to create or reflect only an administrative
relationship between independent contracting parties.

              (b) EACH ISSUING BANK SHALL ACT ON BEHALF OF THE BANKS WITH
RESPECT TO ANY LETTERS OF CREDIT ISSUED BY IT AND THE DOCUMENTS ASSOCIATED
THEREWITH UNTIL SUCH TIME AND EXCEPT FOR SO LONG AS AGENT MAY AGREE AT THE
REQUEST OF THE BANKS TO ACT FOR SUCH ISSUING BANK WITH RESPECT THERETO;
PROVIDED, HOWEVER, THAT SUCH ISSUING BANK SHALL HAVE ALL OF THE BENEFITS AND
IMMUNITIES (i) PROVIDED TO AGENT IN THIS ARTICLE X WITH RESPECT TO ANY ACTS
TAKEN OR OMISSIONS SUFFERED BY SUCH ISSUING BANK IN CONNECTION WITH LETTERS OF
CREDIT ISSUED BY IT OR PROPOSED TO BE ISSUED BY IT AND THE APPLICATION AND
AGREEMENTS FOR LETTERS OF CREDIT PERTAINING TO THE LETTERS OF CREDIT AS FULLY AS
IF THE TERM "AGENT," AS USED IN THIS ARTICLE X, INCLUDED SUCH ISSUING BANK WITH
RESPECT TO SUCH ACTS OR OMISSIONS, AND (ii) AS ADDITIONALLY PROVIDED IN THIS
AGREEMENT WITH RESPECT TO SUCH ISSUING BANKS. PRIOR TO THE ISSUANCE OF A LETTER
OF CREDIT BY AN ISSUING BANK OTHER THAN AGENT, SUCH ISSUING BANK SHALL PROVIDE
WRITTEN NOTICE TO AGENT OF THE DOLLAR AMOUNT, THE DATE OF SUCH ISSUANCE AND THE
EXPIRY DATE OF SUCH LETTER OF CREDIT. SUCH ISSUANCE SHALL BE SUBJECT TO THE
CONSENT OF AGENT. SUCH CONSENT SHALL NOT RESULT IN THE IMPOSITION OF ANY
LIABILITY UPON AGENT.

         10.02 Delegation of Duties. Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters



                                      -72-
<PAGE>

pertaining to such duties. Agent shall not be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects with reasonable
care.

         10.03 Liability of Agent. None of Agent-Related Persons shall (a) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (b) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Borrower or any Subsidiary or
Affiliate of the Borrower, or any officer thereof, contained in this Agreement
or in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by Agent under or in
connection with, this Agreement or any other Loan Document, or for the value of
or title to any Collateral, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of the Borrower or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Borrower or any of the Borrower's Subsidiaries or
Affiliates.

         10.04 Reliance by Agent.

              (a) Agent shall be entitled to rely, and shall be fully protected
in relying, upon any writing, resolution, notice, consent, certificate,
affidavit, letter, telegram, facsimile, telex or telephone message, statement or
other document or conversation believed by it 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 counsel to the Borrower), independent
accountants and other experts selected by Agent. Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of all of the
Banks, as applicable, as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of all of the Banks, as
applicable, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Banks.

              (b) For purposes of determining compliance with the conditions
specified in Section 5.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.



                                      -73-
<PAGE>
         10.05 Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default, except with respect
to defaults in the payment of principal, interest and fees required to be paid
to Agent for the account of the Banks, unless Agent shall have received written
notice from a Bank or the Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default." Agent will notify the Banks of its receipt of any such notice. Agent
shall take such action with respect to such Default or Event of Default as may
be requested by all of the Banks, as applicable, in accordance with Article IX;
provided, however, that unless and until Agent has received any such request,
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable or in the best interest of the Banks.

         10.06 Credit Decision. Each Bank acknowledges that none of
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of the
Borrower and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Borrower and its Subsidiaries, the value of and title to any Collateral, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Borrower hereunder. Each Bank also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks by Agent, Agent
shall not have any duty or responsibility to provide any Bank with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Borrower which may come
into the possession of any of Agent-Related Persons.

         10.07 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Borrower and
without limiting the obligation of the Borrower to do so), pro rata, from and
against any and all Indemnified Liabilities; provided, however, that no Bank
shall be liable for the payment to Agent-Related Persons of any portion of such
Indemnified Liabilities resulting solely from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Bank shall




                                      -74-
<PAGE>

reimburse Agent upon demand for its ratable share of any costs or out-of-pocket
expenses (including Attorney Costs) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
the Borrower. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.

         10.08 Agent in Individual Capacity. Fortis and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Borrower and its
Subsidiaries and Affiliates as though Fortis were not Agent or an Issuing Bank
hereunder and without notice to or consent of the Banks. The Banks acknowledge
that, pursuant to such activities, Fortis or its Affiliates may receive
information regarding the Borrower or its Affiliates (including information that
may be subject to confidentiality obligations in favor of the Borrower or such
Subsidiary) and acknowledge that Agent shall be under no obligation to provide
such information to them. With respect to its Loans, Fortis shall have the same
rights and powers under this Agreement as any other Bank and may exercise the
same as though it were not Agent or an Issuing Bank, and the terms "Bank" and
"Banks" include Fortis in its individual capacity.

         10.09 Successor Agent. Agent may resign as Agent upon thirty (30) days'
notice to the Banks. If Agent resigns under this Agreement, the Banks shall
appoint, from among the Banks, a successor agent for the Banks. If no successor
agent is appointed prior to the effective date of the resignation of Agent,
Agent may appoint, after consulting with the Banks, a successor agent from among
the Banks. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article X and Sections 11.04 and 11.05 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is thirty (30) days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become effective
and the Banks shall perform all of the duties of Agent hereunder until such
time, if any, as the Banks appoint a successor agent as provided for above.



                                      -75-
<PAGE>

         10.10 Withholding Tax.

              (a) If any Bank is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such
Bank agrees with and in favor of Agent, to deliver to Agent:

                  (i) if such Bank claims an exemption from, or a reduction of,
         withholding tax under a United States tax treaty, properly completed
         and executed copies of IRS Form W-8BEN before the payment of any
         interest in the first calendar year and before the payment of any
         interest in each third succeeding calendar year during which interest
         may be paid under this Agreement;

                  (ii) if such Bank claims that interest paid under this
         Agreement is exempt from United States withholding tax because it is
         effectively connected with a United States trade or business of such
         Bank, two properly completed and executed copies of IRS Form W-8ECI
         before the payment of any interest is due in the first taxable year of
         such Bank and in each succeeding taxable year of such Bank during which
         interest may be paid under this Agreement; and

                  (iii) such other form or forms as may be required under the
         Code or other laws of the United States as a condition to exemption
         from, or reduction of, United States withholding tax.

Such Bank agrees to promptly notify Agent of any change in circumstances which
would modify or render invalid any claimed exemption or reduction.

              (b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form W-8BEN
and such Bank sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Borrower to such Bank, such Bank agrees to
notify Agent of the percentage amount in which it is no longer the beneficial
owner of Obligations of the Borrower to such Bank. To the extent of such
percentage amount, Agent will treat such Bank's IRS Form W-8BEN as no longer
valid.

              (c) If any Bank claiming exemption from United States withholding
tax by filing IRS Form W-8ECI with Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of the Borrower to
such Bank, such Bank agrees to undertake sole responsibility for complying with
the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.

              (d) If any Bank is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Bank an
amount equivalent to the applicable withholding tax after taking into account
such reduction. However, if the forms or other documentation required by
subsection (a) of this Section are not




                                      -76-
<PAGE>

delivered to Agent, then Agent may withhold from any interest payment to such
Bank not providing such forms or other documentation an amount equivalent to the
applicable withholding tax imposed by Sections 1441 and 1442 of the Code,
without reduction.

              (e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered, was not properly executed, or because such
Bank failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Bank shall indemnify Agent fully for all amounts paid, directly or
indirectly, by Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to Agent
under this Section, together with all costs and expenses (including Attorney
Costs), except to the extent caused solely by the gross negligence or willful
misconduct of Agent. The obligation of the Banks under this Subsection shall
survive the payment of all Obligations and the resignation or replacement of
Agent.

         10.11 Collateral Matters. (a) Agent is authorized on behalf of all the
Banks, without the necessity of any notice to or further consent from the Banks,
from time to time to take any action with respect to any Collateral or the Loan
Documents which may be necessary to perfect and maintain perfected the security
interest in and Liens upon the Collateral granted pursuant to the Loan
Documents.

              (b) The Banks irrevocably authorize Agent, at its option and in
its discretion, to release any Lien granted to or held by Agent upon any
Collateral (I) upon payment in full of all Loans and all other Obligations known
to Agent and payable under this Agreement or any other Loan Document; (ii)
constituting property sold or to be sold or disposed of as part of or in
connection with any disposition permitted hereunder; (iii) constituting property
in which the Borrower or any Subsidiary owned no interest at the time the Lien
was granted or at any time thereafter; (iv) constituting property leased to the
Borrower or any Subsidiary under a lease which has expired or been terminated in
a transaction permitted under this Agreement or is about to expire and which has
not been, and is not intended by the Borrower or such Subsidiary to be, renewed
or extended; (v) consisting of an instrument evidencing Indebtedness or other
debt instrument, if the indebtedness evidenced thereby has been paid in full; or
(vi) if approved, authorized or ratified in writing by the all of the Banks.
Upon request by Agent at any time, the Banks will confirm in writing Agent's
authority to release particular types or items of Collateral pursuant to this
Subsection 10.11(b); provided, however, that the absence of any such
confirmation for whatever reason shall not affect Agent's rights under this
Section 10.11.

              (c) Each Bank agrees with and in favor of each other (which
agreement shall not be for the benefit of the Borrower or any Subsidiary) that
the Borrower's obligations to such Bank under this Agreement and the other Loan




                                      -77-
<PAGE>

Documents is not and shall not be secured by any real property collateral now or
hereafter acquired by such Bank.

         10.12 Monitoring Responsibility. Each Bank will make its own credit
decisions hereunder, including the decision whether or not to make advances or
consent to the Issuance of Letters of Credit, thus Agent shall have no duty to
monitor the Collateral Position, the amounts outstanding under sub-lines or the
reporting requirements or the contents of reports delivered by the Borrower.
Each Bank assumes the responsibility of keeping itself informed at all times.

                                   ARTICLE XI

                                  MISCELLANEOUS

         11.01 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing and signed by all the Banks (or by Agent at the written request of
all the Banks) and the Borrower and acknowledged by Agent, and then any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.

         11.02 Notices.

              (a) All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by
facsimile transmission; provided, however, that any matter transmitted by the
Borrower by facsimile (i) shall be immediately confirmed by a telephone call to
the recipient at the number specified on Schedule 11.02, and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and mailed, faxed
or delivered, to the address or facsimile number specified for notices on
Schedule 11.02; or, as directed to the Borrower or Agent, to such other address
as shall be designated by such party in a written notice to the other parties,
and as directed to any other party, at such other address as shall be designated
by such party in a written notice to the Borrower and Agent.

              (b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Articles II, III or X shall not be effective until actually
received by Agent.

              (c) Any agreement of Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Borrower. Agent and the Banks shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the Borrower to
give such notice and Agent and



                                      -78-
<PAGE>

the Banks shall not have any liability to the Borrower or other Person on
account of any action taken or not taken by Agent or the Banks in reliance upon
such telephonic or facsimile notice, except to the extent of the gross
negligence or willful misconduct of Agent or any Bank. The obligation of the
Borrower to repay the Loans and L/C Obligations shall not be affected in any way
or to any extent by any failure by Agent and the Banks to receive written
confirmation of any telephonic or facsimile notice or the receipt by Agent and
the Banks of a confirmation which is at variance with the terms understood by
Agent and the Banks to be contained in the telephonic or facsimile notice.

         11.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of Agent or any Bank, any right, remedy, power
or privilege hereunder, shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.

         11.04 Costs and Expenses. The Borrower shall:

              (a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse Fortis (including in its capacity as Agent) within
five (5) Business Days after demand (subject to Subsection 5.01(e)) for all the
actual and reasonable costs and expenses incurred by Fortis (including in its
capacity as Agent) in connection with the preparation, delivery, and execution
of, and any amendment, supplement, waiver or modification to (in each case,
whether or not consummated), this Agreement, any Loan Document and any other
documents prepared in connection herewith or therewith, and the consummation of
the transactions contemplated hereby and thereby, including reasonable Attorney
Costs and costs of commercial finance examinations, incurred by Fortis
(including in its capacity as Agent) excluding, however, any costs or expenses
incurred in connection with any negotiation, dispute or claim solely between or
among Agent and/or one or more of the Banks; and

              (b) pay or reimburse Agent and each Bank within five Business Days
after demand (subject to Subsection 5.01(e)) for all actual and reasonable costs
and expenses (including Attorney Costs) incurred by them in connection with the
monitoring, administration, enforcement, attempted enforcement, or preservation
of any rights or remedies under this Agreement or any other Loan Document
excluding, however, any costs or expenses incurred in connection with any
negotiation, dispute or claim solely between or among Agent and/or one or more
of the Banks; and all such costs and expenses during the existence of an Event
of Default or after acceleration of the Loans (including in connection with any
"workout" or restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding).

         11.05 INDEMNITY. WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY
ARE CONSUMMATED, THE BORROWER SHALL INDEMNIFY AND HOLD AGENT-RELATED PERSONS,
AND EACH BANK AND EACH OF ITS RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
COUNSEL, AGENTS AND ATTORNEYS-IN-FACT (EACH, AN "INDEMNIFIED PERSON") HARMLESS
FROM AND AGAINST




                                      -79-
<PAGE>

ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, CHARGES, EXPENSES AND DISBURSEMENTS (INCLUDING ATTORNEY
COSTS) OF ANY KIND OR NATURE WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING AT ANY
TIME FOLLOWING REPAYMENT OF THE LOANS, THE TERMINATION OF THE LETTERS OF CREDIT
AND THE TERMINATION, RESIGNATION OR REPLACEMENT OF AGENT OR REPLACEMENT OF ANY
BANK) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY SUCH PERSON IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED BY OR
REFERRED TO HEREIN, OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY ACTION TAKEN
OR OMITTED BY ANY SUCH PERSON UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING,
INCLUDING WITH RESPECT TO ANY INVESTIGATION, LITIGATION OR PROCEEDING (INCLUDING
ANY INSOLVENCY PROCEEDING OR APPELLATE PROCEEDING) RELATED TO OR ARISING OUT OF
THIS AGREEMENT OR THE LOANS OR LETTERS OF CREDIT OR THE USE OF THE PROCEEDS
THEREOF, WHETHER OR NOT ANY INDEMNIFIED PERSON IS A PARTY THERETO (ALL THE
FOREGOING, COLLECTIVELY, THE "INDEMNIFIED LIABILITIES"); PROVIDED, HOWEVER, THAT
THE BORROWER SHALL HAVE NO OBLIGATION HEREUNDER TO ANY INDEMNIFIED PERSON FOR
THAT PORTION OF ANY INDEMNIFIED LIABILITIES THAT IS ADJUDGED BY A COURT OF
COMPETENT JURISDICTION TO HAVE BEEN CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNIFIED PERSON OR THAT PORTION OF ANY INDEMNIFIED
LIABILITIES WHICH ARE OWED BY AN INDEMNIFIED PERSON TO ANY OTHER INDEMNIFIED
PERSON, BUT IN ALL EVENTS, THE BORROWER SHALL REMAIN LIABLE FOR THE REMAINDER OF
THE INDEMNIFIED LIABILITIES NOT SO EXCLUDED. THE AGREEMENTS IN THIS SECTION
SHALL SURVIVE PAYMENT OF ALL OTHER OBLIGATIONS.

         11.06 Payments Set Aside. To the extent that the Borrower makes a
payment to Agent or the Banks, or Agent or the Banks exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by Agent or
such Bank in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any Insolvency Proceeding or otherwise, then (a) to
the extent of such recovery the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such set-off had not occurred, and (b) each
Bank severally agrees to pay to Agent upon demand its pro rata share of any
amount so recovered from or repaid by Agent.

         11.07 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or Obligations under this Agreement without the prior written
consent of Agent and each Bank.

         11.08 Assignments, Participations, Etc.

              (a) Any Bank, at any time may assign and delegate to one or more
Eligible Assignees (each an "Assignee") all, or any ratable part of all, of the
Loans, the




                                      -80-
<PAGE>

Uncommitted Line, the L/C Obligations and the other rights and obligations of
such Bank hereunder, in a minimum amount of $1,000,000.00; provided, however,
that (i) any such disposition shall not, without the prior consent of the
Borrower, require the Borrower to file a registration statement with the
Securities and Exchange Commission or apply to register or qualify the Loan or
any Note under the securities laws of any state, and (ii) the Borrower and Agent
may continue to deal solely and directly with such Bank in connection with the
interest so assigned to an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses and related information with
respect to the Assignee, shall have been given to the Borrower and Agent by such
Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered to
the Borrower and Agent an Assignment and Acceptance ("Assignment and
Acceptance") in form attached hereto as Exhibit D, together with any Note or
Notes subject to such assignment; and (iii) the assignor Bank or Assignee has
paid to Agent a processing fee in the amount of $2,500.00.

              (b) From and after the date that Agent notifies the assignor Bank
that it has received an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank
shall, to the extent that rights and obligations hereunder and under the other
Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Loan Documents.

              (c) The Borrower shall execute and deliver to Agent, new Notes
evidencing such Assignee's assigned Loans and Uncommitted Line Portion and, if
the assignor Bank has retained a portion of its Loans and its Uncommitted Line
Portion, replacement Notes in the principal amount of the Loans retained by the
assignor Bank (such Notes to be in exchange for, but not in payment of, the
Notes held by such Bank). Immediately upon each Assignee's making its processing
fee payment under the Assignment and Acceptance, this Agreement shall be deemed
to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Uncommitted Line
Portion arising therefrom. The Uncommitted Line Portion allocated to each
Assignee shall reduce such Uncommitted Line Portion of the assigning Bank pro
tanto. Upon such Assignment, Agent is authorized to revise Schedule 2.01 and
Schedule 11.02 to reflect the adjusted status of the Banks.

              (d) Any Bank may at any time sell to one or more commercial banks
or other Persons not Affiliates of the Borrower (a "Participant") participating
interests in any Loans, the Uncommitted Line Portion of that Bank and the other
interests of that Bank (the "originating Bank") hereunder and under the other
Loan Documents; provided, however, that (i) the originating Bank's and the
Borrower's obligations under this



                                      -81-
<PAGE>

Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Borrower, the
Issuing Banks and Agent shall continue to deal solely and directly with the
originating Bank in connection with the originating Bank's rights and
obligations under this Agreement and the other Loan Documents, and (iv) no Bank
shall transfer or grant any participating interest under which the Participant
has rights to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would require unanimous consent of the Banks as
described in the first proviso to Section 11.01. In the case of any such
participation, the Participant shall not have any rights under this Agreement,
or any of the other Loan Documents, and all amounts payable by the Borrower
hereunder shall be determined as if such Bank had not sold such participation;
except that, if amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement.

              (e) Each Bank agrees to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all information identified
as "confidential" or "secret" by the Borrower and provided to it by the Borrower
or any Subsidiary or Affiliate, or by Agent on the Borrower or Subsidiary's or
Affiliate's behalf, under this Agreement or any other Loan Document, and neither
it nor any of its Affiliates shall use any such information other than in
connection with or in enforcement of this Agreement and the other Loan
Documents; except to the extent such information (i) was or becomes generally
available to the public other than as a result of disclosure by the Bank, or
(ii) was or becomes available on a non-confidential basis from a source other
than the Borrower; provided, however, that such source is not bound by a
confidentiality agreement with, or under obligation of confidentiality, the
Borrower known to the Bank; provided, however, that any Bank may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which Agent, any
Bank or their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to such Bank's independent auditors and other
professional advisors; (G) to any Affiliate of such Bank, or to any Participant
or Assignee, actual or potential; provided, however, that such Affiliate,
Participant or Assignee agrees to keep such information confidential to the same
extent required of the Banks hereunder, and (H) as to any Bank, as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which the Borrower is party or is deemed party with such
Bank. The foregoing is not



                                      -82-
<PAGE>

intended to limit the Banks' obligations to maintain confidential information
received from the Borrower under applicable laws.

              (f) Notwithstanding any other provision in this Agreement, any
Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve
Bank may enforce such pledge or security interest in any manner permitted under
applicable law.

         11.09 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Borrower, any such notice being waived by the Borrower to
the fullest extent permitted by law, to set off and apply any and all deposits
at any time held by, and other indebtedness at any time owing by, such Bank to
or for the credit or the account of the Borrower against any and all Obligations
owing to such Bank, now or hereafter existing, irrespective of whether or not
Agent or such Bank shall have made demand under this Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. Each Bank
agrees promptly to notify the Borrower and Agent after any such set-off and
application made by such Bank; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and application.

         11.10 Automatic Debits of Fees. With respect to any letter of credit
fee or other fee, interest or any other cost or expense (including Attorney
Costs) due and payable to Agent, the Issuing Banks, Fortis or the Arranger under
the Loan Documents, the Borrower hereby irrevocably authorizes Fortis to debit
any deposit accounts of the Borrower with Chase (such deposit accounts being
owned by Fortis and under the exclusive dominion and control of Fortis) in an
amount such that the aggregate amount debited from all such deposit accounts
does not exceed such fee or other cost or expense. If there are insufficient
funds in such deposit accounts to cover the amount of the fee or other cost or
expense then due, such debits will be reversed (in whole or in part, in Fortis'
sole discretion) and such amount not debited shall be deemed to be unpaid. No
such debit under this Section shall be deemed a set-off.

         11.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify Agent in writing of any changes in the address to which notices to the
Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as Agent shall reasonably request.

         11.12 Bank Blocked Account Charges and Procedures. Agent is hereby
authorized to (a) charge the Bank Blocked Account or any deposit account of the
Borrower maintained at Chase for all returned checks, service charges, and other
fees and charges associated with the deposits by the Borrower to and withdrawals
by the Borrower



                                      -83-
<PAGE>

from the Bank Blocked Account; (b) follow its usual procedures in the event the
Bank Blocked Account or any check, draft or other order for payment of money
should be or become the subject of any writ, levy, order or other similar
judicial or regulatory order or process; and (c) transfer, at Agent's sole
discretion, any collected and available balances relating to the Borrower in the
Bank Blocked Account each day by wire transfer to the Borrower's operating
account number 375-1561112 maintained with Bank of America, N.A. Funds are not
available if, in the reasonable determination of Agent, they are subject to a
hold, dispute or legal process preventing their withdrawal. If the available
balances in the Bank Blocked Account relating to the Borrower are not sufficient
to pay Agent for any returned check, draft or order for the payment of money
relating to the Borrower, or to compensate Agent for any charges or fees due
Agent with respect to the deposits by the Borrower to and withdrawals by the
Borrower from the Bank Blocked Account, the Borrower agrees to pay on demand the
amount due Agent. The Borrower agrees that it cannot, and will not, withdraw any
monies from the Bank Blocked Account and it will not permit the Bank Blocked
Account to become subject to any other pledge, assignment, lien, charge or
encumbrance of any kind, nature or description, other than Agent's security
interest.

         11.13 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.

         11.14 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.

         11.15 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Borrower, the Banks, Agent
and Agent-Related Persons, and their permitted successors and assigns, and no
other Person shall be a direct or indirect legal beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any of the other Loan Documents.

         11.16 GOVERNING LAW AND JURISDICTION.

              (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW (WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAWS) OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT AGENT AND
THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

              (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT MAY BE



                                      -84-
<PAGE>

BROUGHT IN THE STATE COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, STATE
OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER, AGENT
AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, AGENT AND THE BANKS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE BORROWER HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON THE BORROWER AND IRREVOCABLY
APPOINTS CORPORATION SERVICE COMPANY, 80 STATE STREET, ALBANY, NY 12207, AS
REGISTERED AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS WITHIN THE
STATE OF NEW YORK AND AGREES TO OBTAIN A LETTER FROM CORPORATION SERVICE
COMPANY, ACKNOWLEDGING SAME AND CONTAINING THE AGREEMENT OF CORPORATION SERVICE
COMPANY, TO PROVIDE AGENT WITH THIRTY (30) DAYS ADVANCE NOTICE PRIOR TO ANY
RESIGNATION OF CORPORATION SERVICE COMPANY AS SUCH REGISTERED AGENT.

         11.17 WAIVER OF JURY TRIAL. THE BORROWER, THE BANKS AND AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER, THE
BANKS AND AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.



                                      -85-
<PAGE>

         11.18 DISCRETIONARY FACILITY. THE BORROWER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT PROVIDES FOR A CREDIT FACILITY THAT IS COMPLETELY DISCRETIONARY
ON THE PART OF THE BANKS AND THAT THE BANKS HAVE ABSOLUTELY NO DUTY OR
OBLIGATION TO ADVANCE ANY REVOLVING LOANS OR TO ISSUE ANY LETTER OF CREDIT. THE
BORROWER UNDERSTANDS THAT WITHOUT REASON, CAUSE OR PRIOR NOTICE, THE BANKS MAY
CEASE ADVANCING REVOLVING LOANS AND ISSUING LETTERS OF CREDIT AND MAKE DEMAND
FOR PAYMENT OF ALL OBLIGATIONS OF BORROWER TO THE BANKS AT ANY TIME. BORROWER
REPRESENTS AND WARRANTS TO THE BANKS THAT BORROWER IS AWARE OF THE RISKS
ASSOCIATED WITH CONDUCTING BUSINESS UTILIZING AN UNCOMMITTED FACILITY.

         11.19 Entire Agreement. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS, EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG THE BORROWER,
THE BANKS AND AGENT, AND SUPERSEDES ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS AND
UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF.



                                      -86-
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

                                   WOODWARD MARKETING, L.L.C.,
                                   a Delaware limited liability company


                                   By:  /s/ RONALD W. BAHR
                                      -------------------------------------
                                   Name:  Ronald W. Bahr
                                   Title: Senior Vice President


                                   Borrower's Address:
                                   11251 Northwest Freeway, Suite 400
                                   Houston, Texas  77092
                                   Attention:  Ronald W. Bahr
                                   Telephone:  (713) 688-7771
                                   Facsimile:  (713) 688-5124


                                   FORTIS CAPITAL CORP.,
                                   A CONNECTICUT CORPORATION
                                   as Agent and a Bank


                                   By:  /s/ CHRISTINA E. ROBERTS
                                      -------------------------------------
                                   Name:  Christina E. Roberts
                                   Title: Managing Director


                                   By:  /s/ CHRISTINA M. REYNOLDS
                                      -------------------------------------
                                   Name:  Christina M. Reynolds
                                   Title: Senior Vice President

                                   100 Crescent Court
                                   Suite 1777
                                   Dallas, TX 75201
                                   Telephone:  (214) 953-9314
                                   Facsimile:  (214) 969-9332



                          [Woodward - Credit Agreement]




                                      -87-
<PAGE>


                                    FORTIS CAPITAL CORP.,
                                    A CONNECTICUT CORPORATION,
                                    as a Bank and Issuing Bank


                                    By: /s/ CHRISTINA E. ROBERTS
                                       -----------------------------------------
                                           Name:    Christina E. Roberts
                                           Title:   Managing Director


                                    By:  /s/ CHRISTINA M. REYNOLDS
                                       -----------------------------------------
                                           Name:    Christina M. Reynolds
                                           Title:   Senior Vice President


                                    100 Crescent Court
                                    Suite 1777
                                    Dallas, TX 75201
                                    Telephone:  (214) 953-9314
                                    Facsimile:  (214) 969-9332




                                    BNP PARIBAS,
                                    a bank organized under the laws of France




                                    By:  /s/ EDWARD K. CHIN
                                       -----------------------------------------
                                           Name:  Edward K. Chin
                                           Title:  Director

                                    By: /s/ KEITH COX
                                           Name: Keith Cox
                                           Title:   Director


                                    787 Seventh Avenue
                                    New York, New York  10019
                                    Attention:  Ed Chin
                                    Telephone:  (212) 841-2020
                                    Facsimile:  (212) 841-2536





                          [Woodward - Credit Agreement]



                                      -88-
<PAGE>

                                  SCHEDULE 2.01

                              UNCOMMITTED LINE AND
                            UNCOMMITTED LINE PORTION
                 (EXCLUDING OVERDRAFT LINES AND SWAP CONTRACTS)


                                UNCOMMITTED LINE:


<Table>
<Caption>
              Line:                          Bank              Dollar Amount                    Share
              ----                           ----              -------------                    -----
<S>                                   <C>                      <C>                              <C>
Borrowing Base Line                   Fortis                   $      75,000,000.00              60%

                                      BNP Paribas              $      50,000,000.00              40%


Collateralized L/C Line               Fortis                   $       9,000,000.00              60%

                                      BNP Paribas              $       6,000,000.00              40%
</Table>



                                 Schedule 2.01-1
<PAGE>


                                  SCHEDULE 6.05

                 LITIGATION, AND PATENT, TRADEMARK, ETC. CLAIMS

None.




                                 Schedule 6.05-1

<PAGE>


                                  SCHEDULE 6.07

                                  ERISA MATTERS

None.



                                 Schedule 6.07-1
<PAGE>

                                  SCHEDULE 6.12

                              ENVIRONMENTAL MATTERS

None.



                                 Schedule 6.12-1
<PAGE>

                                  SCHEDULE 6.16

                       SUBSIDIARIES AND EQUITY INVESTMENTS

Southern Resources, Inc.



                                 Schedule 6.16-1
<PAGE>


                                  SCHEDULE 6.17

                                INSURANCE MATTERS

None.



                                 Schedule 6.17-1
<PAGE>


                                SCHEDULE 7.03(f)

                         LOCATIONS OF INVENTORY STORAGE

North Liberty, Kansas
Saltville, Virginia
Barnsley, Kentucky
East Diamond, Kentucky
Bearcreek, Louisiana
Epps, Louisiana



                               Schedule 7.03(f)-1
<PAGE>

                                  SCHEDULE 8.01

                        PERMITTED INDEBTEDNESS AND LIENS

None.



                                 Schedule 8.01-1
<PAGE>

                                  SCHEDULE 8.07

                             CONTINGENT OBLIGATIONS

None.



                                 Schedule 8.07-1
<PAGE>

                                 SCHEDULE 11.02

                    LENDING OFFICES AND ADDRESSES FOR NOTICES

FORTIS CAPITAL CORP.,
as Agent

Fortis Capital Corp.
100 Crescent Court
Suite 1777
Dallas, TX 75201
Attention: Marla Jennings
Telephone:  (214) 953-9314
Facsimile:  (214) 969-9332

AGENT'S PAYMENT OFFICE:

Fortis Capital Corp.
100 Crescent Court
Suite 1777
Dallas, TX 75201
Attention: Marla Jennings
Telephone:  (214) 953-9314
Facsimile:  (214) 969-9332

FORTIS CAPITAL CORP.,
as Issuing Bank

Fortis Capital Corp.
100 Crescent Court
Suite 1777
Dallas, TX 75201
Attention: Marla Jennings
Telephone:  (214) 953-9314
Facsimile:  (214) 969-9332




                                Schedule 11.02-1
<PAGE>

FORTIS CAPITAL CORP.,
as a Bank

Fortis Capital Corp.
100 Crescent Court
Suite 1777
Dallas, TX 75201
Attention: Marla Jennings
Telephone:  (214) 953-9314
Facsimile:  (214) 969-9332

BNP PARIBAS,

BNP Paribas
787 Seventh Avenue
New York, New York  10019
Attention:  Ed Chin
Telephone:  (212) 841-2020
Facsimile:  (212) 841-2536




                                Schedule 11.02-2
<PAGE>

                                    EXHIBIT A

                           FORM OF NOTICE OF BORROWING
                               (LETTERS OF CREDIT)

                                     [DATE]

Fortis Capital Corp.
100 Crescent Court
Suite 1777
Dallas, TX 75201
Attention: Marla Jennings
Telephone:  (214) 953-9314
Facsimile:  (214) 969-9332

         Re:      Credit Agreement, dated to be effective as of December 1, 2001
                  (as amended or supplemented from time to time, the
                  "Agreement"), by and among Woodward Marketing, L.L.C. (the
                  "Borrower"), the banks that from time to time are parties
                  thereto, and Fortis Capital Corp., as Agent

Ladies and Gentlemen:

         Reference is made to the Agreement (capitalized terms used herein that
are not defined shall have the respective meanings ascribed thereto in the
Agreement). The Borrower hereby gives notice of its intention to request the
[ISSUANCE, AMENDMENT, OR RENEWAL] of Letters of Credit as is further described
on the Letter of Credit Application attached hereto.

         The Borrower represents and warrants, as of the date hereof and as of
the date any Letter of Credit is Issued, amended or renewed, that (i) no Default
or Event of Default has occurred and is continuing on the date hereof, nor will
any thereof occur after giving effect to the Letters of Credit requested above;
(ii) that neither the Borrowing Base Advance Cap nor the limit under the
Collateralized L/C Line will be exceeded after giving effect to the Letters of
Credit requested above; and (iii) all of Borrower's representations and
warranties under the Agreement are true and correct, to Borrower's knowledge, as
of the date hereof.

                                                Very truly yours,

                                                WOODWARD MARKETING, L.L.C.,



                                                By:
                                                   -----------------------------
                                                Name:
                                                     ---------------------------
                                                Title:
                                                      --------------------------



                                      A-1
<PAGE>


                           FORM OF NOTICE OF BORROWING
                                (REVOLVING LOAN)

                                     [DATE]

Fortis Capital Corp.
100 Crescent Court
Suite 1777
Dallas, TX 75201
Attention: Marla Jennings
Telephone:  (214) 953-9314
Facsimile:  (214) 969-9332

         Re:      Credit Agreement, dated to be effective as of December 1, 2001
                  (as amended or supplemented from time to time, the
                  "Agreement"), by and among Woodward Marketing, L.L.C. (the
                  "Borrower"), the banks that from time to time are parties
                  thereto, and Fortis Capital Corp., as Agent

Ladies and Gentlemen:

         Reference is made to the Agreement (capitalized terms used herein that
are not defined shall have the respective meanings ascribed thereto in the
Agreement). The Borrower hereby gives notice of its intention to borrow under
the Borrowing Base Line.

         Please advance a Revolving Loan as follows:

         Date of Borrowing(a-1)        :
                                         ------------------------------
         Amount                        :
                                         ------------------------------
         Type of Advance
         (Base Rate or Offshore Rate)  :
                                         ------------------------------
         Interest Period
         (if Offshore Rate)            :                               .
                                         ------------------------------

         The Borrower represents and warrants, as of the date hereof and as of
the date any Revolving Loan is made or renewed, that (i) no Default or Event of
Default has occurred and is continuing on the date hereof, nor will any thereof
occur after giving effect to the





(a-1) The aggregate amount of the Borrowing comprised of Offshore Rate Loans
must be made in an amount equal to the Offshore Effective Amount. The date of
the Borrowing must be a Business Day. Borrower must give three(s) Business
Days' advance notice for Borrowings comprised of Offshore Rate Loans, and the
same Business Day advance notice for Borrowings comprised of Base Rate Loans.

                                      A-2
<PAGE>

Revolving Loan requested above; (ii) that neither the Borrowing Base Advance Cap
nor the Dollar Advance Cap will be exceeded after giving effect to the Revolving
Loan requested above; and (iii) all of Borrower's representations and warranties
under the Agreement are true and correct, to Borrower's knowledge, as of the
date hereof.

                                           Very truly yours,

                                           WOODWARD MARKETING, L.L.C.,



                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------




                                      A-3
<PAGE>
                                    EXHIBIT B

                                     FORM OF
                        NOTICE OF CONVERSION/CONTINUATION

                                     [Date]

Fortis Capital Corp.
100 Crescent Court
Suite 1777
Dallas, TX 75201
Attention: Marla Jennings
Telephone:  (214) 953-9314
Facsimile:  (214) 969-9332

         Re:      Credit Agreement, dated to be effective as of December 1, 2001
                  (as amended or supplemented from time to time, the
                  "Agreement"), by and among Woodward Marketing, L.L.C. (the
                  "Borrower"), the banks that from time to time are parties
                  thereto, and Fortis Capital Corp., as Agent

Ladies and Gentlemen:

         The Borrower hereby gives you irrevocable notice pursuant to Section
2.04 of the Agreement that the undersigned hereby requests a [conversion]
[continuation] of [outstanding Borrowings] [an outstanding Borrowing] into a new
Borrowing (the "Proposed Borrowing") on the terms set forth below:

         Outstanding Borrowing #1

         Date of Borrowing                     :
         Aggregate Amount for Conversion(2)    :
         Type of Advance                       :
         Interest Period                       :


----------

     (2) The aggregate amount for conversion with respect to Borrowings
comprised of Offshore Rate Loans must be made in an amount equal to the Offshore
Effective Amount or, if the remaining outstanding amount of such Borrowing would
be less than an amount equal to the Offshore Effective Amount following the
conversion or continuation, in the remaining outstanding amount of such
Borrowing.



                                      B-1
<PAGE>

         Proposed Borrowing

         Date of Conversion or Continuation(3) :
         Aggregate Amount                      :
         Type of Advance                       :
         Interest Period                       :

         The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed Borrowing:

              (a) the representations and warranties contained in the Agreement
are correct in all material respects, before and after giving effect to the
proposed Borrowing and the application of the proceeds therefrom, as though made
on the date of the proposed Borrowing;

              (b) no Default has occurred and remains uncured, nor would result
from the proposed Borrowing; and

              (c) the Borrowing Base Advance Cap will not be exceeded after
giving effect to the proposed Borrowing.

                                          Very truly yours,

                                          WOODWARD MARKETING, L.L.C.,



                                          By:
                                             -----------------------------------
                                          Name:
                                               ---------------------------------
                                          Title:
                                                  ------------------------------

----------

    (3) The date of the proposed conversion or continuation must be a Business
Day. Borrower must give three(s) Business Days' advance notice for conversions
into or continuations of Borrowings comprised of Offshore Rate Loans, and the
same Business Day advance notice for conversions into or continuations of
Borrowings comprised of Base Rate Loans.



                                      B-2
<PAGE>

                                    EXHIBIT C

                                     FORM OF
                             COMPLIANCE CERTIFICATE

                                     [Date]

Fortis Capital Corp.
100 Crescent Court
Suite 1777
Dallas, TX 75201
Attention: Marla Jennings
Telephone:  (214) 953-9314
Facsimile:  (214) 969-9332

         Re:      Credit Agreement, dated to be effective as of December 1, 2001
                  (as amended or supplemented from time to time, the
                  "Agreement"), by and among Woodward Marketing, L.L.C. (the
                  "Borrower"), the banks that from time to time are parties
                  thereto, and Fortis Capital Corp., as Agent

Ladies and Gentlemen:

         The Borrower, acting through its duly authorized Responsible Officers
(as that term is defined in the Agreement), certifies to each of the Banks that
the Borrower is in compliance with the Agreement and in particular certifies the
following as of ____________:

           (i)   Net Working Capital                     $                 ;
                                                          -----------------

           (ii)  Tangible Net Worth                      $                 ;
                                                          -----------------

           (iii) Ratio of Total Liabilities to Tangible
                 Net Worth                                                 :1;
                                                         ------------------

           (iv) Borrowing Base Sub-Cap                   $                 .
                                                          -----------------

         Further, the undersigned hereby certify that the Net Position has at no
time exceeded the limitations set forth in Section 8.11 of the Agreement and
that the undersigned have no knowledge of any Defaults under the Agreement which
existed as of [______________] or which exist as of the date of this letter.

         The undersigned also certifies that the accompanying financial
statements present fairly, in all material respects, the financial condition of
the Borrower as of



                                      C-1
<PAGE>

[_____________], and the related results of operations for the [___________]
then ended, in conformity with generally accepted accounting principles.

                                         Very truly yours,

                                         WOODWARD MARKETING, L.L.C.


                                         By:
                                            -----------------------------------
                                         Name:
                                              ---------------------------------
                                         Title:
                                               --------------------------------



                                      C-2
<PAGE>


                                    EXHIBIT D

                                     FORM OF
                            ASSIGNMENT AND ACCEPTANCE

                                     [Date]

         Reference is made to the Credit Agreement dated to be effective as of
December 1, 2001 (as amended or supplemented from time to time, the
"Agreement"), among WOODWARD MARKETING, L.L.C. (the "Borrower"), the banks that
from time to time are signatories thereto, and Fortis Capital Corp., as Agent.
Capitalized terms used herein but not defined herein shall have the meanings
specified in the Agreement.

         Pursuant to the terms of the Agreement, [_________________]
("Assignor"), wishes to assign and delegate to [________________] ("Assignee"),
[_______]% of its rights and obligations under the Agreement. Therefore,
Assignor, Assignee, and Agent agree as follows:

         1. The Assignor hereby sells and assigns and delegates to the Assignee,
and the Assignee hereby purchases and assumes from the Assignor, without
recourse to the Assignor and without representation or warranty except for the
representations and warranties specifically set forth in clauses (i), (ii), and
(iii) of Section 2 of this Assignment and Acceptance, a [_____]% interest in and
to all of the Assignor's rights and obligations under the Agreement and the
other Loan Documents as of the Effective Date (as defined below), including such
percentage interest in the Assignor's Uncommitted Line Portion, the Loans owing
to the Assignor, the Assignor's Pro Rata Share of the Letters of Credit, and the
Note held by the Assignor.

         2. The Assignor (i) represents and warrants that, prior to executing
this Assignment and Acceptance, its Uncommitted Line Portion is
$[________________], the aggregate outstanding principal amount of Loans owed by
the Borrower to the Assignor is $[______________], and its Pro Rata Share of the
outstanding Effective Amount of L/C Obligations is $[_____________]; (ii)
represents and warrants that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and clear
of any adverse claim; (iii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties, or representations
made in or in connection with the Agreement or any other Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency, or
value of the Agreement or any other Loan Document or any other instrument or
document furnished pursuant thereto; (iv) 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 Agreement or any other Loan Document or any other
instrument or document furnished pursuant thereto; and (v) attaches the Note
referred to in Section 1 above and requests that Agent exchange such Note for a
new Note dated [____________], in the principal amount of




                                      D-1
<PAGE>

$[_____________] payable to the order of the Assignee[, and a new Note dated in
the principal amount of $[______________] payable to the order of Assignor].

         3. The Assignee (i) confirms that it has received a copy of the
Agreement, together with copies of the financial statements referred to in
Section 7.01 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance (ii) agrees that it will, independently and without
reliance upon Agent, the Assignor or any other Bank, 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 Agreement or any
other Loan Document; (iii) appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers under the Agreement and any
other Loan Document as are delegated to Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; (iv) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Agreement or any other Loan Document are required to be performed by it
as a Bank; (v) specifies as its Lending Office (and address for notices) the
office set forth beneath its name on the signature pages hereof; (vi) attaches
the forms prescribed by the Internal Revenue Service of the United States
certifying as to the Assignee's status for purposes of determining exemption
from United States withholding taxes with respect to all payments to be made to
the Assignee under the Agreement and Notes or such other documents as are
necessary to indicate that all such payments are subject to such rates at a rate
reduced by an applicable tax treaty, and (vii) represents that it is an Eligible
Assignee.

         4. The effective date for this Assignment and Acceptance shall be
[___________________] ("Effective Date"), and following the execution of this
Assignment and Acceptance, Agent will record it in its records of the
transactions under the Agreement.

         5. Upon such recording, from and after the Effective Date, Agent shall
make all payments under the Agreement and the Notes in respect of the interest
assigned hereby (including all payments of principal, interest, and fees) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Agreement and the Notes for periods prior to the Effective
Date directly between themselves.

         6. This Assignment and Acceptance shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York.



                                      D-2
<PAGE>

         The parties hereto have caused this Assignment and Acceptance to be
duly executed as of the date first above written.

                              [ASSIGNOR]



                              By:
                                 ----------------------------------------------
                              Name:
                                   --------------------------------------------
                              Title:
                                    -------------------------------------------


                              Address:
                                      -----------------------------------------

                              Attention:
                                        ---------------------------------------
                              Telecopy No:
                                          -------------------------------------


                              [ASSIGNEE]



                              By:
                                 ----------------------------------------------
                              Name:
                                   --------------------------------------------
                              Title:
                                    -------------------------------------------

                              Lending Office:

                              Address:
                                      -----------------------------------------

                              Attention:
                                        ---------------------------------------
                              Telecopy No:
                                          -------------------------------------

                              FORTIS CAPITAL CORP., as Agent

                              By:
                                 ----------------------------------------------
                              Name:
                                   --------------------------------------------
                              Title:
                                    -------------------------------------------



                                      D-3
<PAGE>
                                    EXHIBIT E

                                     FORM OF
                    BORROWING BASE COLLATERAL POSITION REPORT

                                     [Date]

Fortis Capital Corp.
100 Crescent Court
Suite 1777
Dallas, TX 75201
Attention: Marla Jennings
Telephone:  (214) 953-9314
Facsimile:  (214) 969-9332

         Re:      Credit Agreement, dated to be effective as of December 1, 2001
                  (as amended or supplemented from time to time, the
                  "Agreement"), by and among Woodward Marketing, L.L.C. (the
                  "Borrower"), the banks that from time to time are parties
                  thereto, and Fortis Capital Corp., as Agent

Ladies and Gentlemen:

         The Borrower, acting through its duly authorized Responsible Officer
(as that term is defined in the Agreement), deliver the attached report to the
Banks and certify to each of the Banks that it is in compliance with the
Agreement. Further, the undersigned hereby certifies that the Net Position has
at no time exceeded the limitations set forth in Section 8.11 of the Agreement
and that the undersigned has no knowledge of any Defaults or Events of Default
under the Agreement which exist as of the date of this letter.

         The undersigned also certifies that the amounts set forth on the
attached report constitute all Collateral which has been or is being used in
determining availability for an advance or letter of credit issued under the
Borrowing Base Line as of the preceding date.



                                      E-1
<PAGE>

This certificate and attached reports are submitted pursuant to Section 7.02(b)
of the Agreement. Capitalized terms used herein and in the attached reports have
the meanings specified in the Agreement.

                                         Very truly yours,

                                         WOODWARD MARKETING, L.L.C.,


                                         By:
                                            -----------------------------------
                                         Name:
                                              ---------------------------------
                                         Title:
                                               --------------------------------



                                      E-2
<PAGE>

                           WOODWARD MARKETING, L.L.C.,
                    BORROWING BASE COLLATERAL POSITION REPORT
                                  AS OF [DATE]

         In my capacity as Responsible Officer for Woodward Marketing, L.L.C., I
hereby certify that as of the date written above, the amounts indicated below
were accurate and true as of the date of preparation. I also certify that the
net long or short position has not exceeded the limitations set forth in Section
8.11 of the Credit Agreement.

<Table>
<S>      <C>                                                         <C>             <C>        <C>
I.       COLLATERAL

         A.   Cash Collateral                                       $            100%           $
                                                                     -----------                 ------------
         B.   Eligible Broker                                       $             90%           $
                                                                     -----------                 ------------
         C.   Tier I Accounts                                       $             90%           $
                                                                     -----------                 ------------
         D.   Tier II Accounts                                      $             85%           $
                                                                     -----------                 ------------
         E.   Tier I Unbilled Accounts                              $             85%           $
                                                                     -----------                 ------------
         F.   Tier II Unbilled Accounts                             $             80%           $
                                                                     -----------                 ------------
         G.   Eligible Inventory                                    $             80%           $
                                                                     -----------                 ------------
         H.   Eligible Exchange Receivables                         $             80%           $
                                                                     -----------                 ------------
         I.   Undelivered Product Value                             $             80%           $
                                                                     -----------                 ------------
         J.   First purchaser liability                            (             )              (             )
                                                                     -----------                 ------------

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

                                                                     ===========    =========    ============
         TOTAL COLLATERAL                                           $                           $
                                                                     -----------    ---------
                                                                                                 ------------
         BORROWING BASE SUB-CAP                                                                 $
                                                                                                 ------------
         BORROWING BASE ADVANCE CAP (Least of                                                   $
         $125,000,000.00, Borrowing Base Sub-Cap or Total
         Collateral)
                                                                                                 ------------
II.      BANK OUTSTANDINGS

         A.   Loans from the Banks                                                              $
                                                                                                 ------------
         B.   L/C's from the Banks                                                              $
                                                                                                 ------------
         C.   125% of Net amounts due BNP Paribas under
              Commodity Swap Contracts                                                          $
                                                                                                 ------------
TOTAL OUTSTANDINGS UNDER BORROWING BASE LINE

III.     EXCESS/(DEFICIT) (I-II)                                                                $
                                                                                                 ------------
IV.      NET SHORT OR LONG POSITION ___________ MMBTUS                                          $
                                                                                                 ------------
Attached hereto are (i) an aging report, (ii) a schedule of netted qualified
exchange balances, (iii) a schedule of qualified inventory and (iv) a schedule
of all contras applied against (i), (ii), and (iii).
</Table>

                                               By:
                                                  -----------------------------
                                                  Responsible Officer


                                      E-3
<PAGE>

                                    EXHIBIT F

                           FORM OF NET POSITION REPORT

                                     [Date]

Fortis Capital Corp.
100 Crescent Court
Suite 1777
Dallas, TX 75201
Attention: Marla Jennings
Telephone:  (214) 953-9314
Facsimile:  (214) 969-9332

         Re:      Net Positions

         In my capacity as Responsible Officer of Woodward Marketing, L.L.C., I
hereby certify to you that as of the date written above, such company's
aggregate net positions are as follows:

<Table>
<Caption>
                                                           MMBTUS of
                                                           Natural Gas
<S>                                                        <C>
        Long
                                                             -----
        (Short)
                                                             -----

        Net Position
                                                             -----
</Table>

         To the best of my knowledge, these net positions have at no time
exceeded the limitations set forth in Section 8.11 of that certain Credit
Agreement, dated to be effective as of December 1, 2001, as amended or
supplemented from time to time, by and among Woodward Marketing, L.L.C., the
banks that from time to time are parties thereto, and Fortis Capital Corp., as
Agent.

         Furthermore, at no time has the sum of the following:

         (a)      25% of the Borrower's Net Position Value,   $          , plus
                                                               ----------
         (b)      Borrower's Transportation
                  and Storage Exposure,                       $          , plus
                                                               ----------
         (c)      Borrower's Below Index Sales Exposure,      $
                                                               ----------


                                      F-1
<PAGE>

         exceeded 33% of Borrower's Net Working Capital,

         where,

         "Net Position Value" means Borrower's Net Position valued at
         $3.00/MMBTU.

         "Below Index Sales Exposure" means (the maximum volume of gas required
         to be sold at below index prices multiplied by the discount from
         index), minus (the net positive value of all hedge contracts related to
         the utilization of the related storage & transportation assets).

         "Transportation and Storage Exposure" means the aggregate contractual
         cost of transportation & storage contracts for a term of in excess of 3
         months.

                                      Very truly yours,

                                      WOODWARD MARKETING, L.L.C.,



                                      By:
                                           ----------------------------------
                                      Name:
                                            ---------------------------------
                                      Title:
                                              -------------------------------

Date:
     --------


                                      F-2
<PAGE>

                                    EXHIBIT G

                                 FORM OF NOTICE
                   TO TRANSFER FUNDS FROM BANK BLOCKED ACCOUNT




Fortis Capital Corp.
100 Crescent Court
Suite 1777
Dallas, TX 75201
Attention: Marla Jennings
Telephone:  (214) 953-9314
Facsimile:  (214) 969-9332

         Re:      Credit Agreement, dated to be effective as of December 1, 2001
                  (as amended or supplemented from time to time, the
                  "Agreement"), by and among Woodward Marketing, L.L.C. (the
                  "Borrower"), the banks that from time to time are parties
                  thereto, and Fortis Capital Corp., as Agent

Ladies and Gentlemen:

         Reference is made to the Agreement (capitalized terms used herein that
are not defined shall have the respective meanings ascribed thereto in the
Agreement). Borrower hereby requests that $___________________________ be
transferred on ___________, 20____ from the Bank Blocked Account No.:
[_________] into Borrower's Operating Account No.: [_________] pursuant to
Section 7.14 and Section 11.12 of the Agreement.

         Borrower represents and warrants, as of the date hereof, that (i) no
Default or Event of Default has occurred and is continuing on the date hereof.

         Executed this ___ day of _______, 200_

                                   Very truly yours,

                                   WOODWARD MARKETING, L.L.C.,


                                   By:
                                      ------------------------------------
                                   Name:
                                        ----------------------------------
                                   Title:
                                         ---------------------------------



                                      G-1
<PAGE>
                                    EXHIBIT H

                             SUBORDINATION AGREEMENT


         THIS SUBORDINATION AGREEMENT (this "Agreement") is made as of the _____
day of __________, 2001, by and between FORTIS CAPITAL CORP. a Connecticut
Corporation ("Agent"), as Agent for the ratable benefit of the Banks
(hereinafter defined), ___________________________ (the Subordinated Creditor")
and acknowledged by WOODWARD MARKETING, L.L.C., a Delaware limited liability
company ("Borrower").

                                    RECITALS

         WHEREAS, Agent and the Banks have made, or in the future may make,
credit accommodations available to Borrower, pursuant to the terms and
provisions of that certain Credit Agreement dated to be effective as of December
1, 2001 ("Credit Agreement") among Agent, the Borrower and the banks and
financial institutions from time to time party thereto (collectively, the
"Banks"); and

         WHEREAS, Subordinated Creditor has made, or in the future may make,
credit accommodations available to Borrower; and

         WHEREAS, in order to induce Agent to consider making the credit
accommodations described above available to Borrower in the future, Subordinated
Creditor has agreed to subordinate certain of its rights and claims now existing
or hereafter arising against Borrower to the rights and claims of Agent now
existing or hereafter arising against Borrower, all in accordance with the terms
and provisions of this Agreement; and

         WHEREAS, the parties hereto are entering into this Agreement in order
to set forth their agreements as to payment of the Senior Indebtedness
(hereinafter defined) and the Junior Indebtedness (hereinafter defined) and
their agreements as to certain other matters including but not limited to lien
priorities.

         NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements contained herein, the parties hereto hereby agree as follows:

                                    AGREEMENT

                             ARTICLE I DEFINITIONS

         As used in this Agreement, the terms defined above shall have their
respective meanings set forth above and the following terms shall have the
following meanings:



                                      H-1
<PAGE>
                  "Collateral" shall mean any and all property which now
         constitutes or hereafter will constitute collateral or other security
         for payment of the Senior Indebtedness pursuant to the Senior Documents
         or otherwise.

                  "Default" shall have the meaning set forth in the Credit
         Agreement.

                  "Distribution" by any Person shall mean (a) with respect to
         any stock issued by such Person, the retirement, redemption, purchase
         or other acquisition for value of any such stock, (b) the declaration
         or payment of any dividend or other distribution on or with respect to
         any such stock, (c) any loan or advance by such Person to, or other
         investment by such Person in, the holder of any such stock, and (d) any
         other payment (other than ordinary salaries to employees or advances
         made in the ordinary course of business to employees for travel or
         other expenses incurred in the ordinary course of business) by such
         Person to or for the benefit of the holder of any such stock.

                  "Event of Default" shall have the meaning set forth in the
         Credit Agreement.

                  "Federal Bankruptcy Code" shall have the meaning set forth in
         Article VIII of this Agreement.

                  "Junior Creditor" shall mean the Subordinated Creditor and its
         successors and assigns.

                  "Junior Documents" shall mean any and all agreements,
         documents and instruments evidencing, governing or executed or
         delivered in connection with the Junior Indebtedness.

                  "Junior Indebtedness" shall mean any and all indebtedness,
         obligations and liabilities of every kind and character of Borrower now
         or hereafter owing to any party to this Agreement other than Senior
         Creditor, including, without limitation, the indebtedness evidenced and
         to be evidenced by the Junior Documents, whether such indebtedness,
         obligations and liabilities are direct or indirect, primary or
         secondary, joint, several or joint and several, fixed or contingent and
         whether incurred by Borrower as maker, endorser, guarantor or
         otherwise.

                  "Permitted Payments shall have the meaning set forth in
         Article IV of this Agreement.

                  "Person" shall mean and include an individual, a partnership,
         a corporation, a business trust, a joint stock company, a trust, an
         unincorporated association, a joint venture or other entity or a
         governmental authority.



                                      H-2
<PAGE>

                  "Proceeds" shall have the meaning assigned to it under the
         Uniform Commercial Code, shall also include "products" (as defined in
         the Uniform Commercial Code), and, in any event, shall include, but not
         be limited to (a) any and all proceeds of any insurance, indemnity,
         warranty, letter of credit or guaranty or collateral security payable
         to any grantor from time to time with respect to any of the Collateral,
         (b) any and all payments (in any form whatsoever) made or due and
         payable to the owner of the Collateral from time to time in connection
         with any requisition, confiscation, condemnation, seizure or forfeiture
         of all or any part of the Collateral by any governmental body,
         authority, bureau or agency (or any Person acting under color of
         governmental authority) and (c) any and all other amounts from time to
         time paid or payable under or in connection with any of the Collateral.

                  "Senior Creditor" shall mean Agent and its successors and
         assigns.

                  "Senior Documents" shall mean any and all agreements,
         documents and instruments evidencing, governing or executed or
         delivered in connection with the Senior Indebtedness or the Senior
         Creditor's interests in the Collateral, including, without limitation,
         the Credit Agreement.

                  "Senior Indebtedness" shall mean any and all indebtedness,
         obligations and liabilities of every kind and character of Borrower now
         or hereafter owing to Senior Creditor, whether such indebtedness,
         obligations and liabilities are direct or indirect, primary or
         secondary, joint, several or joint and several, fixed or contingent and
         whether incurred by Borrower as maker, endorser, guarantor or
         otherwise, including, without limitation, any and all indebtedness,
         obligations and liabilities of Borrower now or hereafter owing to
         Senior Creditor pursuant to or evidenced by the Senior Documents.

                        ARTICLE II RIGHTS IN COLLATERAL

         2.1 Priorities Regarding Collateral. The Junior Creditor covenants and
agrees that it will not take or hold any liens or security interests on any
property of Borrower. If for any reason, however, the Junior Creditor does
obtain a lien or security interest in the Collateral, any and every lien and
security interest in the Collateral in favor of or held for the benefit of the
Senior Creditor has and shall have priority over any lien or security interest
that Junior Creditor has or might have or acquire in the Collateral
notwithstanding any statement or provision contained in the Junior Documents or
otherwise to the contrary and irrespective of the time or order of filing or
recording of financing statements, deeds of trust, mortgages or other notices of
security interests, liens or assignments granted pursuant thereto, and
irrespective of anything contained in any filing or agreement to which any party
hereto or its respective successors and assigns may now or hereafter be a party,
and irrespective of the ordinary rules for determining priorities under the
Uniform Commercial Code or under any other law governing the relative priorities
of secured creditors.



                                      H-3
<PAGE>
         2.2 Management of Collateral. Senior Creditor shall have the exclusive
right to manage, perform and enforce the terms of the Senior Documents with
respect to the Collateral, to exercise and enforce all privileges and rights
thereunder according to its discretion and the exercise of its business judgment
including, but not limited to, the exclusive right to take or retake possession
of the Collateral and to hold, prepare for sale, process, sell, lease, dispose
of, or liquidate the Collateral, pursuant to a foreclosure or otherwise.
Notwithstanding any rights or remedies available to the Junior Creditor under
applicable law or under any document or instrument evidencing, securing or
otherwise executed in connection with the incurrence of the obligations
contemplated by the Junior Documents, Junior Creditor shall not be permitted to
foreclose upon their security interests in any of the Collateral, or to exercise
similar remedies with respect thereto, so long as any of the Senior Indebtedness
shall continue to exist, and only the Senior Creditor shall have the right to
restrict or permit, or approve or disapprove, the sale, transfer or other
disposition of Collateral. Junior Creditor will not in any manner interfere with
Senior Creditor's security interests in the Collateral unless and until Borrower
has satisfied in full the Senior Indebtedness and Senior Creditor has given
Junior Creditor written notice thereof. The Junior Creditor waives notice of,
and agrees not to challenge the method, manner, time, place or terms, of any
disposition of the Collateral by Senior Creditor. Accordingly, should Senior
Creditor elect to exercise its rights and remedies with respect to any of the
Collateral, Senior Creditor may proceed to do so without regard to any interest
of the Junior Creditor, and the Junior Creditor waives any claims that it may
have against Senior Creditor for any disposition of the Collateral. The Junior
Creditor agrees, whether or not a default has occurred in the payment of any
indebtedness or the performance of any other obligations to it, that any liens
on and security interests in the Collateral or any portion thereof that it might
have or acquire shall automatically be fully released ipso facto as to all
indebtedness and other obligations secured thereby owing to Junior Creditor if
and when Senior Creditor releases its lien in and security interest on such
Collateral in the event of any sale, disposition or other realization by Senior
Creditor (or any agent therefor) upon such Collateral.

                              ARTICLE III PROCEEDS

         3.1 Distribution of Proceeds of Collateral. At any time during which
all or any part of the Senior Indebtedness remains outstanding, and whether or
not the same is then due and payable, the Proceeds of any sale, disposition or
other realization by Senior Creditor (or any agent therefor) upon all or any
part of the Collateral shall be applied first to the payment in full of all
Senior Indebtedness in such order as Senior Creditor shall determine in its sole
discretion.

         3.2 Contingent Obligations. For purposes of distributing the Proceeds
of Collateral pursuant to this Article III, the portion of Senior Indebtedness
consisting of loans or advances not yet made by Senior Creditor to Borrower
under the Senior Documents (including, but not limited to, amounts with respect
to letters of credit outstanding and reimbursement for fees, costs and expenses)
shall be considered Senior



                                      H-4
<PAGE>

Indebtedness then outstanding, and the Senior Creditor shall have the right to
retain, in a cash collateral account, cash collateral equal to the amount
thereof which Senior Creditor determines, in its sole good faith discretion, may
arise or exist from time to time.

         3.3 Holding of Proceeds in Trust. Except as provided for in Article IV
of this Agreement, in the event the Junior Creditor receives Proceeds of the
Collateral, Junior Creditor shall be deemed to hold all of such Proceeds in
trust for the benefit of Senior Creditor until the proper application thereof in
accordance with Section 3.1 hereof. The Junior Creditor shall not seek to
challenge the validity, enforceability, priority or perfection of any of the
Senior Documents if the purpose or effect thereof would in any manner defeat or
delay the distribution of the Proceeds of any Collateral in the manner set forth
in Section 3.1 hereof.

                            ARTICLE IV SUBORDINATION

         The Junior Creditor covenants and agrees that the Junior Indebtedness,
howsoever evidenced and whether now existing or hereafter incurred, shall be
subordinate and junior in right of payment, to the extent and in the manner
hereinafter set forth, to all Senior Indebtedness:

                  (a) The holder of the Senior Indebtedness shall first be
finally and irrevocably paid in cash an aggregate amount equal to the principal
thereof and termination fees, if any, interest at the time due thereon, and all
other costs, fees, expenses and/or obligations now or hereafter owing
thereunder, before any payment or Distribution of any character, whether in
cash, securities or other property, shall be made on account of the Junior
Indebtedness or otherwise to or for the benefit of Junior Creditor; and any
payment or Distribution of any character, whether in cash, securities or other
property, which would otherwise, but for the provisions of this Article IV, be
payable or deliverable in respect of the Junior Indebtedness or otherwise shall
be paid or delivered directly to the holder of the Senior Indebtedness (or its
duly authorized representatives), until all the Senior Indebtedness shall have
been paid in full.

                  (b) Notwithstanding the provisions of subparagraph (a) of this
Article IV, Borrower may pay interest on the unpaid principal balance of the
Junior Indebtedness on a monthly basis in arrears and make both scheduled
payments and prepayments of principal on the terms and conditions set forth in
the Junior Documents (the "Permitted Payments"); provided, however, that as a
condition precedent to Borrower's right to make (and the Junior Creditor's
rights to receive) any and all such Permitted Payments, there shall not have
occurred or then exist a Default or Event of Default under any of the Senior
Indebtedness or any of the Senior Documents, or an event or condition which with
notice, lapse of time or the making of such payment would constitute a Default
or Event of Default under any of the foregoing.

                  (c) The Junior Creditor agrees to promptly notify the Senior
Creditor in writing of any default or event of default on any Junior
Indebtedness or otherwise or



                                      H-5
<PAGE>

under any of the Junior Documents and further agrees not to exercise any right
or remedy or take any enforcement action with respect to any default or event of
default on any of the Junior Indebtedness or otherwise or under any of the
Junior Documents until such time as the Senior Indebtedness has been paid in
full. Without limiting any of the foregoing, any failure of Borrower to perform
any of its obligations to Junior Creditor as a result of any of the
prohibitions, restrictions or limitations set forth in this Agreement shall not
constitute the basis for a default or event of default on any Junior
Indebtedness or under any Junior Documents.

                  (d) No reimbursement, payment, direct or indirect, or
disbursement of other property or assets of Borrower shall be made by Borrower
on account of the Junior Indebtedness or otherwise or received, accepted,
retained or applied by the Junior Creditor (except for the account and benefit
of Senior Creditor, which shall be held in trust for Senior Creditor or except
for Permitted Payments as allowed in subparagraph (b) of this Article IV) until
such time as the Senior Indebtedness has been finally and irrevocably paid in
full in cash.

                  (e) Without affecting Junior Creditor's obligations set forth
in this Agreement not to exercise any remedy as set forth in this Agreement, in
the event that the Junior Creditor receives any payment of any character,
whether in cash, securities, or other properties, payable or deliverable in
respect of the Junior Indebtedness and (i) such payment would cause an event or
condition to occur which, with notice, lapse of time, or both, would cause a
Default or an Event of Default to occur under the Senior Documents; or (ii) such
payment is made after a Default or an Event of Default has occurred under the
Senior Documents; or (iii) such payment is made at a time that the management of
Borrower knew or reasonably should have known that a Default or an Event of
Default had occurred under the Senior Documents, or that such payment could
reasonably be expected to cause a Default or an Event of Default to occur under
the Senior Documents, then such cash, securities or other properties shall be
held in trust for the benefit of the holder of the Senior Indebtedness and shall
be paid or delivered to the holder of the Senior Indebtedness (or its authorized
representatives), in the proportions in which it holds same, until all the
Senior Indebtedness shall have been paid in full.

                  (f) The provisions of this Agreement are and are intended
solely for the purpose of defining the relative rights of the holder of the
Junior Indebtedness, on the one hand, and the holder of the Senior Indebtedness
on the other hand. Nothing contained in this Agreement is intended to or shall
impair, as between Borrower and its creditors other than the holder of the
Senior Indebtedness and the holder of the Junior Indebtedness, the obligations
of Borrower which are absolute and unconditional, to pay to the holder of the
Junior Indebtedness the principal thereof and interest thereon as and when the
same shall become due and payable in accordance with its terms, or is intended
to or shall affect the relative rights against Borrower of the holder of the
Senior Indebtedness.



                                      H-6
<PAGE>
                  (g) No right of any present or future holder of any of the
Senior Indebtedness to enforce the subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of Borrower or by any act in good faith or failure to act in good faith by
any such holder, or by any noncompliance by Borrower with the covenants,
agreements and conditions of the Junior Indebtedness, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.

                  (h) Senior Creditor shall have no obligation to preserve the
rights of the Collateral against any prior parties or to marshal any of the
Collateral for the benefit of any Person.

                   ARTICLE V BENEFIT OF AGREEMENT; AMENDMENT

         This Agreement shall constitute a continuing offer to all persons who,
in reliance upon such provisions, become a Senior Creditor, and such provisions
are made for the benefit of each Senior Creditor and each of them may enforce
such provisions. The Junior Creditor agrees not to assign or transfer, at any
time this Agreement remains in effect, any rights, claim or interest of any kind
in or to any Junior Indebtedness without first notifying Senior Creditor and
making such assignment expressly subject to this Agreement. The provisions of
the Junior Documents as in effect on the date hereof may not be amended or
modified in any respect without the prior written consent of Senior Creditor.

                         ARTICLE VI FURTHER ASSURANCES

         Each of the parties hereto hereby agrees to promptly execute and
deliver to the other parties hereto any and all such further instruments and
documents and take such further action as such other parties may reasonably
request in order to fully effect the purposes of this Agreement.

                   ARTICLE VII REPRESENTATIONS AND WARRANTIES

         7.1   Senior Creditor and Junior Creditor.  Each of the parties hereto
hereby represents and warrants to the other party hereto that:

               (a) such party has full power, authority and legal right to
execute, deliver and perform this Agreement, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement; and

               (b) this Agreement constitutes a legal, valid and binding
obligation of such party enforceable against it in accordance with its terms
except as enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or other similar laws


                                      H-7
<PAGE>
affecting creditors rights generally and except as enforceability may be limited
by general principles of equity (whether considered in a suit at law or in
equity).

                            ARTICLE VIII BANKRUPTCY

         The Junior Creditor agrees not to commence, or to join with any other
creditor in commencing, any case under Title 11 of the United States Code, as
amended and/or superseded (the "Federal Bankruptcy Code") by or against Borrower
or any of its property without the prior written consent of Senior Creditor. The
provisions of this Agreement shall continue in full force and effect,
notwithstanding the commencement of a case under the Federal Bankruptcy Code by
or against Borrower. In furtherance of the foregoing, if Junior Creditor
receives any property of, or payments from Borrower after the commencement of
such a case on account of a secured claim which is subordinated by the terms of
this Agreement (whether as "adequate protection" payments or otherwise), Junior
Creditor shall immediately turn such property or payments over to the Senior
Creditor. To the extent that Junior Creditor has or acquires any rights under
Section 363 or Section 364 of the Federal Bankruptcy Code with respect to the
Collateral, the Junior Creditor hereby agrees not to assert such rights without
the prior written consent of the Senior Creditor. The Junior Creditor hereby
grants to the Senior Creditor the right, but Senior Creditor shall not be
obligated, to file, prove and vote claims on account of the Junior Indebtedness
in any receivership, bankruptcy, or other proceeding under the Federal
Bankruptcy Code commenced by or against Borrower.

                            ARTICLE IX MISCELLANEOUS

         9.1 No Waiver, Cumulative Remedies. No failure to exercise, and no
delay in exercising on the part of any party hereto, any right, power or
privilege under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided in this Agreement
are cumulative and shall not be exclusive of any rights or remedies provided by
law.

         9.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telegraph, telecopier, or telex) and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered by hand,
or five days after being deposited in the mail, postage prepaid, or, in the case
of telegraphic notice, when delivered to the telegraph company, or in the case
of telex notice, when sent, answer back received, addressed as set forth below
or to such address or other address as may be hereafter notified by the
respective parties hereto:



                                      H-8
<PAGE>

                To Senior Creditor:               Fortis Capital Corp.
                                                  100 Crescent Court
                                                  Suite 1777
                                                  Dallas, TX 75201
                                                  Attention: Marla Jennings
                                                  Telephone:  (214) 953-9314
                                                  Facsimile:  (214) 969-9332

                To Junior Creditor:
                                                  -------------------------

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

                                                  -------------------------
                                                  Attention:
                                                             --------------
                                                  Telephone:
                                                             --------------
                                                  Facsimile:
                                                             --------------

         9.3 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK AND SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES
HERETO AND THEIR RESPECTIVE SUCCESSORS, TRANSFEREES AND ASSIGNS.

         9.4 Amendments and Waivers. Neither this Agreement nor any of the terms
hereof may be amended, waived, discharged or terminated unless such amendment,
waiver, discharge or termination is in writing signed by each of the parties
hereto.

         9.5 Exculpation. Neither the Senior Creditor nor its agents have made
to the other parties hereto nor do any of them hereby or otherwise make any
representations or warranties, express or implied, nor do they assume any
liability with respect to (i) obligors under any instruments of guarantee; (ii)
the enforceability, validity, value or collectibility of the Senior
Indebtedness, any Collateral therefor, or any guarantee or security which may
have been granted to any of them in connection with the Senior Documents; or
(iii) Borrower's title or right to transfer any collateral or security. No party
hereto shall be liable to any other party hereto for any action or failure to
act or any error of judgment, negligence, or mistake or oversight whatsoever on
its part or its respective agents, officers, employees or attorneys with respect
to any transaction relating to the Collateral or this Agreement. To the maximum
extent permitted by law, except as otherwise provided herein, the Junior
Creditor waives any claim it might have against Senior Creditor with respect to,
or arising out of, the handling of the Collateral (including, without
limitation, any such claim based upon the timing or method of realizing upon
such Collateral).



                                      H-9
<PAGE>
         9.6 Third Party Rights. This Agreement is solely for the benefit of the
parties hereto and their respective successors and assigns, and no other Person
shall have any right, benefit, priority or other interest under, or because of
the existence of, this Agreement.

         9.7 Termination.  This Agreement shall terminate upon the final and
indefeasible payment in full of all the Senior Indebtedness and the termination
of all of the Senior Documents.

         9.8 Counterparts. This Agreement may be executed by one or more of the
parties hereto in any number of separate counterparts, each of which shall be an
original, but all of which shall constitute but one agreement.

         9.9 Legend.  All promissory notes issued in connection with the Junior
Indebtedness shall contain a legend substantially in the form of the following:

             "THIS PROMISSORY NOTE, AND PAYMENT AND ENFORCEMENT HEREOF, IS
         SUBJECT TO THE TERMS AND PROVISIONS OF THAT CERTAIN SUBORDINATION
         AGREEMENT DATED AS OF ________________, 2001 BETWEEN FORTIS CAPITAL
         CORP., AS AGENT, AND _________________________________ AS SUCH
         SUBORDINATION AGREEMENT MAY BE AMENDED FROM TIME TO TIME."

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                           [EXECUTION PAGES TO FOLLOW]



                                      H-10
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their proper and duly authorized officers as of the day and
year first above written.

                                  SENIOR CREDITOR:

                                  FORTIS CAPITAL CORP., as Agent


                                  By:
                                       ---------------------------------------
                                  Name:
                                         -------------------------------------
                                  Title:
                                          ------------------------------------



                                      H-11
<PAGE>
                                  JUNIOR CREDITOR:



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


                                  By:
                                       ---------------------------------------
                                  Name:
                                         -------------------------------------
                                  Title:
                                          ------------------------------------



                                      H-12
<PAGE>
                  ACKNOWLEDGMENT BY WOODWARD MARKETING, L.L.C.

         Woodward Marketing, L.L.C. hereby acknowledges receipt of a copy of the
foregoing Subordination Agreement and agrees that, except as otherwise provided
by the foregoing Subordination Agreement, it will not pay any indebtedness
subordinated by the foregoing Subordination Agreement until all the Senior
Indebtedness shall have been paid in full.

                                      WOODWARD MARKETING, L.L.C.,
                                      a Delaware limited liability company



                                      By:
                                           -----------------------------------
                                      Name:
                                             ---------------------------------
                                      Title:
                                              --------------------------------



                                      H-13

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2(B)
<SEQUENCE>7
<FILENAME>d94293ex10-2b.txt
<DESCRIPTION>GUARANTY
<TEXT>
<PAGE>

                                                                EXHIBIT 10.2 (b)


                                   GUARANTY OF
                           ATMOS ENERGY MARKETING, LLC

         This Guaranty (this "Guaranty"), entered into and effective as of
December 1, 2001, is made by ATMOS ENERGY MARKETING, LLC, a Delaware limited
liability company ("Guarantor"), in favor of FORTIS CAPITAL CORP., A CONNECTICUT
CORPORATION ("Agent") as agent for the ratable benefit of the Banks (as
hereinafter defined).

         WHEREAS, pursuant to that certain Credit Agreement (as amended from
time to time, the "Credit Agreement"), dated to be effective as of the date
hereof, between WOODWARD MARKETING, L.L.C., a Delaware limited liability company
(the "Borrower"), and Agent (Agent, in its capacity as a Bank, along with any
other bank which has or may become a Bank pursuant to the terms of the Credit
Agreement referred to collectively as the "Banks"), the Banks have agreed that,
upon the conditions and in accordance with the provisions thereof, the Banks
will extend to the Borrower an uncommitted discretionary and demand line of
credit facility in an amount outstanding at any one time of up to an aggregate
of $125,000,000.00; and

         WHEREAS, Agent, in its capacity as a Bank has further agreed that, upon
the conditions and in accordance with the provisions of the Credit Agreement,
Agent will extend to the Borrower an uncommitted, discretionary demand line for
overdraft advances; and

         WHEREAS, BNP Paribas, a bank organized under the laws of France ("BNP
Paribas") , in its capacity as a Bank has further agreed that, upon the
conditions and in accordance with the provisions of the Credit Agreement, may
enter into Swap Contracts with the Borrower; and

         WHEREAS, it is a condition precedent to the availability of such
extensions of credit that the Guarantor shall have executed and delivered this
Guaranty.

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby agrees as follows:

         The Guarantor unconditionally guarantees the prompt payment to Banks,
their affiliates and their successors and assigns, of all Obligations (as
defined in the Credit Agreement). Nothing to the contrary contained herein or in
any other Loan Document, Guarantor's liability under this Guaranty is limited to
payment of the Guaranteed Payment Amount (as defined below).



                                      -1-
<PAGE>

         "Guaranteed Payment Amount" as used in this Guaranty shall mean the sum
of the following:

                  (1)      an amount equal to one hundred percent (100%) of the
                           Obligations, plus

                  (2)      interest (including interest that accrues during any
                           bankruptcy proceeding of Borrower), which (A) shall
                           accrue on any unpaid portion of the amount described
                           in clause (1) of this definition from the date demand
                           is made therefor by Agent (the "Demand Date") until
                           such amount is paid, (B) shall be calculated at the
                           interest rate presently in effect pursuant to the
                           terms of the Credit Agreement, plus

                  (3)      all reasonable attorney's fees and other collection
                           costs incurred by Agent and Banks in connection with
                           the enforcement of and/or collection under this
                           Guaranty, including any bankruptcy proceeding
                           affecting Guarantor.

         Guarantor acknowledges and agrees that Agent has no duty to foreclose
upon any collateral securing any of the Obligations, but, if Agent elects to
foreclose, Agent may pursue collection under this Guaranty prior to,
contemporaneously with, or after any foreclosure on such collateral.

         At the time Guarantor pays any sum which may become due the Banks under
the terms of this Guaranty, written notice of such payment shall be delivered to
the Banks by Guarantor, and in the absence of such notice, any sum received by
the Banks on account of any of the Obligations shall be conclusively deemed paid
by the Borrower. All sums paid the Banks by Guarantor may be applied by the
Banks at their discretion upon any of the Obligations.

      1. The obligations of the Guarantor hereunder shall be payable and
performable at Agent's Payment Office at 100 Crescent Court, 301 Suite 1777,
Dallas, TX 75201, or any other office designated by the Agent.

      2. This Guaranty is an absolute, complete and continuing one, and no
notice of the Obligations or any rearrangement, modification or waiver thereof
needs to be given to the Guarantor and in any such event the Guarantor will
remain fully bound hereunder. The Guarantor hereby expressly waives presentment,
demand, protest, and notice of protest and dishonor with respect to the
Obligations, and also notice of acceptance of this Guaranty, acceptance on the
part of Agent being conclusively presumed by its request for this Guaranty and
delivery of same to it.

      3. The Guarantor authorizes Agent, without notice or demand and without
affecting its liability hereunder, to take and hold security from third Persons
for the



                                      -2-
<PAGE>

payment of the Obligations, and exchange, enforce, waive and release any such
security; and to apply such security and direct the order or manner of sale
thereof as the Banks in their discretion may determine; and to obtain a guaranty
of the Obligations from any one or more other Persons whomsoever and at any time
or times to enforce, waive, rearrange, modify, limit or release such other
Persons from their obligations under such guaranties.

      4. The Guarantor waives any right to require Agent to (a) proceed against
the Borrower, (b) proceed against or exhaust any security held from the
Borrower, or (c) pursue any other remedy in Agent's power whatsoever, including,
without limitation, any right of Agent to pursue any remedy against any other
guarantor. The Guarantor waives any defense of the Borrower or any other
guarantor of the Obligations or any portion thereof, and shall remain liable
hereon regardless of whether the Borrower or any other guarantor be found not
liable thereon for any reason including, without limitation, bankruptcy,
insolvency, or corporate dissolution and even though the Obligations, or any
part thereof, may be rendered void or unenforceable or uncollectible as against
the Borrower or any other guarantor. This Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time payment of any
portion of the Obligations by the Borrower is rescinded or must otherwise be
returned by Agent upon the insolvency, bankruptcy or reorganization of the
Borrower or otherwise, all as though such payment had not been made, and the
Guarantor will, thereupon, guarantee payment of such amount as to which refund
or restitution has been made, together with interest accruing thereon subsequent
to the date of refund or restitution at the applicable rate under the Credit
Agreement and reasonable collection costs and fees (including, without
limitation, reasonable attorney's fees) applicable thereon. The Guarantor shall
(i) not exercise any right of subrogation and (ii) waives any right to exercise
any remedy which Agent now has or may hereafter have against the Borrower and
any right to participate in any security now or hereafter held by Agent, so long
as the Guaranteed Payment Amount, or any portion thereof, shall remain
outstanding.

      5. The Guarantor agrees that if the maturity of the Obligations is
accelerated for any reason, including, without limitation, by bankruptcy or
otherwise, such maturity shall also be deemed accelerated for the purpose of
this Guaranty without demand or notice to the Guarantor.

      6. It is expressly agreed that the liability of the Guarantor for payment
of the Obligations shall be primary and not secondary.

      7. To induce the Banks and Agent to enter into the Credit Agreement with
the Borrower, the Guarantor represents and warrants to Banks and Agent (which
representations and warranties will survive the delivery of this Guaranty) that:

         (a) The execution and delivery by the Guarantor of this Guaranty and
the performance of obligations hereunder are within its power and do not (i)
contravene or conflict with any provision of law, (ii) contravene or conflict
with any indenture, instrument or other agreement to which the Guarantor is a
party or by which its property




                                      -3-
<PAGE>

may be presently bound or encumbered, or (iii) result in or require the creation
or imposition of any Lien in, upon or against any of the respective property of
the Guarantor under any such indenture, instrument or other agreement.

         (b) This Guaranty when duly executed and delivered, will be the legal,
valid and binding obligation of the Guarantor enforceable in accordance with its
terms (subject to any applicable debtor relief laws and general principles of
equity).

         (c) No authorization, consent, approval, exemption, franchise, permit
or license of, or filing with, any governmental or public authority or any third
party is required to authorize, or is otherwise required in connection with the
valid execution and delivery by the Guarantor of this Guaranty which has not
been obtained.

         (d) The Guarantor has duly and properly filed all United States Income
Tax returns and all other tax returns (or permissible extensions thereof) which
are required to be filed, and has paid all taxes prior to delinquency pursuant
to all returns or pursuant to any assessment received, except such taxes, if
any, as are being contested in good faith and as to which adequate provisions
and disclosures to Agent have been made.

         (e) Except as previously disclosed to Agent in writing, to the
knowledge of the Guarantor, there is no litigation or other action pending
before any court, governmental instrumentality, regulatory authority or arbitral
body or threatened against or affecting the Guarantor which might reasonably be
expected to result in a material adverse change in the financial condition of
the Guarantor.

       8. So long as any of the Obligations shall remain unpaid or
unsatisfied, or any Letter of Credit (as defined in the Credit Agreement) shall
remain outstanding, Guarantor covenants and agrees as follows:

         (a) as soon as available, but not later than 120 days after the end of
each fiscal year, a copy of the audited financial statements to include a
balance sheet as at the end of such year for the Guarantor, with schedules and
the related statements of income or operations, members' capital and cash flows
for such year for the Guarantor, setting forth in each case in comparative form
the figures for the previous fiscal year, and accompanied by the opinion of a
nationally-recognized independent public accounting firm ("Independent Auditor")
which report shall state that such financial statements present fairly the
financial position for the periods indicated in conformity with GAAP applied on
a basis consistent with prior years. Such opinion shall not be qualified or
limited because of a restricted or limited examination by the Independent
Auditor of any material portion of the Guarantor's or any subsidiary's records;
and

         (b) as soon as available, but not later than 45 days after the end of
each month, the Guarantor prepared financial statements for the Guarantor in
form acceptable to Banks.



                                      -4-
<PAGE>

       9. In all instances herein, the singular shall be construed to include
the plural and the masculine to include the feminine. In the event more than one
party executes this Guaranty as a guarantor, then each party agrees to be
jointly and severally liable for the Obligations.

       10. This Guaranty is and shall be in every particular available to the
successors and assigns of Banks and is and shall always be fully binding upon
the successors and assigns of the Guarantor.

       11. The Guarantor consents to the execution and delivery by the Borrower
of the Credit Agreement and each of the other Loan Documents and the performance
by the Borrower of their obligations thereunder.

       12. No failure to exercise nor any delay in exercising on the part of
Agent of any right, power or privilege hereunder or at law or in equity shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided are cumulative and not exclusive of any rights or remedies
provided by law or in equity.

       13. THIS GUARANTY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS (WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS) OF THE STATE OF NEW
YORK.

       14. ANY SUIT TO ENFORCE ANY RIGHT HEREUNDER OR TO OBTAIN A DECLARATION OF
ANY RIGHT OR OBLIGATION HEREUNDER, MAY, AT THE SOLE OPTION OF THE BANKS, BE
BROUGHT (I) IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK, OR (II) IN ANY COURT OF COMPETENT
JURISDICTION WHERE JURISDICTION MAY BE HAD OVER GUARANTOR. THE GUARANTOR HEREBY
EXPRESSLY CONSENTS TO THE JURISDICTION OF THE COURTS OF NEW YORK FOR SUCH
PURPOSES.

       15. If any clause or portion of this Guaranty shall be declared
unenforceable, invalid, or illegal, the remaining clauses and portions shall not
be affected thereby.

       16. The Guarantor warrants, represents and acknowledges that it is not
relying on any representations or statements of Agent or any Bank, or any other
party concerning the financial condition of the Borrower, the likelihood that
the Guarantor will be required to pay or perform the Obligations or any other
representations or statements other than as expressly set forth herein, and all
other representations or agreements, if any, are merged into this Guaranty.



                                      -5-
<PAGE>

       17. All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and may be personally served or sent by
telex, telecopier, mail or the express mail service of the United States Postal
Service, Federal Express or other equivalent overnight or expedited delivery
service and shall be deemed to have been given upon receipt. For purposes
hereof, the address of the Guarantor shall be the address written under
Guarantor's name on the signature page hereof, the address of Agent shall be as
follows:

                            Fortis Capital Corp.
                            100 Crescent Court
                            Suite 1777
                            Dallas, TX 75201
                            Attention:  Marla Jennings
                            Telephone: (214) 953-9314
                            Facsimile: (214) 969-9332

and the addresses of the Banks shall be as follows:

                            Fortis Capital Corp.
                            100 Crescent Court
                            Suite 1777
                            Dallas, TX 75201
                            Attention:  Marla Jennings
                            Telephone:  (214) 953-9314
                            Facsimile:  (214) 969-9332

                            BNP Paribas
                            919 Third Avenue
                            New York, New York 10022
                            Attention:  Ed Chin
                            Telephone:  (212) 841-2020
                            Facsimile:  (212) 841-2536

Any party may, by proper written notice hereunder to the other parties, change
the address to which notices shall thereafter be sent to it.

       18. Unless otherwise defined, all capitalized terms used herein have the
meanings assigned to such terms in the Credit Agreement.

       19. THIS WRITTEN AGREEMENT AND THE OTHER WRITTEN AGREEMENTS ENTERED INTO
AMONG THE PARTIES REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.




                                      -6-
<PAGE>


         Executed as of the date first written above.

                                          GUARANTOR:

                                          ATMOS ENERGY MARKETING, LLC

                                          By:    /s/ LOUIS P. GREGORY
                                                 ---------------------------
                                          Name:  Louis P. Gregory
                                          Title: Vice President and
                                                 General Counsel


Address of Guarantor:

1800 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240




                              [Woodward - Guaranty]

                                      -7-


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2(C)
<SEQUENCE>8
<FILENAME>d94293ex10-2c.txt
<DESCRIPTION>1ST AMENDMENT TO GUARANTY
<TEXT>
<PAGE>
                                                                EXHIBIT 10.2 (c)


                           FIRST AMENDMENT TO GUARANTY


         THIS FIRST AMENDMENT TO GUARANTY (this "First Amendment") is entered
into effective as of January 31, 2002 by and between ATMOS ENERGY MARKETING,
LLC, a Delaware limited liability company ("Guarantor") and FORTIS CAPITAL
CORP., a Connecticut corporation ("Agent"), as agent for the ratable benefit of
the Banks (as hereinafter defined).

                                   WITNESSETH:

         WHEREAS, pursuant to that certain Credit Agreement (as amended from
time to time, the "Credit Agreement"), dated as of December 1, 2001, between
WOODWARD MARKETING, L.L.C., a Delaware limited liability company (the
"Borrower"), Agent (Agent, in its capacity as a Bank, along with any other bank
which has or may become a Bank pursuant to the terms of the Credit Agreement
referred to collectively as the "Banks"), the Banks agreed, upon the conditions
and in accordance with the provisions thereof, to extend to the Borrower an
uncommitted discretionary and demand line of credit facility;

         WHEREAS, in connection with the execution of the Credit Agreement,
Guarantor executed and delivered to and in favor of Agent, for the ratable
benefit of the Banks, a Guaranty guaranteeing the prompt payment to Banks, their
affiliates, successors and assigns, of all Obligations; and

         WHEREAS, the parties hereto desire to enter into this First Amendment
to amend the Guaranty as set forth below.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Agent and Guarantor agree as follows:

         1. Paragraph 8(b), which states "as soon as available, but not later
than 45 days after the end of each month, the Guarantor prepared financial
statements for the Guarantor in form acceptable to Banks," is deleted in its
entirety.

         2. Renewal; Continued Effect. Except as set forth above, the Guaranty
shall continue in full force and effect in accordance with its terms.

         3. Representations. To induce Agent to enter into this First Amendment,
Guarantor ratifies and confirms each representation and warranty set forth in
the Guaranty (as amended hereby) as if such representations and warranties were
made on even date herewith, and Guarantor is fully authorized to enter into this
First Amendment.

         4. Conditions Precedent. As a condition to Agent entering into this
First Amendment, Agent must have received executed originals of each of the
following documents and instruments, in form and substance satisfactory to
Agent:



                                       1
<PAGE>

         (a) this First Amendment, duly executed by Guarantor; and

         (d) such other documents or certificates as Agent may reasonably
             request.

     5.  Miscellaneous.

         (a) Severability. In case any of the provisions of this First Amendment
shall for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this First Amendment shall be construed as if such invalid, illegal,
or unenforceable provision had never been contained herein.

         (b) Capitalized Terms. Except as otherwise defined herein, capitalized
terms shall have the meanings specified in the Guaranty.

         (c) Execution in Counterparts. This First Amendment may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any party hereto may execute this First Amendment by
signing one or more counterparts.

         (d) Governing Law. This First Amendment shall be construed in
accordance with and governed by the laws of the State of New York (without
reference to principles of conflicts of laws), provided, however, that Agent
shall retain all rights under federal law.

         (e) Rights of Third Parties. Except as set forth herein, all provisions
herein are imposed solely and exclusively for the benefit of Guarantor and
Agent, for the ratable benefit of the Banks, and their permitted successors and
assigns, and no other Person shall be a direct or indirect legal beneficiary of,
or have any direct or indirect cause of action or claim in connection with this
agreement or any of the other Loan Documents.

         (f) COMPLETE AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER WRITTEN
AGREEMENTS ENTERED INTO AMONG THE PARTIES REPRESENT THE FINAL AGREEMENT AMONG
THE PARTIES CONCERNING THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
                             EXECUTION PAGES FOLLOW]



                                       2
<PAGE>


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

                           ATMOS ENERGY MARKETING, LLC
                           a Delaware limited liability company
                           as Guarantor


                           By:  /s/ RONALD W. BAHR
                              ---------------------------------
                           Name:  Ronald W. Bahr
                           Title: Senior Vice President

                           FORTIS CAPITAL CORP.,
                           a Connecticut corporation,
                           as Agent


                           By: /s/ CHRISTINA E. ROBERTS
                              ---------------------------------
                           Name:  Christina E. Roberts
                           Title: Managing Director


                           By: /s/ CHRISTINA M. REYNOLDS
                              ---------------------------------
                           Name:  Christina M. Reynolds
                           Title: Senior Vice President


                           100 Crescent Court
                           Suite 1777
                           Dallas, Texas  75201
                           Attention:  Marla Jennings
                           Telephone:  (214) 953-9314
                           Facsimile:  (214) 969-9332



                                       3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>9
<FILENAME>d94293ex12.txt
<DESCRIPTION>COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TEXT>
<PAGE>
                                                                      EXHIBIT 12



                            Atmos Energy Corporation
                    Computation of Earnings to Fixed Charges
                                December 31, 2001


<Table>
<Caption>
                                                                         Three Months Ended
                                                                             December 31
                                                                       ----------------------
                                                                         2001          2000
                                                                       --------      --------

<S>                                                                    <C>           <C>
Income from continuing operations before provision for
     income taxes per statement of income                              $ 32,855      $ 36,348
Add:
     Portion of rents representative of the interest factor                 902           548
     Interest on debt & amortization of debt expense                     16,215        12,246
                                                                       --------      --------
        Income as adjusted                                             $ 49,972      $ 49,142
                                                                       ========      ========

Fixed charges:
     Interest on debt & amortization of debt expense (1)               $ 16,215      $ 12,246
     Capitalized interest (2)                                               372          --
     Rents                                                                2,706         1,644
     Portion of rents representative of the interest factor (3)             902           548
                                                                       --------      --------
        Fixed charges (1)+(2)+(3)                                      $ 17,489      $ 12,794
                                                                       ========      ========

Ratio of earnings to fixed charges                                         2.86          3.84
</Table>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15
<SEQUENCE>10
<FILENAME>d94293ex15.txt
<DESCRIPTION>LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION
<TEXT>
<PAGE>
                                                                      EXHIBIT 15



Board of Directors
Atmos Energy Corporation


We are aware of 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; and Form S-8,
No. 333-63738) of Atmos Energy Corporation and in the related Prospectuses of
our report dated January 00, 2002, relating to the unaudited condensed
consolidated interim financial statements of Atmos Energy Corporation which are
included in its Form 10-Q for the quarter ended December 31, 2001.



                                                             ERNST & YOUNG LLP


Dallas, Texas
February 13, 2002


</TEXT>
</DOCUMENT>
</SUBMISSION>
