ROANOKE GAS COMPANY
                 KEY EMPLOYEE STOCK OPTION PLAN

     1.   PURPOSE:
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     The purpose of this Plan is to promote the interests of
Roanoke Gas Company (the "Corporation") and its shareholders by
aiding in attracting, retaining and motivating officers and other
key employees of the Corporation and its affiliates.  The Plan is
designed to accomplish these objectives by providing such
officers and key employees with an opportunity to acquire a
proprietary interest in the Corporation by means of options and
thereby benefit from appreciation in value of the shares of the
Corporation's Common Stock.  This opportunity should provide
additional incentives for such officers and key employees to
continue to use their best efforts and superior performances to
promote the best interests of the Corporation, for their own
benefit and for the benefit of the shareholders.

     2.   DEFINITIONS:
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     The following words and phrases as used herein shall have
the meanings set forth below:

     2.1  "Board" shall mean the Board of Directors of the
Corporation.

     2.2  "Change in Control" shall mean a change in control of a
nature that would be required to be reported (assuming such event
has not been "previously reported") in response to Item 1(a) of
the Current Report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended ("Exchange Act"); provided that, notwithstanding
the foregoing and without limitation, such a change in control
shall be deemed to have occurred at such time as (i) any Person
is or becomes the "beneficial owner" (as defined in Rule 13d-3 or
Rule 13d-5 under the Exchange Act as in effect on the date
hereof), directly or indirectly, of 20% or more of the combined
voting power of the Corporation's voting securities; (ii) the
incumbent Board ceases for any reason to constitute at least the
majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Corporation's shareholders, was
approved by a vote of at least 75% of the directors comprising
the incumbent Board (either by a specific vote or by approval of
the proxy statement of the Corporation in which such person is
named as a nominee for director, without objection to such
nomination) shall be, for purposes of this clause (ii) considered
as though such person were a member of the incumbent Board;
(iii) all or substantially all of the assets of the Corporation
are sold, transferred or conveyed by any means, including but not
limited to, direct purchase or merger, if the transferee is not
controlled by the Corporation, control meaning the ownership of
more than 50% of the combined voting power of such entity's
voting securities; or (iv) the Corporation is merged or
consolidated with another corporation or entity and as a result
of such merger or consolidation less than 75% of the outstanding
voting securities of the surviving or resulting corporation or
entity shall be owned in the aggregate by the former shareholders
<PAGE>
of the Corporation.  Notwithstanding anything in the foregoing to
the contrary, no change in control shall be deemed to have
occurred for purposes of this Agreement by virtue of any
transaction (i) which results in the Optionee or a group of
Persons which includes the Optionee, acquiring, directly or
indirectly, 20% or more of the combined voting power of the
Corporation's voting securities; or (ii) which results in the
Corporation, any affiliate of the Corporation or any profit-
sharing plan, employee stock ownership plan or employee benefit
plan of the Corporation or any of its affiliates (or any trustee
of or fiduciary with respect to any such plan acting in such
capacity) acquiring, directly or indirectly, 20% or more of the
combined voting power of the Corporation's voting securities.

     2.3  "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

     2.4  "Committee" shall mean the Compensation Committee of
the Board of Directors, or such other committee of the Board as
may be designated by the Board from time to time, for the purpose
of administering this Plan as contemplated by Section 3 of this
document.  The composition of the Committee shall meet the
disinterested administration requirements of Rule 16b-3
promulgated pursuant to the Exchange Act.  Should any member of
the Committee cease to be a disinterested person under
Rule 16b-3(c)(2)(i) or any subsequent rule, he shall immediately
be deemed not to be a member of the Committee for all purposes of
this Plan.

     2.5  "Common Stock" shall mean the common stock of the
Corporation.

     2.6  "Option" shall mean any stock option granted pursuant
to this Plan.

     2.7  "Optionee" shall mean any person who is the holder of
an Option granted under this Plan.

     2.8  "Person" shall mean person within the meaning of
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.

     2.9  "Plan" shall mean this Roanoke Gas Company Key Employee
Stock Option Plan.

     2.10 "Fair Market Value" shall mean the closing sales price
of Common Stock on a nationally recognized stock exchange or, if
not traded on such an exchange, the NASDAQ National Market
System, on the date involved if that is a trading day, or if not,
the first trading day prior to such day.  If said Common Stock is
not quoted on the NASDAQ National Market System, then Fair Market
Value shall mean the average between the bid and asked price on
the date involved if that is a trading day, or if not, the first
trading day prior to such day.  If there is no such average, the
Committee shall determine Fair Market Value in good faith.  In
determining such Fair Market Value, the Committee shall utilize
all information which it deems pertinent, including, but not
limited to, actual sale or purchase data, and may engage the
services of an accounting firm to assist in the determination. 
The Committee shall further determine Fair Market Value using
<PAGE>
guidelines promulgated pursuant to the pertinent provisions of
the Code.

     3.   ADMINISTRATION:
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     3.1  The Plan shall be administered by the Committee, which
may make such determinations and take such actions in connection
with the Plan as it deems necessary.  Such determinations and
actions shall be binding and conclusive for all purposes and upon
all persons.

     3.2  The Committee may correct any defects, omissions or
ambiguities, or reconcile any inconsistencies, in the Plan, or in
any document issued pursuant to the Plan, in the manner and to
the extent it shall deem reasonably desirable.  The Committee
shall have full and sole authority to make all administrative,
interpretative and other determinations with respect to the Plan
and all such determinations shall be final and conclusive.

     3.3  As provided in Section 6.1 hereof, the Committee shall
have full and sole authority to make all grants to be made
hereunder.  

     3.4  Any other provision of the Plan to the contrary
notwithstanding, the Committee is authorized to take such action
as it, in its discretion, may deem necessary or advisable and
fair and equitable with regard to Optionees in the event of:  a
Change in Control of the Corporation; a tender, exchange or
similar offer for all or any part of the Common Stock made by an
entity, person or group (other than the Corporation, any
affiliate of the Corporation or any savings, pension or other
benefit plan for the benefit of employees of the Corporation or
its affiliates); a merger of the Corporation into, a
consolidation of the Corporation with, or an acquisition of the
Corporation by another corporation; or a sale or transfer of all
or substantially all of the Corporation's assets.  Such action,
in the Committee's discretion, may include (but shall not be
deemed limited to): establishing, amending or waiving the forms,
terms, conditions or duration of Options granted hereunder or
subject to grant hereunder, so as to provide for earlier, later,
extended or additional terms for exercise of the whole, or any
installment thereof (provided that, except as permitted by the
provisions of this Section and Section 9.1 hereof, in no event
will any Option be exercisable within the first six months of its
respective term); alternate forms of payment; or other
modifications.  The Committee may take any such actions pursuant
to this Section 3.4 by adopting rules or regulations of general
applicability to all Optionees, or to certain categories of
Optionees; by amending or waiving terms and conditions in stock
option agreements; or by taking action with respect to individual
Optionees.  The Committee may take any such actions before or
after the public announcement of any such Change in Control,
tender offer, exchange offer, merger, consolidation, acquisition
or sale or transfer of assets.

     4.   SHARES AVAILABLE:
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     4.1  Subject to the provisions of Sections 4.2 and 4.3
hereof, the aggregate number of shares of Common Stock to be
<PAGE>
subject to Options under this Plan shall not exceed 50,000
shares.  Such shares shall be made available from the authorized
but unissued shares of Common Stock of the Corporation.

     4.2  Shares subject to an Option, to the extent such shares
are surrendered or withheld to pay the exercise price of the
Option, are no longer available for issuance hereunder.  Other
shares subject to Options granted under this Plan, which Options
have been canceled or have expired or are unexercised and no
longer outstanding, shall thereupon become available for issuance
pursuant to other Options granted under the Plan.  This
Section 4.2 shall in all cases be interpreted in a manner
consistent with Rule 16b-3, as amended from time to time.

     4.3  The Committee may, at any time, make or provide for
such adjustments to the Plan, to the number and class of shares
available thereunder or to any outstanding Options as it shall
deem appropriate to prevent dilution or enlargement of the rights
of Optionees, including adjustments in the event of changes in
the outstanding Common Stock by reason of stock dividends, stock
splits, distributions to shareholders (other than cash
dividends), recapitalizations, mergers, consolidations,
combinations or exchanges of shares, separations,
reorganizations, liquidations and the like.  Such adjustments may
include, in the discretion of the Committee, adjustments to the
aggregate number and kind of shares which may be issued pursuant
to Options under this Plan, and the number, kind and price of
shares subject to each Option then outstanding.

     5.   ELIGIBILITY:
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     5.1  Officers and other full-time, salaried employees of the
Corporation and its affiliates shall be eligible to receive
Options under the Plan.  No Option, however, may be granted to a
person who, immediately after an Option is granted, owns directly
or indirectly shares of stock possessing more than 5% of the
total combined voting power or value of all classes of stock of
the Corporation at the time outstanding.  For purposes of this
paragraph only, an employee shall be deemed to own directly or
indirectly shares of stock which he may purchase under
outstanding Options.

     5.2  A director of the Corporation or any of its affiliates
who is not also regular, full-time employee of the Corporation or
its affiliates will not be eligible for Options under the Plan.

     5.3  An employee who has been granted an Option otherwise
under the Plan may be granted additional Options, if the
Committee shall so determine.

     6.   GRANTS:
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     6.1  Subject to the express provisions of this Plan, the
Committee shall have sole authority to determine the individuals
to whom Options shall be granted, the time or times at which
Options shall be granted, the number of shares of Common Stock to
be subject to each Option granted, the period of each Option and
the time or times at or during which an Option may be exercised
in whole or in part, and all such other terms and conditions of
such Options granted as the Committee deems appropriate.  
<PAGE>
     6.2  Each Option granted to an Optionee under this Plan
shall, if required by the Committee, be evidenced by a written
agreement to be duly executed and delivered by or on behalf of
the Corporation and the Optionee and containing provisions not
inconsistent with the Plan.

     7.   OPTION PRICE:
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     The exercise price under each Option shall be established by
the Committee, but in no event shall it be less than 100% of the
Fair Market Value of the Common Stock on the date the Option is
granted.

     8.   TERM OF OPTIONS:
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     The term of each Option shall be fixed by the Committee,
but, subject to the power of the Committee, among other things,
to accelerate or otherwise adjust the terms for exercise of
Options pursuant to Section 3.4 hereof in the event of the
occurrence of any of the events set forth therein, no Option
shall be exercisable later than ten years from the date of grant
of the Option or earlier than six months from the date of grant
of the Option, except as otherwise provided in Section 9.1.

     9.   EXERCISE OF OPTIONS:
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     9.1  Each Option granted under this Plan shall be
exercisable in such number of shares and, subject to the
provisions of Section 8, at such time or times, including
periodic installments, as may be determined by the Committee at
the time of the grant.  The six months from the date of the grant
of the Option restriction pursuant to Section 8 shall not be
applicable to an Optionee in the event that he dies prior to the
expiration of such period.  The right to acquire shares pursuant
to Options that are exercisable in installments shall be
cumulative so that when the right to acquire any shares has
accrued such shares or any part thereof may be acquired at any
time thereafter until the expiration or termination of the
Option.

     9.2  An Option may be exercised by giving written notice of
exercise to the Corporation specifying the number of shares to be
purchased and by paying in full in cash the exercise price.  The
proceeds received by the Corporation in cash will be used for
general corporate purposes.

     9.3  If authorized by the Committee, the exercise price may
also be paid by (i) the delivery of shares of Common Stock with a
Fair Market Value equal to the exercise price, or (ii) a
combination of cash and such Common Stock equal to the exercise
price.

     9.4  Upon notification of the amount due and prior to, or
concurrently with, the delivery to the Optionee of a certificate
representing any shares purchased pursuant to the exercise of an
Option, the Optionee shall promptly pay to the Corporation any
amount necessary to satisfy applicable federal, state or local
tax requirements.  
<PAGE>
     9.5  An Optionee shall have none of the rights of a
shareholder with respect to the shares subject to any Option
until such shares have been issued and registered on the
Corporation's transfer books upon exercise thereof.

     10.  NON-TRANSFERABILITY:
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     No Option granted under this Plan shall be transferable
other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined in
the Code, and an Option may be exercised during the lifetime of
the Optionee only by him or by his guardian or legal
representative.

     11.  TERMINATION OF EMPLOYMENT, RETIREMENT, DEATH OR 
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          CANCELLATION:
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     11.1 In the event that the employment of an Optionee is
terminated, for a reason other than retirement or death, no
Option held by such Optionee shall be exercisable later than
three months after such Optionee shall have ceased to be an
employee of the Corporation or one of its affiliates or, if
earlier, later than the expiration date of the Option.  The
employment relationship, however, will be treated as continuing
intact while the Optionee is on military or sick leave if the
period of such leave does not exceed ninety days, or, if longer,
so long as the Optionee's right to re-employment is guaranteed
either by statute or by contract.

     11.2 In the event that an Optionee shall retire or die while
employed by the Corporation or one of its affiliates, Options
held by such Optionee may be exercised by the Optionee or by the
person designated in the will of the Optionee or by the proper
legal representative of the Optionee within one year following
the Optionee's death or one year following retirement, but in no
event later than the expiration date of the Option.

     11.3 Notwithstanding the express term of the grant or the
foregoing provisions of this Section 11, Options shall terminate
upon the termination of the employment of the Optionee if the
Corporation determines that such termination is for deliberate,
willful or gross misconduct, and the Options shall terminate
(whether or not the employment of the Optionee is terminated) if
the Corporation determines that the Optionee has improperly
disclosed confidential information of the Corporation and the
Optionee is so notified.

     12.  LISTING AND REGISTRATION OF SHARES:
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     Each Option shall be subject to the requirement that, if at
any time the Committee shall determine in its discretion that the
listing, registration or qualification of the shares subject to
such Option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or
in connection with, the granting of such Option or the issuance
<PAGE>
or purchase of shares thereunder, then such Option shall not be
granted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the
Committee.

     13.  EFFECTIVE DATE:
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     This Plan is subject to approval by the shareholders of the
Corporation.  The Plan will become effective on the date so
approved.  The Committee may, in its discretion, grant Options
conditioned upon the shareholders' subsequent approval of the
Plan.  

     14.  DURATION AND AMENDMENT:
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     14.1  There is no express limitation upon the duration of
the Plan.

     14.2  The Board may terminate or may amend the Plan at any
time, provided, however, that the Board may not, without approval
of the shareholders of the Corporation, (i) increase the maximum
number of shares for which Options may be granted under the Plan,
(ii) permit the granting of Options at less than 100% of Fair
Market Value at time of grant, or (iii) change the class of
employees eligible to receive Options under the Plan.  The
transactions under this Plan are intended to comply with
Rule 16b-3 (or its successor), as amended from time to time,
promulgated pursuant to the Exchange Act, and the Corporation
may, but shall not be required to, submit any proposed Plan
amendment to its shareholders for their approval to assure
continued compliance if such proposed amendment would, with
respect to any participant who is an officer, director or 10%
shareholder of the Corporation who is subject to Section 16 of
the Exchange Act ("Control Person"), (i) materially increase the
benefits accruing to participants under the Plan, or
(ii) materially increase the number of securities which may be
issued under the Plan (this shall not affect the prohibition
against increasing the maximum number of shares for which Options
may be granted under the Plan pursuant to the previous paragraph
without shareholder approval), or (iii) materially modify the
requirements as to eligibility for participation in the Plan.

     15.  MISCELLANEOUS:
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     With respect to any participant who is a Control Person,
transactions under this Plan are intended to comply with
Rule 16b-3 (or its successor), as amended from time to time,
promulgated pursuant to the Exchange Act.  Therefore, to the
extent any provision of the Plan or action by a person
administering the Plan fails to so comply, it shall be deemed
null and void ab initio to the extent permitted by law and deemed
              -- ------
advisable by the Committee.
<PAGE>
     As evidence of its adoption of this Plan, the Corporation
has caused this document to be executed on its behalf this 30th
day of October, 1995.

                              ROANOKE GAS COMPANY

                              By: /s/Frank A. Farmer, Jr. 
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                                  Its:  President                 
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<PAGE>