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                        ASSET SALE AND PURCHASE AGREEMENT

                                  By and Among

                          SOUTHWESTERN ENERGY COMPANY,


                          ARKANSAS WESTERN GAS COMPANY

                                       and

                            ATMOS ENERGY CORPORATION

                          Dated as of October 15, 1999

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<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

                                                                            Page
<S>                                                                          <C>
I.    DEFINITIONS.............................................................1

II.   SALE AND PURCHASE.......................................................5

   2.1.  Sale and Purchase of Assets..........................................5

   2.2.  Excluded Assets......................................................6

   2.3.  Purchase Price; Adjustment...........................................7

   2.4.  Assumption of Liabilities............................................9

   2.5.  Closing.............................................................10

   2.6.  Nonassignable Contracts.............................................11

III.  REPRESENTATIONS AND WARRANTIES OF SELLERS..............................11

   3.1.  Corporate Existence.................................................11

   3.2.  Authorization and Validity of Agreement.............................12

   3.3.  No Contravention....................................................12

   3.4.  Title to Assets; Adequacy; Condition................................12

   3.5.  Material Contracts..................................................12

   3.6.  Real Property.......................................................13

   3.7.  Permits.............................................................13

   3.8.  Litigation..........................................................13

   3.9.  Compliance with Laws................................................13

   3.10.    Governmental Consents............................................13

   3.11.    Tax Matters......................................................13

   3.12.    Financial Statements.............................................14

   3.13.    Employee Matters.................................................14

   3.14.    Brokerage........................................................15

   3.15.    Environmental Matters............................................15

   3.16.    No Undisclosed Liabilities; No Material Adverse Effect...........16

   3.17.    Customers; Suppliers.............................................16

   3.18.    Books and Records................................................16

   3.19.    Insurance........................................................16

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   3.20.    Accounts Receivable..............................................16

   3.21.    Y2K Compliance...................................................16

   3.22.    No Other Representations.........................................16

IV.   REPRESENTATIONS AND WARRANTIES OF BUYER................................17

   4.1.  Organization........................................................17

   4.2.  Authorization and Validity of Agreement.............................17

   4.3.  No Contravention....................................................17

   4.4.  Consents............................................................17

   4.5.  Brokerage...........................................................17

   4.6.  Litigation..........................................................17

   4.7.  Financing...........................................................17

V.    OBLIGATIONS OF SELLERS.................................................17

   5.1.  Consents............................................................18

   5.2.  Conduct of Business.................................................18

   5.3.  Access Before Closing...............................................18

   5.4.  Clearance Certificate...............................................18

VI.   OBLIGATIONS OF BUYER...................................................18

   6.1.  Consents............................................................18

VII.     EMPLOYEE MATTERS....................................................19

   7.1.  Employment of Employees.............................................19

   7.2.  Severance Benefits..................................................19

   7.3.  Transfer of Pension Assets and Liabilities..........................19

   7.4.  Savings Plan........................................................20

   7.5.  Indemnification for Plan Liabilities................................20

   7.6.  Service Credit......................................................21

   7.7.  Medical and Dental Plans............................................21

   7.8.  Vacation and Sick Day Benefits Accrued Through Closing Date.........22

   7.9.  Welfare Benefits....................................................22

   7.10.    Long Term Disability.............................................22

   7.11.    Flexible Spending Accounts.......................................22

   7.12.    WARN Act Liability...............................................22

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   7.13.    Health Care Continuation Coverage................................22

   7.14.    Employment Taxes.................................................22

VIII.    ADDITIONAL RIGHTS AND OBLIGATIONS...................................23

   8.1.  Access After Closing................................................23

   8.2.  Further Assurances..................................................23

   8.3.  Confidentiality.....................................................23

   8.4.  Schedules...........................................................23

   8.5.  Tax Matters.........................................................23

   8.6.  Use of Name and Logos...............................................24

   8.7.  Environmental Matters...............................................24

   8.8.  Abstracts...........................................................24

   8.9.  Y2K.................................................................25

IX.   CONDITIONS TO BUYER'S OBLIGATIONS......................................25

   9.1.  Representations, Warranties and Covenants of Sellers................25

   9.2.  No Prohibition......................................................25

   9.3.  Further Action......................................................25

   9.4.  No Material Adverse Effect..........................................25

   9.5.  Abstracts...........................................................25

   9.6.  Omnibus Gas Transportation and Supply Agreement.....................26

   9.7.  Other Documents.....................................................26

X.    CONDITIONS TO SELLERS' OBLIGATIONS.....................................26

   10.1.    Representations, Warranties and Covenants of Buyer...............26

   10.2.    No Prohibition...................................................26

   10.3.    Further Action...................................................26

   10.4.    Omnibus Gas Transportation and Supply Agreement..................26

   10.5.    Other Documents..................................................26

XI.   TERMINATION PRIOR TO CLOSING...........................................26

   11.1.    Termination......................................................26

   11.2.    Effect of Termination............................................27

XII.     INDEMNIFICATION AND SURVIVAL........................................27

   12.1.    Indemnification by Sellers.......................................27

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   12.2.    Indemnification by Buyer.........................................27

   12.3.    Limitations on Liability.........................................27

   12.4.    Indemnification Procedure........................................28

   12.5.    Exclusive Remedies...............................................29

XIII.    MISCELLANEOUS.......................................................29

   13.1.    Entire Agreement.................................................29

   13.2.    Waiver of Bulk Transfer Requirements.............................29

   13.3.    Successors and Assigns...........................................29

   13.4.    Counterparts.....................................................29

   13.5.    Headings.........................................................29

   13.6.    Modification and Waiver..........................................29

   13.7.    No Third-Party Beneficiary Rights................................30

   13.8.    Sales and Transfer Taxes.........................................30

   13.9.    Expenses.........................................................30

   13.10.   Waiver of Conditions.............................................30

   13.11.   Notices..........................................................30

   13.12.   Knowledge of Sellers.............................................31

   13.13.   Governing Law....................................................31

   13.14.   Waiver of Jury Trial.............................................31

   13.15.   Announcements....................................................31

   13.16.   Severability.....................................................32


</TABLE>










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<TABLE>
<CAPTION>

SCHEDULES

<S>             <C> <C>
2.1.1           -   Owned Property
2.1.2           -   Leased Property
2.1.4           -   List of Machinery, Equipment, etc.
2.1.6           -   Contracts
2.1.13          -   Intellectual Property
2.2(c)          -   Names and Logos
2.2(k)          -   Other Excluded Assets
2.3.3           -   Financial Principles
2.4             -   Certain Excluded Liabilities
2.5.2(c)        -   Gas Transportation and Supply Matters
3.3             -   Sellers' Third Party Consents
3.4             -   Encumbrances on Transferred Assets
3.5             -   Material Contracts
3.6             -   Real Property
3.7             -   Permits
3.8             -   Litigation
3.9             -   Compliance with Laws
3.10            -   Seller Governmental Consents
3.12            -   Financial Statements
3.13.1          -   Employee Benefit Plans
3.13.2          -   Pension Plans
3.13.4          -   Labor Matters
3.15            -   Environmental Matters
3.16            -   Certain Liabilities
3.19            -   Insurance Policies
3.20            -   Accounts Receivable
4.4             -   Buyer's Consents
7.1             -   Transferred Employees
7.2             -   Severance Benefits
7.3.2           -   Accumulated Benefit Obligation and Calculation Assumption
7.11            -   Flexible Spending Accounts
9.3             -   Required Non-Governmental Third Party Consents

</TABLE>

<PAGE>



                        ASSET SALE AND PURCHASE AGREEMENT

         ASSET SALE AND PURCHASE AGREEMENT (the "Agreement") dated as of October
15, 1999, by and among  SOUTHWESTERN  ENERGY  COMPANY,  a corporation  organized
under  the laws of the  state  of  Arkansas  ("Parent"),  ARKANSAS  WESTERN  GAS
COMPANY, a corporation  organized under the laws of the state of Arkansas ("AWG"
and,  together with Parent,  the  "Sellers"),  and ATMOS ENERGY  CORPORATION,  a
corporation organized under the laws of Texas and Virginia ("Buyer").

                                   BACKGROUND

         Sellers  desire  to sell and  assign to Buyer,  and  Buyer  desires  to
purchase  and  assume  from  Sellers,   the   Transferred   Assets  (as  defined
hereinafter) and the Assumed  Liabilities (as defined  hereinafter),  all on the
terms and subject to the conditions of this Agreement.

                                      TERMS

         NOW, THEREFORE, intending to be legally bound hereby, the parties agree
as follows:

                                 I. DEFINITIONS.

         For  purposes of this  Agreement,  the  following  terms shall have the
following meanings:

         "Affiliate"  means,  when  used with  respect  to a  specified  Person,
another  Person  that,  either  directly  or  indirectly  through  one  or  more
intermediaries, controls or is controlled by or is under common control with the
Person specified.

         "Abstracts" has the meaning specified in Section 8.8.

         "Agreement" has the meaning specified in the first paragraph.

         "Assumed Contracts" has the meaning specified in Section 2.1.6.

         "Assumed Liabilities" has the meaning specified in Section 2.4.

         "Assumption Agreement" has the meaning specified in Section 2.5.3.

         "AWG" has the meaning specified in the first paragraph.

         "Business" means the gas distribution and transmission business and the
unregulated  operations  conducted  by  AWG's  Associated  Natural  Gas  Company
Division in the State of Missouri immediately prior to the date hereof; provided
that the Business  shall not be deemed to include any  operations of the Sellers
conducted in the State of Arkansas.

         "Buyer" has the meaning specified in the first paragraph.

         "Buyer Medical Plan" has the meaning specified in Section 7.7.1.

         "Buyer's Pension Plan" has the meaning specified in Section 7.3.1.

         "Buyer's  Post-Retirement  Trusts" has the meaning specified in Section
7.7.3.

                                      -1-
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         "Buyer's Savings Plan" has the meaning specified in Section 7.4.

         "Closing"  and "Closing  Date" have the  meanings  specified in Section
2.5.1.

         "Closing Purchase Price" has the meaning specified in Section 2.3.1.

         "Closing Statement" has the meaning specified in Section 2.3.3.

         "Code" has the meaning specified in Section 7.3.1.

         "Current  Assets" means the current  assets of the Sellers  reported as
(i) accounts  receivable,  (ii) inventory,  (iii) stores expense  undistributed,
(iv) deferred gas purchases and (v) (to the extent not exceeding $100,000) other
current assets that are included in the Transferred Assets, all as determined in
accordance with the Financial Principles applied consistently with the Financial
Statements.

         "Current  Liabilities"  means the  current  liabilities  of the Sellers
reported as (i) accounts payable,  (ii) other taxes payable,  (iii) deferred gas
purchases, (iv) customer deposits, (v) accrued vacation payable and (vi) (to the
extent  not  exceeding  $50,000)  other  current  liabilities  that are  Assumed
Liabilities,  all as  determined in  accordance  with the  Financial  Principles
applied consistently with the Financial Statements.

         "Current Period" has the meaning specified in Section 2.3.4.

         "Eligible  Transferred  Employee" has the meaning  specified in Section
7.4.

         "Encumbrances" has the meaning specified in Section 2.1.

         "Environmental  Laws"  means  any  federal,  state,  local  or  foreign
statute,  law,  ordinance,  regulation,  rule, code, order,  common law, and any
enforceable  judicial or administrative  interpretation  thereof,  including any
judicial or administrative order, writ, consent decree or judgment, relating: to
(a)  emissions,   discharges,  releases  or  threatened  releases  of  Hazardous
Materials  into the natural  environment,  including  into  ambient  air,  soil,
sediments, land surface or subsurface,  buildings or facilities,  surface water,
groundwater,  publicly-owned  treatment  works,  septic systems or land; (b) the
generation,   treatment,   storage  disposal,   use,  handling,   manufacturing,
transportation or shipment of Hazardous  Materials;  (c) occupational health and
safety;  or  (d)  otherwise  relating  to the  pollution  or  protection  of the
environment,  health, safety or natural resources;  provided that "Environmental
Laws"  shall not mean or refer to any of the  foregoing  except to the extent in
existence  and in full  force  and  effect  on and as of the  Closing  Date and,
accordingly,  shall  not  include  any of the  foregoing  as it may be  enacted,
promulgated,  amended, changed or altered (by statute,  judicial interpretation,
official  interpretation or otherwise) at any time with effect after the Closing
Date.

         "Environmental  Permit"  means  any  permit,  approval,  identification
number,  license or other authorization required under or issued pursuant to any
Environmental Law.

         "ERISA" has the meaning specified in Section 3.13.2.

         "Excluded Assets" has the meaning specified in Section 2.2.

         "Excluded Liabilities" has the meaning specified in Section 2.4.

         "Financial Principles" has the meaning specified in Section 2.3.3.

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         "Financial Statements" has the meaning specified in Section 3.12.

         "FSA's" has the meaning specified in Section 7.11.

         "Hazardous Material" means (a) any petroleum,  petroleum  hydrocarbons,
gas, gas liquids,  or any other  petroleum  products,  by-products  or breakdown
products,  radioactive materials,  asbestos-containing  materials in any form or
condition  or  polychlorinated  biphenyls  in any form or  condition  or (b) any
solid,  chemical,  material or substance regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any Environmental Law.

         "Knowledge of Sellers" has the meaning specified in Section 13.12.

         "Leased Property" has the meaning specified in Section 2.1.2.

         "Leave" has the meaning specified in Section 7.1.

         "Losses" has the meaning specified in Section 12.1.

         "Material  Adverse  Effect"  means any  change  in, or effect  on,  the
Business  or the  Transferred  Assets  that  is or is  reasonably  likely  to be
materially  adverse to the  Transferred  Assets  taken as a whole or the assets,
liabilities,  operations,  results of operations  or financial  condition of the
Business taken as a whole, except for any such changes or effects resulting from
(i) changes in general economic,  regulatory or political  conditions or changes
that affect the industry in general and (ii) this Agreement or the  transactions
contemplated hereby .

         "Material Contracts" has the meaning specified in Section 3.5.

         "Matters of Environmental Concern" has the meaning specified in Section
8.7(a).

         "Measurement Period" has the meaning specified in Section 2.3.3.

         "Names and Logos" has the meaning specified in Section 2.2(c).

         "Net Working Capital" has the meaning specified in Section 2.3.3.

         "Non-Assigned Contracts" has the meaning specified in Section 2.6.

         "Omnibus  Gas  Transportation  and Supply  Agreement"  has the  meaning
specified in Section 2.5.2.

         "Owned Property" has the meaning specified in Section 2.1.1.

         "Parent" has the meaning specified in the first paragraph.

         "Pension Plans" has the meaning specified in Section 3.13.2.

         "Permits" has the meaning specified in Section 3.7.

         "Permitted Encumbrances" has the meaning specified in Section 3.4.

                                      -3-
<PAGE>

         "Person"  means  any  individual,   partnership,   firm,   corporation,
association,  trust,  limited liability  company,  unincorporated  organization,
governmental authority or other entity.

         "Plans" has the meaning specified in Section 3.13.1.

         "Post-Retirement Benefits" has the meaning specified in Section 7.7.3.

         "Pre-Closing Returns" has the meaning specified in Section 8.5.

         "Purchase Price" has the meaning specified in Section 2.3.1.

         "Returns" has the meaning specified in Section 3.11.

         "Seller Medical Plans" has the meaning specified in Section 7.7.1.

         "Seller Pension Plan" has the meaning specified in Section 7.3.1.

         "Seller Pension Plan Trust" has the meaning specified in Section 7.3.1.

         "Seller Savings Plan" has the meaning specified in Section 7.4.

         "Sellers" has the meaning specified in the first paragraph.

         "Seller's  Post-Retirement Trusts" has the meaning specified in Section
7.7.3.

         "SFAS 106 Obligations" has the meaning specified in Section 3.13.5.

         "System Property" has the meaning specified in Section 2.1.3.

         "Taxes"  means all  federal,  state,  local and other taxes and similar
levies,  fees,  charges and  assessments  imposed by a  governmental  authority,
including without  limitation,  income,  gross receipts,  sales, use,  transfer,
business and occupation,  franchise,  profits,  license, lease, service, service
use, duties, excise, severance, stamp, occupation, ad valorem, real and personal
property, withholding, payroll, and value added taxes.

         "Threshold" has the meaning specified in Section 8.7.

         "Transfer Taxes" has the meaning specified in Section 13.8.

         "Transferred Assets" has the meaning specified in Section 2.1.

         "Transferred  Employee" and  "Transferred  Employees" have the meanings
specified in Section 7.1.

         "Transferred  Pension Plan  Participants"  has the meaning specified in
Section 7.3.1.

         "Transition  Services  Agreement" has the meaning  specified in Section
2.5.2.

         "WARN Act" has the meaning specified in Section 7.12.

         "Welfare Plans" has the meaning specified in Section 3.13.3.

                                      -4-
<PAGE>

                             II. SALE AND PURCHASE.

         2.1. Sale and Purchase of Assets.  Subject to the terms and  conditions
of this Agreement,  at the Closing,  each Seller shall sell, transfer and assign
to Buyer, free and clear of any lien, pledge, option, security interest,  claim,
charge or other encumbrance ("Encumbrances"), except Permitted Encumbrances, and
Buyer shall purchase and assume from each Seller,  the Transferred  Assets.  For
purposes  of this  Agreement,  "Transferred  Assets"  shall  mean the  following
assets:

                  2.1.1. The real property owned in fee by Sellers and listed on
         Schedule 2.1.1 (the "Owned Property"),  together with all improvements,
         fixtures, rights, and other appurtenances thereto of Sellers;

                  2.1.2.  The leasehold  interests of Sellers in all  possessory
         leases  of  real  property   listed  on  Schedule  2.1.2  (the  "Leased
         Property");

                  2.1.3. All rights of way, easements, appurtenances and similar
         realty  interests  of Sellers  relating  to the Owned  Property  or the
         Leased Property or necessary for or relating  primarily to the Business
         (the "System Property");

                  2.1.4. Machinery,  equipment,  tools and fixed assets owned by
         Sellers  listed  on  Schedule   2.1.4,   subject  to  such   additions,
         substitutions  or  deletions  thereto  as shall  have  occurred  in the
         ordinary  course of the  conduct of the  Business  prior to the Closing
         Date that is consistent with past practice;

                  2.1.5. All vehicles and other tangible assets of Sellers which
         are used primarily in or related primarily to the Business;

                  2.1.6.  All rights of Sellers  under the  contracts  listed on
         Schedule 2.1.6,  subject to such  additions,  substitution or deletions
         thereto as shall  have  occurred  in the  ordinary  course of  Sellers'
         conduct of the Business  prior to the Closing  Date that is  consistent
         with past practice (the "Assumed Contracts");

                  2.1.7.  To  the  extent   assignable  to  Buyer,  all  of  the
         governmental   permits,   franchises,   licenses,   consents  or  other
         authorizations issued or given to Sellers which relate primarily to the
         Business  or any of the  Transferred  Assets and which are  required in
         connection with the conduct, use, operation or ownership thereof;

                  2.1.8. Copies of all customer,  supplier and personnel records
         and other records as are in either Seller's possession or control which
         are used primarily in or related primarily to the Business;

                  2.1.9.  Accounts and notes  receivable  of Sellers which arose
         from the  operations  of the  Business  (other than  accounts and notes
         receivable  relating to  inter-company  accounts  between the  Sellers,
         which  accounts  and  notes  receivable  shall not be  included  on the
         Closing Statement);

                  2.1.10.  All inventories of gas,  materials and spare parts of
         Sellers used primarily in or relating primarily to the Business;

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                  2.1.11.  All prepaid expenses of Sellers relating primarily to
         the Business,  except for prepaid expenses attributable to any Excluded
         Asset or Excluded Liability;

                  2.1.12.  To the extent the rights and benefits  thereunder are
         assignable to Buyer, all rights and benefits under any  manufacturer's,
         subcontractor's,   supplier's,   repairman's   or   other   third-party
         warranties,  guarantees,  and service and replacement programs, and all
         rights of indemnification,  insurance proceeds, claims against insurers
         and similar rights of Sellers relating to the Transferred Assets or the
         Business,  except to the extent any such rights or  benefits  relate to
         Excluded  Assets or losses  or  conditions  which  Sellers  have  fully
         remedied prior to the Closing;

                  2.1.13. All patents,  patent rights,  trademarks,  trade names
         and logos used in the Business  listed on Schedule  2.1.13,  other than
         the name "Associated  Natural Gas" or "ANG" or variants thereof and the
         associated logos; and

                  2.1.14.  All of  either  Seller's  other  assets,  properties,
         franchises,  interests,  and  rights and  privileges  of every kind and
         description, real, personal or mixed, tangible or intangible, necessary
         for,  or  primarily  used  by the  Sellers  in,  the  operation  of the
         Business.

         2.2.     Excluded   Assets.    Anything   herein   to    the   contrary
notwithstanding, the  Transferred  Assets shall  not include  the following (the
"Excluded Assets"):

                           (a)      all   cash   on   hand,   cash  equivalents,
                  investments, and bank  accounts of Sellers  as of the  Closing
                  Date;

                           (b)      all  negotiable   instruments  (other   than
                  notes  receivable  of the  type  included  in the  Transferred
                  Assets pursuant to Section 2.1.9) and chattel paper of Sellers
                  as of the Closing Date;

                           (c)      all rights to the name  "Associated  Natural
                  Gas" (or  any  derivative  thereof) or  the  logos  identified
                  on Schedule  2.2(c) (the "Names and  Logos"),  subject  to the
                  provisions of Section 8.6;

                           (d)      refunds  or  claims  for  refunds  due  from
                  federal,  state,  local and  foreign  taxing  authorities with
                  respect to taxes paid or to be paid by Sellers;

                           (e)      all  insurance  policies  of Sellers, except
                  to the extent  provided  in Section  2.1.12,  and any  related
                  unearned premiums;

                           (f)      Sellers' rights under this Agreement;

                           (g)      each Seller's  corporate charter, minute and
                  stock record books and corporate seal;

                           (h)      each  Seller's  ledgers,  journals  and  tax
                  returns;

                           (i)      any   assets   relating   to   any  benefits
                  provided or  plans  maintained  by Sellers for any  employees,
                  subject to the provisions of Article VII;

                                      -6-
<PAGE>

                           (j)      any  assets  of  Sellers  primarily  used in
                  Sellers'   gas   distribution   and   transmission    business
                  conducted in the State of Arkansas; and

                           (k)      the assets identified on Schedule 2.2(k).

         2.3.     Purchase Price; Adjustment.

                  2.3.1.   Determination   and  Payment.   In  addition  to  the
         assumption of the Assumed Liabilities  contemplated by Section 2.4, the
         consideration  to be paid by Buyer for the  Transferred  Assets will be
         $32,000,000 (the "Closing Purchase Price"),  payable at Closing by wire
         transfer of  immediately  available  funds to an account  designated by
         Sellers.  The Closing  Purchase  Price  shall be subject to  adjustment
         after Closing pursuant to Section 2.3.3 (as so adjusted,  the "Purchase
         Price").

                  2.3.2.  Allocation.  Within ninety (90) days after the Closing
         Date, the Purchase Price and the value of the Assumed  Liabilities will
         be  allocated  among the  Transferred  Assets by Buyer and Sellers in a
         mutually acceptable manner which is consistent with Section 1060 of the
         Code and the regulations  thereunder.  The parties agree that they will
         report the federal,  state and local and other tax  consequences of the
         purchase and sale hereunder (including,  without limitation, in filings
         on Internal Revenue Service Form 8594) in a manner consistent with such
         allocation  and that  they  will not  take  any  position  inconsistent
         therewith in connection with any tax return,  refund claim,  litigation
         or otherwise.  The  provisions of this Section 2.3.2 shall apply to any
         subsequent  adjustments  to  the  Purchase  Price,  including,  without
         limitation,  adjustment  pursuant  to  Sections  2.3.3 and 13.8 of this
         Agreement.

                  2.3.3.  Post-Closing  Adjustments.  Within  90 days  after the
         Closing Date,  Sellers shall deliver to Buyer a statement (the "Closing
         Statement")  of (i) the net  amount  of the  Current  Assets  minus the
         Current  Liabilities ("Net Working Capital") as at the Closing Date and
         (ii) capital expenditures with respect to the Business and depreciation
         with respect to the Business  during the period from the date hereof to
         and including the Closing Date ("Measurement  Period"), in each case in
         accordance with the accounting principles and assumptions set forth in,
         and in the form provided in, the document entitled Financial Principles
         which  is   included   as  Schedule   2.3.3   hereto  (the   "Financial
         Principles").












                                      -7-
<PAGE>

                  If Net Working  Capital is more than  $1,600,000,  the Closing
         Purchase  Price shall be  increased  by the amount by which Net Working
         Capital  exceeds  $1,600,000.  If Net  Working  Capital  is  less  than
         $1,600,000, the Closing Purchase Price shall be decreased by the amount
         by which Net  Working  Capital  is less  than  $1,600,000.  If  capital
         expenditures with respect to the Business during the Measurement Period
         exceed depreciation with respect to the Business during the Measurement
         Period,  the Closing Purchase Price shall be increased by the amount by
         which such  capital  expenditures  exceed such  depreciation,  but this
         amount shall not exceed $1,000,000. If depreciation with respect to the
         Business  during the Measurement  Period exceeds  capital  expenditures
         with respect to the Business during the Measurement Period, the Closing
         Purchase  Price  shall  be  decreased  by  the  amount  by  which  such
         depreciation exceeds such capital expenditures.  If the Purchase Price,
         as adjusted  as provided  above,  exceeds the Closing  Purchase  Price,
         Buyer shall pay the amount of such excess to Sellers.  If the  Purchase
         Price, as adjusted as provided above, is less than the Closing Purchase
         Price,  then Sellers shall pay the amount of such deficit to Buyer. Any
         such payment  shall be made by wire transfer of  immediately  available
         funds within 15 days after Buyer's  written  notification to Sellers of
         Buyer's  acceptance  of the Closing  Statement  or within 15 days after
         Buyer is deemed to have  accepted the Closing  Statement as provided in
         this Section 2.3.3.  The amount of any payment required by this Section
         2.3.3 shall bear  interest  from the Closing  Date  through the date of
         actual payment at the rate of 30-day LIBOR plus 50 basis points.

                  After delivery of the Closing Statement,  Sellers shall permit
         Buyer and  Buyer's  independent  accountants  access,  upon  reasonable
         notice and  during  reasonable  business  hours,  to review  their work
         papers  and all books and  records  of  Sellers  relevant  to the items
         covered  by the  Closing  Statement,  and  Sellers  shall  permit  such
         accountants  to perform  such tests as they may  reasonably  require to
         confirm the accuracy of such items.

                  In the event  Buyer  disputes  any  matter or  matters  on the
         Closing  Statement,  Buyer may  within  forty-five  (45) days after the
         delivery of the Closing  Statement  notify Sellers of such dispute in a
         writing  setting forth in reasonable  detail the nature of such dispute
         and the facts upon which it is based,  together with the application or
         treatment  proposed by Buyer and the reasons supporting the use of such
         application or treatment rather than that used by Sellers.  If both the
         Closing  Statement  as  delivered  by Sellers to Buyer and the  Closing
         Statement  as  proposed  by Buyer  would  require a payment by the same
         party pursuant to the second paragraph of this Section 2.3.3, then such
         party  shall  make a payment  of the  lesser  amount  reflected  on the
         respective  Closing  Statements  within 15 days of  delivery of Buyer's
         proposed Closing  Statement to Sellers,  together with interest thereon
         as  provided  by such  paragraph.  If no such  notice is given by Buyer
         within  the time  specified,  the  Closing  Statement  shall be  deemed
         accepted by Buyer.









                                      -8-
<PAGE>

                  If the  parties  have not  resolved  all  matters  in  dispute
         relating to the Closing  Statement  within  forty-five  (45) days after
         Sellers'  receipt of such notice from Buyer,  then any party may notify
         the others in writing that it elects to submit all remaining  issues to
         resolution by a neutral accounting firm of national reputation.  Within
         ten (10) days after receipt of such notice of election by a party,  the
         parties shall agree upon the selection of a neutral accounting firm or,
         if they are unable to agree,  Sellers  and Buyer  shall each submit the
         names of two neutral  firms and a firm shall be selected at random from
         among them. A firm shall be considered neutral if it has not within the
         past  three  years   performed  and  does  not  currently   perform  or
         contemplate performing any accounting, consulting or other services for
         any of the parties and their respective  Affiliates having an aggregate
         value in excess of $250,000.

                  As soon as reasonably  practicable,  the firm  selected  shall
         resolve all  matters  remaining  in dispute  solely on the basis of the
         Financial  Principles and the  provisions of this Section  2.3.3.  Such
         firm shall not be required to follow any particular rules of procedure,
         it being the  intention of the parties to create a feasible,  practical
         and expeditious  method for resolving any disagreement  hereunder.  The
         decision  of such firm  hereunder  shall be final and binding and shall
         not be  subject to review or  challenge  of any kind.  The  appropriate
         party shall pay to the other any disputed  amount that is determined to
         be due within 15 days after such determination,  together with interest
         thereon as provided in the second  paragraph of this Section 2.3.3. The
         fees and expenses of such firm shall be borne equally by Buyer,  on the
         one hand, and Sellers, on the other.

                  If the parties resolve all matters in dispute  relating to the
         Closing  Statement,  then the  Closing  Statement  shall be adjusted as
         required  by the  agreement  resolving  the  matters in dispute and the
         Closing Statement as modified shall be deemed accepted by Buyer.

                  2.3.4.  Proration  of  Certain  Expenses.  To the  extent  not
         reflected on the Closing  Statement,  real property,  personal property
         and other ad valorem Taxes, rents, utility charges and similar expenses
         of Sellers related to the Transferred Assets shall be allocated between
         Buyer,  on the one hand, and Sellers,  on the other,  on the basis of a
         daily  proration and the net amount owing from Buyer to Sellers or from
         Sellers  to Buyer on account  of such  proration  shall be paid at such
         time as the post-closing  adjustment is paid pursuant to Section 2.3.3.
         If an  assessment  for the period that  includes  the Closing Date (the
         "Current  Period")  has not been made by the time that  payment  is due
         under the preceding sentence, a tentative payment shall be made at that
         time based on the assessment for the immediately  preceding tax period,
         and Buyer or  Sellers,  as the case may be,  shall make an  appropriate
         adjusting  payment within 10 days  following  receipt of the assessment
         for the Current Period.

         2.4.     Assumption of Liabilities.  In addition  to the payment of the
Purchase Price in accordance  with Section  2.3.1,  Buyer  shall assume and pay,
perform  and  discharge in  accordance  with the  terms  thereof  the  following
liabilities  and  obligations  (the "Assumed Liabilities"):

                  2.4.1. The obligations of Sellers not required to be performed
         prior to or as of the Closing Date under the Assumed Contracts;

                  2.4.2. The Current  Liabilities  included in the determination
         of Net Working Capital;

                                      -9-
<PAGE>

                  2.4.3. The obligations of Sellers not required to be performed
         prior to or as of the  Closing  Date  under the  governmental  permits,
         franchises,   consents   or  other   authorizations   included  in  the
         Transferred Assets pursuant to Section 2.1.7;

                  2.4.4. The obligations of Sellers not required to be performed
         prior  to  or  as  of  the  Closing  Date  under  the   agreements  and
         arrangements  giving  rise to the rights and  benefits  included in the
         Transferred Assets pursuant to Section 2.1.12; and

                  2.4.5.  The  obligations  of  Sellers to  customers  providing
         advances for  construction  to refund  portions of such advances to the
         extent additional  amounts are received by Buyer after the Closing Date
         from other customers with respect to reimbursement of such advances.

         Notwithstanding  the  foregoing,  the  Assumed  Liabilities  shall  not
include any of the following (collectively, the "Excluded Liabilities"): (a) any
liabilities that AWG's Associated Natural Gas Company Division owes to either of
the Sellers or any of its other  Affiliates  (other than those  arising under an
Assumed  Contract for the payment of natural gas or  transportation  services to
the extent not  disallowed by any  regulatory  agency);  (b) any  liabilities or
obligations that relate primarily to the Excluded Assets; (c) any liabilities or
obligations  of  Sellers  with  respect to any  legal,  administrative  or other
action,  proceeding or  governmental  investigation  pending or threatened on or
prior to the Closing Date; (d) any Taxes  attributable to Tax periods that close
on or before the Closing  Date,  or to the extent a Tax period  closes after the
Closing Date but includes  the period on or before the Closing  Date,  any Taxes
attributable  to the portion of such Tax period that is on or before the Closing
Date; (e) any liability  relating to employee  benefits or employment  except as
provided in Article VII; (f) any liability or obligation  identified on Schedule
2.4; and (g) any other  contingent  liability or  obligation,  whether  known or
unknown,  of either  Seller to the  extent  arising  out of or  relating  to the
operation  or conduct of the  Business  on or prior to the  Closing  Date or the
ownership of the Transferred Assets on or prior to the Closing Date which is not
a liability or  obligation  specifically  referred to in Section  2.4.1,  2.4.2,
2.4.3,  2.4.4 or 2.4.5.  For the  avoidance  of doubt,  the  provisions  of this
paragraph  are not  intended to qualify the  obligations  of Buyer to the extent
provided in Section 2.3.4, Article VII, Section 8.7 or Section 13.8. The Sellers
shall  retain  and pay,  perform  or  discharge  when due,  all of the  Excluded
Liabilities.

         2.5.     Closing.

                  2.5.1.  Time  and  Place.  The  closing  of  the  transactions
         contemplated  hereby (the "Closing") shall take place at the offices of
         Parent, 1083 Sain Street, Fayetteville,  Arkansas 72703, at 11:00 a.m.,
         Central  Time (or at such  other  place and time as Buyer  and  Sellers
         shall  agree),  on the  last  day  of the  month  in  which  all of the
         conditions specified in Articles IX and X hereof have been satisfied or
         waived (the "Closing Date").

                  2.5.2.  Sellers'  Deliveries  at  Closing.   At  the  Closing,
         Sellers shall deliver to Buyer:

                           (a) Such bills of sale and instruments of conveyance,
                  transfer  and  assignment,  dated the Closing  Date,  as Buyer
                  shall  reasonably  request  to vest in Buyer  the  Transferred
                  Assets;

                           (b)   An   agreement   (the   "Transition    Services
                  Agreement") requiring Sellers to furnish to Buyer post-Closing
                  information technology, human resources,  billing, call center
                  and other  transition  services to be mutually  agreed upon by
                  Sellers and Buyer for a

                                      -10-
<PAGE>

                  period not to exceed  ninety (90) days  following  the Closing
                  Date  for  consideration  and  upon  such  other  terms  to be
                  mutually agreed upon by Sellers and Buyer;

                           (c) An agreement (the "Omnibus Gas Transportation and
                  Supply Agreement") relating to certain arrangements  regarding
                  gas  transportation  contracts and related matters,  including
                  those matters identified on Schedule 2.5.2(c),  on terms to be
                  mutually agreed upon by Sellers and Buyer; and

                           (d) The closing  certificates and documents  required
                  by this Agreement and such other  documents and instruments as
                  may be reasonably requested by Buyer.

                  2.5.3.  Buyer's Deliveries at Closing.  At the Closing,  Buyer
         shall deliver to Sellers:

                           (a)      By wire transfer, the Closing Purchase Price
                  in the manner specified in Section 2.3.1 hereof;

                           (b)      An instrument of assumption of  liabilities,
                  dated the  Closing Date,  in a form  reasonably  acceptable to
                  Sellers (the "Assumption Agreement");

                           (c)      An  executed  counterpart  of  each  of  the
                  Transition   Services    Agreement   and   the   Omnibus   Gas
                  Transportation and Supply Agreement; and

                           (d) The closing  certificates and documents  required
                  by this Agreement and such other  documents and instruments as
                  may be reasonably requested by Sellers.

         2.6.  Nonassignable  Contracts.  In the case of any  contract  or other
agreement  (other  than  agreements  described  in Section  2.1.7) that would be
included  in the  Transferred  Assets but which by its terms or by virtue of its
subject matter is not assignable to Buyer as of the Closing Date  (collectively,
the  "Non-Assigned  Contracts"),   such  Non-Assigned  Contracts  shall  not  be
transferred  or  assigned  to  Buyer,  and  Sellers  agree  to use  commercially
reasonable efforts to obtain, as soon as is reasonably practicable following the
Closing Date, any consents necessary to convey to Buyer the benefit thereof,  it
being understood that such efforts shall not include any requirement to offer or
grant any  material  financial  accommodations  to any third  party or to remain
secondarily liable with respect to any such Non-Assigned Contract. Sellers agree
to use commercially  reasonable  efforts to provide Buyer with the same economic
and other benefits of each  Non-Assigned  Contract as if such contracts had been
assigned on the Closing Date. Nothing in this Agreement shall be construed as an
attempt or an agreement to assign or cause the  assignment  of any  Non-Assigned
Contract  which is not  assignable  without  the  consent of the other  party or
parties  thereto,  unless such consent shall have been given, or as to which all
the  remedies for the  enforcement  thereof  enjoyed by Sellers  would not, as a
matter of law, pass to Buyer as an incident of the assignments  provided by this
Agreement. The provision of benefits under this Section 2.6 shall not constitute
satisfaction of the conditions in Articles IX and X.

                 III. REPRESENTATIONS AND WARRANTIES OF SELLERS.

         Sellers,  jointly and severally,  hereby represent and warrant to Buyer
as follows:

         3.1.  Corporate  Existence.  Each  Seller  (a)  is a  corporation  duly
incorporated,  validly existing and in good standing under the laws of the State
of Arkansas, (b) has the requisite power and authority to

                                      -11-
<PAGE>

enter into and perform its  obligations  under this  Agreement,  and (c) is duly
qualified to do business as a foreign  corporation,  and is in good  standing in
each jurisdiction where the Business makes such qualification necessary,  except
where the failure to be so qualified or in good standing would not reasonably be
expected to have a Material Adverse Effect.

         3.2. Authorization and Validity of Agreement.  The execution,  delivery
and  performance by each Seller of this  Agreement have been duly  authorized by
all  necessary  corporate  action.  This  Agreement  has been  duly and  validly
executed  and  delivered  by each  Seller and  constitutes  a valid and  binding
obligation  enforceable against each Seller in accordance with its terms, except
to the  extent  that  such  enforceability  (i) may be  limited  by  bankruptcy,
insolvency,  reorganization,  moratorium  or  other  similar  laws  relating  to
creditors' rights generally, or (ii) is subject to general principles of equity.

         3.3. No Contravention.  The execution, delivery and performance by each
Seller of this Agreement and the consummation by each Seller of the transactions
contemplated  on its part hereby will not,  subject to obtaining  the  consents,
approvals, authorizations, exemptions or waivers identified on Schedule 3.3, 3.7
or 3.10,  (i) violate any  provision of law,  rule or regulation to which either
Seller is subject,  (ii)  violate any order,  judgment or decree  applicable  to
either Seller or (iii)  conflict  with, or result in a breach or default  under,
any term or  condition  of any of the charter or bylaws of either  Seller or any
material term or condition of any contract,  agreement or instrument  (including
the  Assumed  Contracts)  to  which  it is a party  or by which it or any of the
Transferred Assets may be bound.

         3.4. Title to Assets; Adequacy;  Condition.  Each Seller has good title
to the Transferred Assets to be sold by it hereunder, subject to no Encumbrance,
except  Permitted  Encumbrances.  For  purposes  of this  Agreement,  "Permitted
Encumbrances"  shall  mean (i) liens for  Taxes and  assessments  not yet due or
being  contested  in good  faith by  appropriate  proceedings,  (ii) such  minor
imperfections of title and encumbrances that do not secure monetary  obligations
which individually or in the aggregate are not substantial and do not materially
detract  from the value or impair  the use of the  Transferred  Assets and (iii)
such  encumbrances as set forth in Schedule 3.4. The Transferred  Assets include
all assets and properties that are necessary for the supply and servicing of the
customers  of the  Business in  accordance  in all  material  respects  with the
historical supply and service standards of the Sellers, except for the functions
subject to the Transition  Services Agreement and the Omnibus Gas Transportation
and Supply Agreement. The tangible assets included in the Transferred Assets are
in good operating condition, reasonable wear and tear excepted, and are adequate
for the uses to which they are being put in the conduct of the Business.

         3.5. Material  Contracts.  Schedule 3.5 contains a list of each Assumed
Contract in  existence  as of  September  30,  1999,  (i) which is a gas supply,
transportation or storage agreement relating to the Business involving a minimal
annual  payment  of more than  $50,000,  (ii) which  involves  a minimum  annual
payment to or by a Seller  relating to the Business of more than $50,000,  (iii)
the loss of which would have a Material  Adverse Effect,  (iv) pursuant to which
either  Seller  is  subject  to  take-or-pay  obligations  with  respect  to gas
purchases or gas marketing in connection  with the Business which impose minimum
obligations of more than $50,000 over the remaining term thereof or (v) which is
otherwise material to the Business or the Transferred Assets (collectively,  the
"Material Contracts"). Except as set forth in Schedule 3.5, each of the Material
Contracts is in full force and effect and is valid and enforceable in accordance
with its terms, subject as to enforceability to the effects of any bankruptcy or
similar  laws.  Except as set forth in Schedule  3.5, each Seller is in material
compliance  with all  applicable  terms of each  Material  Contract,  and to the
Knowledge of each  Seller,  each other party  thereto

                                      -12-
<PAGE>

is in material  compliance with all applicable terms of each Material  Contract.
Neither  Seller has given to or received  from any other  party to any  Material
Contract  any  notice or other  written  communication  regarding  any actual or
alleged  material breach of or default under any Material  Contract that has not
been withdrawn, settled, or otherwise resolved.

         3.6. Real Property.  To the Knowledge of each Seller,  no condemnation,
expropriation,  eminent domain or similar  proceeding is pending or contemplated
with respect to the Owned Property,  the Leased Property or the System Property.
Except as set forth in  Schedule  3.6,  each  Seller  is in  compliance,  in all
material respects,  with all covenants,  restrictions,  rights of way, easements
and similar realty  interests  benefiting or encumbering the Real Property,  the
Leased Property and the System Property.  The Real Property, the Leased Property
and the System  Property,  and all improvements  thereon,  do not violate in any
material respect any applicable zoning,  construction code or other governmental
restriction.

         3.7. Permits.  Except with regard to Environmental Permits, as to which
the Sellers' sole  representations and warranties are set forth in Section 3.15,
each Seller  holds all material  permits,  franchises  and other  authorizations
necessary  to conduct the Business as  currently  conducted by such Seller.  The
Sellers are in compliance,  in all material respects,  with all of such permits,
franchises and other authorizations.  A list of all material permits, franchises
and other  authorizations,  other than  Environmental  Permits,  relating to the
Business is set forth in Schedule 3.7 (the "Permits").

         3.8.  Litigation.  Except as set  forth in  Schedule  3.8,  there is no
legal,  administrative or other action,  proceeding or, to the Knowledge of each
Seller,  governmental  investigation either pending or, to the Knowledge of each
Seller, threatened (i) against either Seller with respect to the Business or the
Transferred  Assets,  or (ii) which seeks to enjoin or obtain damages in respect
of the consummation of the transactions  contemplated  hereby,  which, in either
case,  if decided  adversely,  would  reasonably  be expected to have a Material
Adverse Effect.

         3.9.  Compliance  with Laws.  Except as set forth in Schedule 3.9, each
Seller  is in  compliance,  in all  material  respects,  with all  laws,  rules,
regulations,  ordinances,  judgments, injunctions, orders and decrees applicable
to the Transferred  Assets or the Business,  excluding,  however,  Environmental
Laws, as to which the Sellers' sole representations and warranties are set forth
in Section 3.15.

         3.10.  Governmental Consents.  Except as set forth in Schedule 3.10, no
consent,  approval  or  authorization  of,  or  exemption  by,  or  declaration,
registration  or filing  with,  any  governmental  or  regulatory  authority  is
required in connection  with the execution,  delivery and performance by Sellers
of this  Agreement  or the  taking  of any  other  action  contemplated  hereby,
excluding, however, consents, approvals, authorizations, exceptions and filings,
if any,  where the  failure  to obtain or make the same  would not impair in any
material  respect the  consummation  of the  transactions  contemplated  by this
Agreement  and  would  not  materially  affect  the  use  or  operation  of  the
Transferred Assets after the Closing Date.

         3.11.    Tax Matters.

         (a) Tax  Returns.  All  federal,  state,  local and other Tax  returns,
declarations,  statements,  reports or other documents required to be filed with
respect to Taxes  ("Returns") by Sellers on or before the Closing Date have been
filed  or will be  filed on a timely  basis  with the  appropriate  governmental

                                      -13-
<PAGE>

agencies in all  jurisdictions  in which such  Returns are required to be filed.
All such Returns are true, complete and correct in all material respects and all
Taxes  shown on such  Returns  as being due,  or  otherwise  due,  in respect of
material Taxes either (i) have been or will be fully paid or adequately provided
for or (ii) are being contested in good faith by appropriate proceedings.

         (b)  Transferred  Asset  Status.  None of the  Transferred  Assets  (i)
secures any debt the interest on which is  tax-exempt  under  Section 103 of the
Code, (ii) is "tax-exempt use property"  within the meaning of Section 168(h) of
the code,  (iii) is "tax-exempt  bond financing  property" within the meaning of
Section 168(g)(5) of the Code, (iv) is "limited use property" within the meaning
of Revenue  Procedure  76-30, or (v) is required to be treated as being owned by
any other Person  pursuant to the provisions of former section  168(f)(8) of the
Code.

         3.12.  Financial  Statements.  Attached  hereto as Schedule  3.12 are a
balance  sheet and a statement of income for the Business as of and for the nine
months ended  September  30, 1999 and a balance  sheet and a statement of income
for  the  Business  for  the  year  ended  December  31,  1998  (the  "Financial
Statements"). The Financial Statements have been prepared in accordance with the
Financial  Principles  and with the books and records of Sellers.  To the extent
relevant to the  Financial  Statements,  in all material  respects the books and
records of Sellers are true,  accurate and  complete;  have been  maintained  in
accordance  with  good  accounting  practices;  and,  except as set forth in the
Financial Principles,  have been maintained on a consistent basis. The Financial
Statements make adequate provision, in accordance with the Financial Principles,
for any material contracts (or material group of similar  contracts)  reasonably
expected to be performed at a loss. The Financial  Statements fairly present, in
all material  respects,  the financial position and the results of operations of
the  Business  as of and for such  dates  and  periods  in  accordance  with the
Financial Principles consistently applied. Since September 30, 1999, the Sellers
have not made any capital  expenditures  outside the ordinary course of business
or  inconsistent  with past practice with respect to the Business,  entered into
any material  contracts  (or  material  group of similar  contracts)  reasonably
expected  to be  performed  at a  loss,  or  experienced  any  material  damage,
destruction  or loss  (whether  or not  covered by  insurance)  to the assets or
properties used in the conduct of the Business.

         3.13.    Employee Matters.

                  3.13.1.  Schedule  3.13.l  contains a list,  which is true and
         complete in all material  respects,  of (a) each  employment  agreement
         with any  Transferred  Employee,  written or oral,  and (b) each bonus,
         deferred compensation,  incentive compensation,  stock purchase,  stock
         option, severance pay, change in control, disability,  medical, dental,
         life or other insurance,  supplemental  unemployment  benefits,  profit
         sharing, pension or retirement plan, program,  agreement or arrangement
         (collectively,  the "Plans") sponsored, maintained or contributed to or
         required to be contributed to by either Seller or with respect to which
         Seller has any  liability for the benefit of any  Transferred  Employee
         (as hereinafter defined) or any former employee of the Business.

                  3.13.2. Each Seller maintains, sponsors or contributes to only
         those employee pension benefit plans (as defined in Section 3(2) of the
         Employee  Retirement Income Security Act of 1974, as amended ("ERISA"),
         whether  or  not  excluded  from  coverage  under  specific  Titles  or
         Subtitles  of ERISA)  established  or  maintained  for the  benefit  of
         employees or former  employees of the  Business  that are  described in
         Schedule   3.13.2   (the   "Pension   Plans"),   none  of  which  is  a
         multi-employer  plan  (within the  meaning of Section  3(37) of ERISA).
         Except as set  forth on

                                      -14-
<PAGE>

         Schedule 3.13.2, each Pension Plan that is intended to be tax qualified
         under  Sections  401(a) and 501(a) of the Code  is  so  qualified,  has
         received  one  or  more  favorable  IRS determination letters as to its
         qualification,  covering such plan from its inception,  and nothing has
         occurred that could jeopardize such tax qualified status.

                  3.13.3. Each Seller maintains, sponsors or contributes to only
         those  employee  welfare  benefit  plans (as defined in Section 3(1) of
         ERISA,  whether or not excluded from coverage under specific  Titles or
         Subtitles of ERISA) for the benefit of employees or former employees of
         the  Business  that are  described  in Schedule  3.13.1  (the  "Welfare
         Plans"),  none of which is a multi-employer plan (within the meaning of
         Section 3(37) of ERISA).

                  3.13.4. Except as set forth on Schedule 3.13.4, neither Seller
         is a party to any collective  bargaining or labor agreement relating to
         the Business,  and there is not, as of the date of this Agreement,  any
         strike,  work stoppage or material labor controversy or dispute pending
         or, to the best of the Knowledge of each Seller, threatened relating to
         the Business.

                  3.13.5  The  post-retirement  health and life  obligations  of
         Sellers for Transferred  Employees and former employees of the Business
         ("SFAS 106  Obligations")  for the year ended December 31, 1998 did not
         exceed by more than  $20,000 the amount  included in rate  recovery for
         the Business with respect to SFAS 106 Obligations  pursuant to Sellers'
         most recent  Missouri  rate case  (effective  January 10,  1998).  That
         portion  of all  rates  reflecting  the  SFAS 106  Obligations  paid to
         Sellers  relating  to the  Business  has been  deposited  in the trusts
         created to fund the SFAS 106 Obligations.

                  3.13.6   Prior   to   January   10,   1998,   there   were  no
         post-retirement  health or life obligations of Sellers for employees or
         former employees of the Business included in rate recovery,  other than
         "pay-as-you-go" obligations.

         3.14.  Brokerage.  No broker or finder has acted directly or indirectly
for  either  Seller  in  connection  with  this  Agreement  or the  transactions
contemplated  hereby,  and no broker or finder is entitled to any  brokerage  or
finder's  fee or  other  commission  in  respect  thereof  based  in any  way on
agreements,  arrangements  or  understandings  made by or on  behalf  of  either
Seller.

         3.15. Environmental Matters. Except as disclosed in Schedule 3.15, each
Seller holds all  Environmental  Permits that are required for the  operation of
the Business. Except as disclosed in Schedule 3.15, each Seller's conduct of the
Business,  and the condition of all properties and improvements  included in the
Transferred  Assets (and, to the Knowledge of each Seller,  any off-site storage
or disposal of any Hazardous Materials from such operations),  is in compliance,
in all material  respects,  with all Environmental  Laws. Except as disclosed on
Schedule  3.15,  neither  Seller is currently  in receipt of any written  claim,
demand,  notice  or  complaint  alleging  material  violation  of,  or  material
liability under, any Environmental Law relating to the operation of the Business
or the  Transferred  Assets.  Except  as  described  on  Schedule  3.15,  to the
Knowledge of each Seller, neither of Sellers has incurred any material liability
or  obligation  in  connection  with any  release or  threatened  release of any
Hazardous Material in the environment or any material reclamation or remediation
requirements under any Environmental Law, in each case relating to the operation
of the  Business  or the  Transferred  Assets.  No  Seller  has been  named as a
potential  responsible  party under the  Comprehensive  Environmental  Response,
Compensation and Liability Act of 1980, as amended,  or any corresponding  state
laws.  Except

                                      -15-
<PAGE>

as described on Schedule  3.15,  to the  Knowledge of each Seller,  no Hazardous
Materials were  incorporated  in the Real Property,  the Leased  Property or the
System  Property prior to the acquisition  thereof by such Seller.  There are no
sites, locations or operations at which any Seller is currently undertaking,  or
has  completed,  any  remedial or response  action  relating to the  disposal or
release of a Hazardous Material, as required by Environmental Laws, with respect
to the Business.  Buyer acknowledges that (i) the representations and warranties
contained in this Section 3.15 are the only representations and warranties being
made with respect to compliance  with or liability under  Environmental  Laws or
with respect to any  environmental,  health or safety matter,  including natural
resources,  related in any way to this  Agreement or its subject matter and (ii)
no other  representation  contained  in this  Agreement  shall apply to any such
matters and no other  representation or warranty,  express or implied,  is being
made with respect thereto.

         3.16. No Undisclosed Liabilities; No Material Adverse Effect. There are
no material  liabilities  or  obligations  of the  Business or of either  Seller
arising out of or relating to the Business or the Transferred Assets, except (i)
Excluded  Liabilities,   (ii)  liabilities  and  obligations  reflected  in  the
Financial Statements,  (iii) liabilities and obligations arising since September
30, 1999 in the ordinary course of business that are not  inconsistent  with the
types and amounts of such liabilities and obligations  historically  incurred in
the Business,  and (iv) liabilities and obligations  identified on Schedule 3.16
or another Schedule hereto. Since September 30, 1999, there has not occurred any
event resulting in a Material Adverse Effect.

         3.17.    Customers;  Suppliers.  Neither of Sellers  has been  involved
in any material  controversy with any  group of similarly  situated customers of
the Business or with any  material suppliers of the Business during the last two
years.

         3.18.  Books and  Records.  All books and  records of each  Seller with
respect to the Business or the Transferred Assets have been prepared,  assembled
and  maintained  in  accordance  in all  material  respects  with the  usual and
customary policies and procedures and accurately  reflect, in reasonable detail,
the assets and  transactions  of each  Seller  relating  to the  Business or the
Transferred Assets.

         3.19.    Insurance.  Schedule 3.19 identifies each  material  insurance
policy of Sellers relating to the Transferred Assets.


         3.20.    Accounts  Receivable.  Except as set forth on  Schedule  3.20,
the accounts and notes receivable included in the Transferred Assets:  (a) arose
from bona fide  sales or  contracting  transactions  by  Sellers in the ordinary
course of  business consistent  with past practices; and (b) represent bona fide
indebtedness of the respective debtors.

         3.21.  Y2K  Compliance.  Sellers  have put into effect  reasonable  and
customary  practices  and  programs  designed to enable all  material  software,
hardware and equipment that are owned or utilized by Sellers in the operation of
the  Business to be  capable,  by  December  31,  1999,  of  accounting  for all
calculations  using a century  and date  sensitive  algorithm  for the year 2000
without any material interruption caused by the occurrence of the year 2000.

         3.22.    No  Other  Representations.    Except as  set  forth  in  this
Article III or made pursuant to Section 9.1,  Sellers make no  representation or
warranty whatsoever to Buyer.

                                      -16-
<PAGE>

                  IV. REPRESENTATIONS AND WARRANTIES OF BUYER.

         Buyer hereby represents and warrants to Sellers as follows:

         4.1.     Organization.  Buyer is a corporation  duly organized, validly
existing  and in  good  standing  under the  laws of the  State of Texas and the
Commonwealth of Virginia and has all requisite corporate  power and authority to
execute, deliver  and perform this Agreement  and to consummate the transactions
contemplated hereby.

         4.2. Authorization and Validity of Agreement.  The execution,  delivery
and  performance  by Buyer of this  Agreement  have been duly  authorized by all
necessary  corporate  action.  This Agreement has been duly and validly executed
and  delivered  by  Buyer  and  constitutes  a  valid  and  binding   obligation
enforceable  against  Buyer in accordance  with its terms,  except to the extent
that  such  enforceability  (i)  may  be  limited  by  bankruptcy,   insolvency,
reorganization,  moratorium or other similar laws relating to creditors'  rights
generally, or (ii) is subject to general principles of equity.

         4.3. No Contravention. The execution, delivery and performance by Buyer
of this Agreement and the consummation of the  transactions  contemplated on its
part hereby will not,  subject to obtaining  any required  consents,  approvals,
authorizations, exemptions or waivers, (i) violate any provision of law, rule or
regulation  to which it is subject,  (ii) violate any order,  judgment or decree
applicable  to it, or (iii)  conflict  with,  or  result in a breach or  default
under, any term or condition of Buyer's articles of incorporation or bylaws,  or
any contract,  agreement or other  instrument to which it is a party or by which
it may be bound.

         4.4.  Consents.  Except  as set  forth on  Schedule  4.4,  no  consent,
approval or authorization  of, or exemption by, or declaration,  registration or
filing with, any governmental or regulatory  authority is required in connection
with the execution,  delivery and performance by Buyer of this Agreement, or the
taking of any other action contemplated hereby.

         4.5.  Brokerage.  No broker or finder has acted  directly or indirectly
for Buyer in connection  with this  Agreement or the  transactions  contemplated
hereby,  and no broker or finder is entitled to any brokerage or finder's fee or
other commission in respect thereof based in any way on agreements, arrangements
or understandings made by or on behalf of Buyer.

         4.6.  Litigation.  There is no legal,  administrative  or other action,
proceeding or, to Buyer's knowledge,  governmental  investigation pending or, to
Buyer's knowledge, threatened (i) against Buyer with respect to which there is a
reasonable  likelihood of a  determination  which would have a material  adverse
effect on the ability of Buyer to perform its  obligations  under this Agreement
or (ii) which seeks to enjoin or obtain  damages in respect of the  consummation
of the transactions contemplated hereby.

         4.7.     Financing.   Buyer has all funds  necessary to  consummate the
transactions contemplated by this Agreement.


                           V. OBLIGATIONS OF SELLERS.

         Sellers hereby covenant and agree with Buyer as follows:

                                      -17-
<PAGE>

         5.1. Consents.  Each Seller will use commercially  reasonable  efforts,
and will  cooperate  with Buyer,  to secure all necessary  consents,  approvals,
authorizations,   exemptions   and  waivers   from  third   parties,   including
governmental  authorities,  as shall be required  in order to enable  Sellers to
effect the transactions contemplated on their part hereby. It is understood that
such efforts do not require Sellers to offer or grant  financial  accommodations
to any third party or to remain  secondarily  liable with respect to any Assumed
Liability.

         5.2.  Conduct of Business.  Except as may be otherwise  contemplated by
this Agreement or required by any of the documents listed in any Schedule hereto
or except as Buyer may otherwise consent in writing, between the date hereof and
the  Closing  Date  Sellers  will:  (i) in all  material  respects,  conduct the
Business only in the ordinary  course  consistent  with past practice;  (ii) use
commercially reasonable efforts to preserve intact the Business and the goodwill
of its customers,  suppliers,  employees and any other Persons  having  business
relations with them with respect to the Business; (iii) maintain the properties,
machinery  and  equipment  included  in the  Transferred  Assets  in  sufficient
operating  condition  and repair to enable  Buyer to  conduct  the  Business  as
currently conducted by Sellers; and (iv) use commercially  reasonable efforts to
conduct the Business in such a manner so that the representations and warranties
of the Sellers  contained  herein  shall  continue to be true and correct at all
times  prior to the  Closing  Date as if made on and as of such  times.  Without
limiting the generality of the foregoing,  except as Buyer may otherwise consent
in  writing,  Sellers  shall not (i) enter into any  contract  which  would be a
Material Contract, or amend or modify any existing Material Contract, not in the
ordinary  course of business  consistent  with past  practice or (ii) except for
budgeted  compensation  increases,  adopt, amend or terminate any Plan, increase
any salary,  bonus or other compensation or benefit,  or promise or commit to do
any of the foregoing,  except in a manner which individually or in the aggregate
will not result in a material increase in benefits or compensation expense.

         5.3. Access Before  Closing.  From the date of this Agreement until the
Closing  Date,  Sellers  will permit  Buyer and its  representatives  reasonable
access on  reasonable  notice during normal  business  hours to the  properties,
personal property,  personnel, books and records,  contracts, and commitments of
the  Business,  including  the right to make  copies of such books and  records,
contracts,  and commitments.  In the event that any record or other  information
requested by Buyer is subject to a confidentiality agreement with a third party,
attorney-client privilege, or other legal restriction or privilege,  Sellers and
Buyer  will  endeavor  to  find  means  of  disclosing  as much  information  as
practicable that is needed by Buyer to prepare for the transfer of the Business,
but Sellers will not be obligated to breach such restriction or privilege. Buyer
shall return all copies of such books and records,  contracts,  and  commitments
promptly  upon the  request of Sellers  if for any reason the  Closing  does not
occur.

         5.4.  Clearance  Certificate.  On or prior to the Closing Date, Sellers
shall use commercially  reasonable efforts to provide Buyer, at Buyer's request,
with all clearance certificates or similar documents that may be required by any
state,  local or  other  taxing  authority  in  order  to  relieve  Buyer of any
obligation to withhold or escrow any portion of the Purchase Price.

                            VI. OBLIGATIONS OF BUYER.

         Buyer hereby covenants and agrees with Sellers as follows:

         6.1. Consents. Buyer will use commercially reasonable efforts, and will
cooperate   with  Sellers,   to  secure  all  necessary   consents,   approvals,
authorizations,   exemptions   and  waivers   from  third

                                      -18-
<PAGE>

parties,  including governmental  authorities,  as shall be required in order to
enable Buyer to effect the transactions  contemplated  hereby.  It is understood
that  such   efforts  do  not  require   Buyer  to  offer  or  grant   financial
accommodations  to any  third  party or to become  liable  with  respect  to any
Excluded Liability.

                             VII. EMPLOYEE MATTERS.

         7.1. Employment of Employees. As of the Closing Date, Buyer shall offer
to employ each employee  listed in Schedule 7.1 (which Schedule shall be updated
as of the Closing  Date with  appropriate  deletions  and  additions  thereto to
reflect the then  current  employees  of the  Business,  but not  including  any
employee then on long-term disability,  short-term disability or not actively at
work other than those employees on vacation,  bereavement leave, short-term sick
leave or other short-time due to non-medical  reasons which are not scheduled to
last more than ten (10) business days ("Leave"),  unless and until such employee
returns to full-time work from such long-term disability,  short-term disability
or Leave after the  Closing  Date) at a base salary or hourly rate not less than
the base salary or hourly rate then  applicable  to such employee and to provide
such benefits,  holidays,  vacation  days,  and similar  benefits as are, in the
aggregate,  substantially comparable to those then in effect for such employees,
except that Buyer shall not be required to provide a 401(k)  savings plan.  Each
such  employee  as of the  Closing  Date (or for an  employee  on  long-term  or
short-term  disability  or Leave as of the Closing  Date,  who returns from such
disability or Leave after the Closing  Date),  who becomes  employed by Buyer is
herein referred to individually as a "Transferred  Employee" and collectively as
the "Transferred Employees".

         7.2.     Severance   Benefits.   For a  period  of one  year  after the
Closing   Date,  Buyer  shall   provide  to each  Transferred  Employee  who  is
involuntarily terminated not for cause by Buyer the severance benefits set forth
on Schedule 7.2 hereto.

         7.3.     Transfer of Pension Assets and Liabilities.

                  7.3.1.  Transfer.  Subject  to the  review  of  Sellers'  plan
         documents,  as soon as practicable  following the Closing Date, but not
         earlier than thirty (30) days following the filing of appropriate Forms
         5310A, if applicable,  with the Internal Revenue Service,  Parent shall
         cause  to be  transferred  (i)  from the  Southwestern  Energy  Company
         Pension Plan (the "Seller  Pension Plan") to the pension plan sponsored
         by or to be established by Buyer ("Buyer's Pension Plan"),  and Buyer's
         Pension Plan shall  assume,  the accrued  benefits  liability as of the
         Closing Date for each of the Transferred  Employees who participated in
         the Seller  Pension  Plan prior to the Closing  Date (the  "Transferred
         Pension  Plan  Participants"),  and (ii) from the  Southwestern  Energy
         Company  Pension  Trust (the  "Seller  Pension  Plan Trust") to Buyer's
         Pension Plan trust,  an amount in cash equal to the  projected  benefit
         obligation to the Transferred  Pension Plan Participants on the Closing
         Date under the Seller Pension Plan, increased by interest at the plan's
         actuarial  rate  from  Closing  to the  actual  date  of  transfer  and
         decreased by the amount of any benefit payments to Transferred  Pension
         Plan  Participants  after  the  Closing  Date  but  before  the date of
         transfer.  Parent  shall not be  obligated  to cause  any  amount to be
         transferred  to any  plan or trust  designated  by  Buyer  until  Buyer
         provides  evidence (such as a favorable  determination  letter from the
         Internal  Revenue  Service,  an opinion of counsel or other  reasonably
         satisfactory  evidence)  reasonably  acceptable to Parent that (i) such
         plan and trust satisfy the requirements for qualification under Section
         40l(a) of the  Internal  Revenue  Code (the  "Code") and (ii) such plan
         provides that each Transferred  Pension Plan Participant is entitled to
         a nonforfeitable  accrued

                                      -19-
<PAGE>

         benefit  under  such  plan  that  is not less  than the  nonforfeitable
         accrued benefit to which such Transferred  Pension Plan Participant was
         entitled under the Seller Pension Plan on the Closing Date.

                  7.3.2. Benefit Calculations.  The projected benefit obligation
         to Transferred  Pension Plan Participants shall be determined using the
         projected  benefit  obligation  methodology  of  Statement of Financial
         Accounting  Standards  No.  87, on the basis of (i) each  participant's
         age, service for benefit accrual purposes and average  compensation and
         the terms of the Seller Pension Plan in effect on the Closing Date, and
         (ii) the  actuarial  assumptions  and method used for  determining  the
         projected  benefit  obligation  as set forth in Schedule  7.3.2.  In no
         event shall each  amount  transferred  pursuant to this  Section 7.3 be
         less  than  the  amount   required  to  be   transferred  to  meet  the
         requirements  of  Sections  401(a)(12)  and  414(1)  of the  Code.  The
         calculation of projected  benefit  obligation  required for purposes of
         this Section 7.3.2 shall be made in accordance with the assumptions set
         forth on Schedule 7.3.2.

                  7.3.3.  Plan  Termination.  Subject  to  the  requirements  of
         applicable law, in the event of the termination of Buyer's Pension Plan
         within  five (5)  years  after  the  Closing  Date,  all of the  assets
         transferred  to such plan  pursuant to this Section  7.3,  adjusted for
         earnings,  gains or losses  after the date of such  transfer,  shall be
         used to provide benefits to Transferred  Pension Plan  Participants and
         their beneficiaries who are entitled to benefits under such plan at the
         time of its termination.

         7.4. Savings Plan. Subject to the review of Sellers' plan documents, as
soon as  practicable  following  the  Closing  Date,  to the  extent  that Buyer
sponsors a 401(k)  savings  plan (which it shall not be required to do),  Parent
shall cause to be transferred  (i) from the  Southwestern  Energy Company 401(k)
savings plan (the "Seller Savings Plan") to the 401(k) savings plan sponsored by
Buyer ("Buyer's Savings Plan"),  and the Buyer's Savings Plan shall assume,  the
account  balance  liability  as of the date of  transfer  for  each  Transferred
Employee who  participated in the Seller Savings Plan prior to the Closing Date,
who is  employed  by Buyer on the date of transfer  (the  "Eligible  Transferred
Employee"),  and (ii) from the trust  relating to the Seller  Savings  Plan,  an
amount in cash or other property, including participant loans, acceptable to the
trustee of the Buyer's  Savings Plan equal to the sum of the account  values (as
of the date of transfer) of each Eligible Transferred Employee. Parent shall not
be obligated to cause any amount to be transferred  to the Buyer's  Savings Plan
or the trust  thereunder  until  Buyer  provides  evidence  (such as a favorable
determination letter from the Internal Revenue Service, an opinion of counsel or
other reasonably  satisfactory  evidence)  reasonably  acceptable to Parent that
such plan and trust satisfy the  requirements  for  qualification  under Section
40l(a) of the Code. Each Eligible  Transferred Employee shall be entitled on the
date of transfer to a  nonforfeitable  account balance under the Buyer's Savings
Plan that is not less than such Eligible Transferred  Employee's  nonforfeitable
account  balance  under  the  Seller  Savings  Plan  immediately  prior  to such
transfer.  Buyer agrees to permit any Eligible  Transferred  Employee who has an
unpaid loan balance under the Seller Savings Plan to continue to repay such loan
under the Buyer's Savings Plan under the same terms as such loan was required to
be repaid under the Seller Savings Plan.  However,  nothing herein shall require
Buyer to sponsor or  establish a Savings  Plan,  in which case this  Section 7.4
shall not apply. Buyer shall permit the Transferred  Employees to participate in
Buyer's Employee Stock Ownership Plan.

         7.5.  Indemnification  for  Plan  Liabilities.  From  the  dates of the
transfers of assets  referred to in Sections 7.3 and 7.4, Buyer shall  indemnify
and hold Sellers and Seller  Savings Plan and Seller

                                      -20-
<PAGE>

Pension  Plan  harmless  for any loss that  Sellers or said  plans may  incur in
respect of any obligation or liability transferred under Sections 7.3 and 7.4 to
the applicable plan of Buyer designated under such Sections.

         7.6. Service Credit. For purposes of vesting,  benefit accrual, benefit
calculation,  participation,   eligibility  (including  for  optional  forms  of
benefits or early  retirement or  disability  retirement  under Buyer's  Pension
Plan), and matching contribution  benefits, if any, Buyer shall, with respect to
each benefit  required to be provided  under the terms of this Article 7, credit
each Transferred  Employee with all service credited to the Transferred Employee
under  each  Seller's  corresponding  plan,  policy,   program,  or  arrangement
applicable to such Transferred Employee as of the Closing Date.

         7.7.     Medical and Dental Plans.

                  7.7.1.  Effective  as of the  Closing  Date,  Buyer shall make
         enrollment  available to all  Transferred  Employees and their eligible
         dependents  without  any  waiting  period  in a  Buyer  plan  or  plans
         providing  medical and dental benefits (the "Buyer Medical  Plan"),  to
         the extent such  individuals  were covered under Seller's Medical Plan,
         as contemplated by Section 7.1. Such Buyer Medical Plan shall waive any
         restrictions  and  limitations  for  pre-existing  conditions  for  all
         Transferred  Employees,  to the extent such  restrictions did not apply
         under Seller's  Medical Plan, and shall give credit to each Transferred
         Employee for any deductibles and out-of-pocket expenses paid during the
         current  plan  year  by  such   Transferred   Employee  under  Sellers'
         applicable medical and dental Plans (hereinafter  collectively referred
         to as the "Seller Medical Plans").

                  7.7.2.  Buyer  shall be  responsible  for  medical  and dental
         expenses  covered under the terms of the Buyer Medical Plan incurred on
         the later of (i) the Closing Date or (ii) the date such person  becomes
         a Transferred  Employee,  by a Transferred  Employee and/or his covered
         dependents who are enrolled in the Buyer Medical Plan. Sellers shall be
         responsible  only for medical  and dental  expenses  covered  under the
         terms of the Seller  Medical Plans  incurred  prior to the Closing Date
         (or if later,  for the period from the Closing Date until the date such
         person becomes a Transferred Employee) by a Transferred Employee and/or
         his  covered  dependents.  If  a  Transferred  Employee  or  a  covered
         dependent  of a  Transferred  Employee  enrolled in the Seller  Medical
         Plans is  hospitalized  on the Closing Date,  the Seller  Medical Plans
         shall  continue to provide  coverage for such person until he or she is
         discharged from the hospital,  to the extent coverage is provided under
         the terms of the Seller Medical Plans.

                  7.7.3. As soon as possible  following the Closing Date, but in
         no event later than 30 days  following the later of the Closing Date or
         the establishment of Buyer's Post-Retirement Trusts (as defined below),
         Parent  shall  cause to be  transferred  to Buyer,  either  through the
         transfer   from  the   trusts   or  other   vehicles   (the   "Seller's
         Post-Retirement  Trusts") funding the post-retirement medical and other
         welfare benefits (the "Post  Retirement  Benefits") for all Transferred
         Employees  listed on Schedule 7.1 and not greater than thirty-five (35)
         former  employees  of the  Business  (to be listed on a Schedule  to be
         provided by Sellers to Buyer within five days of the date  hereof,  and
         updated as of the Closing Date) to the trust or trusts  established  or
         maintained  by Buyer (the  "Buyer's  Post-Retirement  Trusts")  for the
         funding  of  post-retirement  medical  and other  welfare  benefits  or
         through a direct  payment to Buyer,  an amount equal to the  difference
         between (a) the amount of the  Post-Retirement  Benefits which has been
         recovered by Seller in

                                      -21-
<PAGE>

         rates  on  or  after  January 10, 1998,   and  (b)  the  amount  of the
         Post-Retirement Benefits paid by Seller in the form of benefit payments
         between  January 10, 1998  and  the  Closing  Date.  In  the  event the
         representations  and  warranties  of Sellers in  Section 3.13.6  do not
         continue to be true and correct,  Sellers shall pay to Buyer the amount
         by which the rate recovery  with respect to the  Business  for  periods
         prior to January 10, 1998 exceeded  the  "pay-as-you-go" obligations of
         the Business for periods prior to January 10, 1998.

         7.8. Vacation and Sick Day Benefits Accrued Through Closing Date. Buyer
shall credit each  Transferred  Employee with any vacation and sick days accrued
as of the Closing  Date in  accordance  with the terms of Sellers'  vacation and
sick day policies in effect as of such date.

         7.9.     Welfare Benefits.  Sellers shall be liable for claims incurred
under the Welfare Plans prior to the Closing Date.

         7.10.    Long Term  Disability.  Buyer shall not assume sponsorship of,
or any liabilities under, the  Southwestern  Energy Company Long Term Disability
Plan.  Any and all such liabilities shall remain solely with Sellers.

         7.11.  Flexible Spending  Accounts.  As soon as possible  following the
Closing Date, Sellers shall transfer to Buyer, and Buyer agrees to accept, those
amounts which  represent the  Transferred  Employees'  debit and credit balances
under the Southwestern Energy Company Salary Conservation Plan (the "FSA's"),  a
schedule  of  which is  attached  hereto  as  Schedule  7.11.  Buyer  agrees  to
administer the FSA's  (consistent  with the terms of the flex plan applicable to
Buyer's  employees)  such  that  Transferred  Employees  will be  able to  defer
additional  compensation  (in accordance with the terms of the applicable  Buyer
plan) and to submit claims  against the FSA within the time period  permitted by
applicable law.

         7.12.  WARN Act  Liability.  Sellers shall pay and be solely liable for
all liability under the Worker Adjustment and Retraining Notification Act ("WARN
Act"),  in each case,  arising  from any act or omission of Sellers on or before
the Closing Date.  Buyer shall pay and be solely liable for all liability  under
the WARN Act,  in each case,  arising  from any act or  omission of Buyer or its
Affiliates after the Closing Date.

         7.13. Health Care Continuation  Coverage.  Sellers shall be responsible
for compliance with all requirements under Section 4980B of the Code and Section
601 et seq. of ERISA with respect to any (a) Transferred  Employee or (b) family
member  of such  Transferred  Employee,  in each case who  becomes  a  qualified
beneficiary within the meaning of Section 4980B(g)(1) of the Code as a result of
any  "qualifying  event" within the meaning of Section  4980B(f)(3)  of the Code
which occurs on or prior to the Closing  Date.  Buyer shall be  responsible  for
compliance with all requirements under Section 4980B of the Code and Section 601
et seq.  of ERISA with  respect to any (a)  Transferred  Employee  or (b) family
member  of such  Transferred  Employee,  in each case who  becomes  a  qualified
beneficiary within the meaning of Section 4980B(g)(1) of the Code as a result of
any  "qualifying  event" within the meaning of Section  4980B(f)(3)  of the Code
which occurs after the Closing Date.

         7.14.  Employment Taxes.  Sellers hereby acknowledge that, for FICA and
FUTA tax purposes,  Buyer qualifies as a successor  employer with respect to the
Transferred  Employees.  In connection with the foregoing,  the parties agree to
follow the "Alternative  Procedures" set forth in Section 5 of Revenue Procedure
96-60,  1996-2-C.B.399.  In connection with the application of the  "Alternative
Procedures,"

                                      -22-
<PAGE>

(i) Sellers and Buyer each shall report on a  predecessor-successor basis as set
forth in such Revenue Procedure, (ii) provided that Sellers provide to Buyer all
necessary  payroll records for the calendar year that includes the Closing Date,
Sellers shall be relieved from furnishing Forms W-2 to employees of Sellers that
become  employees  of Buyer, and (iii)  provided  that Sellers provide  to Buyer
all necessary  payroll records for the calendar  year that includes  the Closing
Date, Buyer shall assume the obligations of Sellers to furnish such Forms W-2 to
such employees for the full calendar year in which the Closing occurs.

                    VIII. ADDITIONAL RIGHTS AND OBLIGATIONS.

         8.1.  Access  After  Closing.  Buyer  will  permit  Sellers  and  their
representatives  reasonable  access on reasonable  notice during normal business
hours,  for a period of three  years  following  the  Closing  Date and for such
longer  period as may be required in  connection  with any pending or threatened
tax audit or judicial or administrative proceeding, (i) to the books and records
of Sellers  included  in the  Transferred  Assets,  including  the right to make
copies  thereof,  and to personnel (for reasonable  inquiry and testimony),  and
(ii)  to  any  computerized  data  included  in  the  Transferred   Assets.  All
information so obtained shall be kept  confidential by the Sellers,  unless such
information   otherwise  becomes  publicly   available  or  disclosure  of  such
information is required by applicable law.

         8.2.  Further  Assurances.  At any time and from time to time after the
Closing Date,  Sellers shall,  at the request of Buyer,  and Buyer shall, at the
request of Sellers, execute and deliver any further instruments or documents and
take all such further action as the other party may reasonably  request in order
to  consummate  and make  effective the sale of the  Transferred  Assets and the
assumption of the Assumed  Liabilities  pursuant to this Agreement or to fulfill
any other of such party's obligations hereunder.

         8.3. Confidentiality.  The terms of the Confidentiality Agreement dated
June 15,  1999  between  Parent  and Buyer  are  hereby  incorporated  herein by
reference  and shall  continue in full force and effect  until the  Closing,  at
which time such  Confidentiality  Agreement and the  obligations  of Buyer under
this  Section  8.3  shall  terminate.  If this  Agreement  is,  for any  reason,
terminated prior to the Closing, the Confidentiality Agreement shall continue in
full force and effect.

         8.4.  Schedules.  Certain  information  set forth in the  Schedules  is
included  solely  for  informational  purposes  and  may not be  required  to be
disclosed  pursuant to this Agreement.  The disclosure of any information  shall
not be deemed to constitute an acknowledgment  that such information is required
to be disclosed in condition with the  representations  and  warranties  made by
Sellers in this Agreement. .

         8.5. Tax  Matters.  Sellers  shall  prepare or cause to be prepared and
timely file or cause to be timely  filed all  required  Tax Returns  relating to
Transfer  Taxes  imposed on Sellers  for (i) all  taxable  periods  ending on or
before the Closing  Date for which  Returns  shall not have been filed as of the
Closing Date,  and (ii) all taxable  periods  ending  following the Closing Date
that include the Closing  Date (all such  Returns  referred to in clause (i) and
(ii)  being  "Pre-Closing  Returns").  All  such  Pre-Closing  Returns  shall be
prepared on a basis consistent with prior practice unless a different  treatment
is required by a change in applicable law.

                                      -23-
<PAGE>

         8.6.     Use of Name and Logos.

                  8.6.1.  Buyer agrees to cease using the Names and Logos on its
         literature, inventory, products, labels, packaging or materials as soon
         as available supplies thereof are exhausted and in any event within six
         months after the Closing Date with respect to inventory  and  products,
         and within 90 days after the Closing Date with respect to literature.

                  8.6.2.  For thirty days after  Closing,  Buyer may use, as is,
         any of Sellers'  receipts,  bags,  boxes,  stationery,  purchase  order
         forms,  bills or other similar paper goods on hand or order at Closing.
         After such time,  Buyer shall not use any such supplies  which state or
         otherwise  indicate  thereon that the  business  operated by Buyer is a
         subsidiary,  division or unit of either Seller  without first  crossing
         out or marking over such  statement or indication or otherwise  clearly
         indicating on such  supplies that the business  operated by Buyer is no
         longer a subsidiary, division or unit of either Seller.

         8.7.     Environmental Matters.

         (a) Sellers  jointly and  severally  agree to indemnify  and hold Buyer
harmless  against any and all Losses incurred by Buyer resulting from Matters of
Environmental Concern (as hereinafter defined);  provided that: (i) any claim by
Buyer for indemnification pursuant to this clause 8.7(a) must be made by written
notice given within  three (3) years after the Closing  Date;  (ii) Sellers will
have no obligation to indemnify  Buyer for such Losses except to the extent that
such Losses, taken together, exceed $200,000 in the aggregate (the "Threshold"),
and  then  only to the  extent  of the  excess  that  has not  and  will  not be
recoverable through rates; and (iii) any clean-up,  remediation,  reclamation or
other costs with respect to the Transferred  Assets for which a claim is made by
Buyer under this  Section  8.7(a)  shall be borne,  after  giving  effect to the
Threshold,  50% by Sellers and 50% by Buyer. "Matters of Environmental  Concern"
means (i) any failure by Sellers to have complied prior to the Closing Date with
applicable  Environmental Laws or (ii) any handling,  use, storage,  generation,
release,  discharge,  disposal,  dumping or migration of any Hazardous Materials
(whether legal, illegal,  accidental or intentional) on, to, from or beneath the
Real  Property,  the Leased  Real  Property,  the System  Property  or any other
Transferred Asset to the extent occurring prior to the Closing Date.

         (b) If Buyer or  either  Seller  has or may have the  right to  recover
Losses  indemnified  by Sellers or borne by Buyer pursuant to clause (a) of this
Section 8.7 from a party in addition to Sellers,  Buyer and each Seller,  as the
case may be, shall assign such right to the other (in proportion to the relative
amounts indemnified against or borne) and shall reasonably cooperate in pursuing
any rights against such third party.

         8.8.  Abstracts.  Within 60 days after the date hereof,  Sellers  shall
cause to be prepared by a title  abstractor  reasonably  acceptable to Buyer and
delivered  to Buyer  abstracts  of title for the Real  Property  and the  Leased
Property  (other than office and warehouse  space) and the System  Property (the
"Abstracts")   showing,  in  customary  detail,  the  state  of  title  to  such
Transferred Assets, including the legal description and any other identification
of  such  Transferred  Assets,  the  instruments  creating  or  evidencing  such
Transferred Assets and the encumbrances affecting such Transferred Assets.

                                      -24-
<PAGE>

         8.9.  Y2K.  To the  extent,  if any,  that the  information  technology
included in the  Transferred  Assets  (including  components of the  Transferred
Assets that interface with or whose operation is dependent upon the operation of
information  technology systems) will not operate without error relating to date
data that references different centuries or more than one century, Sellers shall
use commercially  reasonable  efforts, at Sellers' expense, to modify or replace
such   information   technology  so  it  will  so  operate  without  error.  Any
modification  or  replacement  will be made as  promptly  as  practicable  after
Buyer's request; provided that Buyer's request is made not later than six months
after the Closing Date.

                     IX. CONDITIONS TO BUYER'S OBLIGATIONS.

         The   obligations  of  Buyer  under  this  Agreement  to  purchase  the
Transferred Assets and to consummate the other transactions  contemplated hereby
shall be  subject  to the  satisfaction  (or waiver by Buyer) on or prior to the
Closing Date of all of the following conditions:

         9.1.  Representations,  Warranties  and  Covenants of Sellers.  Sellers
shall have complied in all material respects with their agreements and covenants
contained  herein to be performed on or prior to the Closing  Date,  and all the
representations and warranties of Sellers contained herein shall be (a) true and
correct on and as of the date  hereof and (b) true and  correct in all  material
respects  on and as of the  Closing  Date with the same effect as though made on
and as of the Closing Date,  (i) except to the extent that such  representations
and warranties were made as of a specified date, and as to such  representations
and warranties the same shall continue on the Closing Date to have been true and
correct in all material  respects as of the specified  date and (ii) in the case
of clause (b) above, except for changes after the date hereof resulting from the
conduct of the  Business in the ordinary  course of business  that do not result
from a violation of Section 5.2, if such changes could not adversely  affect the
Buyer, the Transferred  Assets or the use or operations  thereof in any material
respect.  Buyer shall have  received a certificate  of Sellers,  dated as of the
Closing  Date and  signed by an  officer of each  Seller,  certifying  as to the
fulfillment of the condition set forth in this Section 9.1.

         9.2.     No  Prohibition.  No statute,  rule or regulation  or order of
any court or administrative agency shall be in effect which prohibits Buyer from
consummating the transactions contemplated hereby.

         9.3.  Further  Action.  All  consents  and  approvals  of  governmental
authorities  referred to in Schedule  3.10 or 4.4 hereto,  the granting of which
are necessary to consummate the  transactions  contemplated  hereby,  shall have
been obtained and shall not (a) result in rate  adjustments  with respect to the
Business which would be materially less favorable in the aggregate to Buyer than
the rates  currently  in effect on the date  hereof,  (b)  prevent or  adversely
affect the  operation of the  Transferred  Assets (or the results of  operations
therefrom)  after the Closing Date in a manner  consistent  with the Business or
(c) contain any other terms  materially  adverse to the Buyer.  The consents and
approvals of third parties (other than governmental  authorities)  identified on
Schedule 9.3 shall have been  obtained and shall be reasonably  satisfactory  to
Buyer.

         9.4.     No Material Adverse Effect.  Since the date of this Agreement,
there shall not have occurred any event resulting in a Material Adverse Effect.

         9.5.     Abstracts.  Buyer shall have received the  Abstracts,  and the
Abstracts  reflect a state of title that is reasonably satisfactory to Buyer.

                                      -25-
<PAGE>

         9.6.     Omnibus Gas Transportation and Supply  Agreement.  The parties
shall have reached agreement on,  and executed,  the Omnibus Gas  Transportation
and Supply Agreement.

         9.7.     Other Documents.  The Sellers  shall have  delivered to  Buyer
such certificates,  documents and instruments, including certified  resolutions,
authorizations and confirmations of incumbency, as Buyer may reasonably  request
to effect or confirm the transactions contemplated hereby.

                     X. CONDITIONS TO SELLERS' OBLIGATIONS.

         The obligations of Sellers under this Agreement to sell the Transferred
Assets and to consummate  the other  transactions  contemplated  hereby shall be
subject to the  satisfaction  (or waiver by  Sellers) on or prior to the Closing
Date of all of the following conditions:

         10.1.  Representations,  Warranties and Covenants of Buyer. Buyer shall
have complied in all material  respects with all of its agreements and covenants
contained herein to be performed on or prior to the Closing Date, and all of the
representations  and warranties of Buyer contained  herein shall be (a) true and
correct on and as of the date  hereof and (b) true and  correct in all  material
respects  on and as of the  Closing  Date with the same effect as though made on
and as of the Closing Date, except to the extent that such  representations  and
warranties were made as of a specified date, and as to such  representations and
warranties  the same shall  continue on the  Closing  Date to have been true and
correct in all material  respects as of the specified  date.  Sellers shall have
received a certificate  of Buyer,  dated as of the Closing Date and signed by an
officer of Buyer, certifying as to the fulfillment of the condition set forth is
this Section 10.1.

         10.2.    No  Prohibition.  No statute, rule, regulation or order of any
court or administrative  agency shall be in effect  which prohibits Sellers from
consummating the transactions contemplated hereby.

         10.3.    Further  Action.  All consents and  approvals of  governmental
authorities,  referred to in Schedule 3.10 or Schedule 4.4 hereto,  the granting
of which are necessary to consummate the transactions contemplated hereby, shall
have been obtained.

         10.4.    Omnibus Gas Transportation and Supply  Agreement.  The parties
shall have reached  agreement on, and executed,  the Omnibus  Gas Transportation
and Supply Agreement.

         10.5.    Other  Documents.  Buyer shall have  delivered to Sellers such
certificates,  documents  and  instruments,  including  certified   resolutions,
authorizations   and  confirmations  of  incumbency,  as Sellers  may reasonably
request to effect or confirm the transactions contemplated hereby.

                        XI. TERMINATION PRIOR TO CLOSING.

         11.1.    Termination.    This  Agreement  may  be  terminated  and  the
transactions  contemplated  hereby  may be abandoned  at any time  prior  to the
Closing:

                    (i)    By the mutual  written consent of  Buyer and Sellers;
                           or

                                      -26-
<PAGE>

                   (ii)    By either Buyer or Sellers, if the Closing shall have
                           not   occurred  on  or  before   December  31,  2000;
                           provided,  however,  that the right to terminate this
                           Agreement  under  this  subclause  (ii)  shall not be
                           available  to any party whose  failure to fulfill any
                           obligation  under this Agreement  shall have been the
                           cause of, or resulted  in, the failure of the Closing
                           to occur on or before such date.

         11.2.  Effect  of  Termination.  In the  event of  termination  of this
Agreement as provided in Section 11.1,  this Agreement  shall  forthwith  become
void;  provided,  however,  that such termination shall not relieve any party of
its  obligations  under Section 8.3,  Section 13.9 and Section 13.15 nor relieve
any party from  liability for any breach  hereof.  Upon any  termination of this
Agreement,  each party hereto will return all  documents,  work papers and other
material of the other party relating to the transactions contemplated hereby and
all copies of such materials,  whether so obtained before or after the execution
hereof, to the party furnishing the same.

                       XII. INDEMNIFICATION AND SURVIVAL.

         12.1.  Indemnification  by Sellers.  Subject to Sections 12.3 and 12.4,
Sellers will jointly and severally indemnify and hold Buyer harmless against any
and all Losses to which Buyer becomes  subject or which Buyer suffers or incurs,
insofar as such Losses arise out of or result from (a) the Excluded Liabilities,
(b) the  inaccuracy  of any  representation  or  warranty  of Sellers  contained
herein,  (c) the breach of any covenant of Sellers contained herein, (d) subject
to  Sections  2.3.4  and  13.8,  any  Tax  imposed  upon  either  Seller  or the
Transferred  Assets for any event or period through the Closing Date and (e) any
failure to comply with any bulk transfer or similar law in  connection  with the
transactions  contemplated  hereby or, subject to the provisions of Section 8.7,
the  imposition  on Buyer of any liability or obligation of Sellers that are not
Assumed  Liabilities  pursuant to any successor  liability  law. As used herein,
"Losses"  means  losses,  liabilities,   claims,  damages,  costs  and  expenses
(including  reasonable  attorneys' fees and costs of investigation),  whether or
not  involving a third party claim;  provided  that Losses shall not include (i)
any multiple, punitive or exemplary damages, except to the extent resulting from
third party claims, (ii) consequential or special damages,  except to the extent
proximately  resulting from any inability to operate the Transferred Assets in a
manner  consistent  with the  Business,  or (iii) any matter to the extent taken
into account on the Closing Statement.

         12.2.  Indemnification  by Buyer.  Subject to  Sections  12.3 and 12.4,
Buyer will  indemnify  and hold Sellers  harmless  against any and all Losses to
which either Seller  becomes  subject or which either Seller  suffers or incurs,
insofar as such Losses arise out of or result from (a) the Assumed  Liabilities,
(b) the inaccuracy of any  representation or warranty of Buyer contained herein,
(c) the  breach of any  covenant  of Buyer  contained  herein or (d)  expect for
matters as to which  Buyer is entitled  to  indemnification  pursuant to Section
12.1, the operation or use of the Transferred  Assets  subsequent to the Closing
Date.

         12.3.    Limitations on Liability.

                  12.3.1.  Time Limitations and Survival.  The  representations,
         warranties,  covenants and  agreements of the parties shall survive the
         Closing and any  investigation  by the parties.  Any claim by any party
         with respect to any  representation or warranty,  or any covenant to be
         performed  on or  prior to the  Closing  Date,  by  another  party  for
         indemnification must be made by written notice given within twelve (12)
         months after the Closing Date; provided that (i) claims with respect to
         the  representations  and  warranties  contained in Section 3.15 may be
         made by

                                      -27-
<PAGE>

         written  notice  within three (3) years after the Closing Date and (ii)
         claims with  respect to the  representations  and  warranties contained
         in Section  3.13.6 may be made by written  notice  until the earlier of
         four (4) years after the Closing Date or the conclusion of Buyer's next
         rate case with respect to the Business.

                  12.3.2.  Limitation on Amount. Sellers will have no obligation
         to indemnify Buyer for any Losses pursuant to clause (b) (other than in
         respect of Section  3.13.6)  or clause (c) (to the extent  relating  to
         covenants to be  performed on or prior to the Closing  Date) of Section
         12.1,  except to the extent that such Losses,  taken  together,  exceed
         $100,000 (provided that if a Loss relates to breach of a representation
         or  warranty   contained  in  Section  3.15   relating  to  Matters  of
         Environmental  Concern,  such Loss  shall be  subject  to the  $200,000
         deductible  provided in Section  8.7(a) and not towards  this  $100,000
         deductible),  and then only to the extent of such  excess.  In no event
         shall Sellers be liable for  aggregate  Losses under  Sections  12.1(b)
         (other than in respect of Section  3.15 or Section  3.13.6) and 12.1(c)
         (but only in respect of the covenants in Section 5.2) of more than $3.2
         million.

                  12.3.3.  Other Limitations.  If any indemnified party may have
         the right to recover  Losses from a third party (other than an insurer)
         in addition to the  indemnifying  party,  the  indemnified  party shall
         assign to the indemnifying  party any such right remaining against such
         third party after the indemnified party shall have recovered all of its
         Losses,  and  shall  reasonably   cooperate  (at  the  expense  of  the
         indemnifying party) in pursuing any rights against such third party.

         12.4.  Indemnification   Procedure.   Promptly  after  receipt  by  any
indemnified  party of notice of the commencement of any action,  proceeding,  or
claim in respect of which the indemnified party intends to seek  indemnification
pursuant  to  Section  12.1 or 12.2,  the  indemnified  party  shall  notify the
indemnifying party in writing; provided that the omission to so notify shall not
relieve the indemnifying party of its indemnification  obligations except to the
extent the indemnifying party is materially prejudiced thereby. The indemnifying
party shall be entitled to assume control of the defense of such action or claim
with  counsel  reasonably  satisfactory  to  the  indemnified  party;  provided,
however, that:

                    (i)    the   indemnified   party   shall  be   entitled   to
                           participate  in the  defense  of  such  claim  and to
                           employ  counsel  at its own  expense to assist in the
                           handling of such claim;

                   (ii)    no  indemnifying  party shall consent to the entry of
                           any judgment or enter into any  settlement  that does
                           not  include as an  unconditional  term  thereof  the
                           giving  by  each   claimant  or   plaintiff   to  the
                           indemnified  party of a release from all liability in
                           respect  of such  claim  or if,  pursuant  to or as a
                           result of such consent or  settlement,  injunctive or
                           other  equitable  relief would be imposed against the
                           indemnified  party  or such  judgment  or  settlement
                           could   materially   interfere   with  the  business,
                           operations or assets of the indemnified party; and

                  (iii)    after written notice by the indemnifying party to the
                           indemnified  party of its election to assume  control
                           of the defense of any such action in accordance  with
                           the  foregoing  provisions,  the  indemnifying  party
                           shall  not  be  liable  to  such  indemnified   party
                           hereunder  for any legal  fees,  costs  and  expenses
                           subsequently  incurred by such  indemnified  party in
                           connection with the defense thereof.

                                      -28-
<PAGE>

         If the  indemnifying  party does not assume  control of the  defense of
such claim in accordance with the foregoing  provisions,  the indemnified  party
shall  have the  right  to  defend  such  claim  in such  manner  as it may deem
appropriate at the reasonable cost and expense of the  indemnifying  party,  and
the indemnifying  party will promptly  reimburse the indemnified party therefore
in accordance with this Section 12.4;  provided that the indemnified party shall
not be  entitled  to  consent  to the entry of any  judgment  or enter  into any
settlement of such claim without the prior written  consent of the  indemnifying
party (not to be unreasonably withheld).

         12.5.  Exclusive  Remedies.  If the Closing  occurs,  then the remedies
provided in this Article XII shall  constitute  the sole and exclusive  remedies
with  respect to all claims for breach of any  representation  or  warranty,  or
covenant to be  performed  on or prior to the Closing  Date,  contained  in this
Agreement,  except for fraud or other willful  dishonesty.  Notwithstanding  the
foregoing, the provisions of this Article XII shall not affect the rights of any
party  hereto  against  any third  party  (including  a third  party whose claim
against a party  hereto is the basis of a claim for  indemnification)  and shall
not inure to the benefit of any third party.

                              XIII. MISCELLANEOUS.

         13.1.  Entire  Agreement.  This  Agreement  (including the Exhibits and
Schedules hereto) and the  Confidentiality  Agreement referred to in Section 8.3
constitute the entire  understanding  of the parties with respect to the subject
matter hereof and, except as provided in Section 8.3, supersedes all other prior
or contemporaneous oral or written statements by any party with respect thereto.

         13.2.  Waiver of Bulk Transfer  Requirements.  Subject to Section 12.1,
Buyer  agrees  to  waive  Sellers'  compliance  with  Article  6 of the  Uniform
Commercial Code (Bulk Transfers), as in effect in any jurisdiction, or any other
applicable bulk sales law.

         13.3.  Successors  and  Assigns.  The  terms  and  conditions  of  this
Agreement  shall  inure to the  benefit  of and be binding  upon the  respective
successors of the parties hereto; provided, however, that this Agreement may not
be assigned by Buyer without the prior written consent of Sellers, which consent
shall not be  unreasonably  withheld in the case of an  assignment  to an entity
that is controlled by Buyer.

         13.4.    Counterparts.  This  Agreement may be  executed in one or more
counterparts,  each of which shall for all purposes be  deemed to be an original
and all of which shall constitute the same instrument.

         13.5.    Headings.  The headings of the sections and paragraphs of this
Agreement  are  inserted  for  convenience  only  and  shall  not  be  deemed to
constitute a part of this Agreement or to affect the construction hereof.

         13.6. Modification and Waiver. No amendment, modification or alteration
of the terms or provisions of this  Agreement  shall be binding  unless the same
shall be in writing and duly executed by the parties hereto,  except that any of
the terms or provisions  of this  Agreement may be waived in writing at any time
by the  party  which  is  entitled  to the  benefits  of such  waived  terms  or
provisions. No waiver of any of the provisions of this Agreement shall be deemed
to or shall  constitute a waiver of any other  provision  hereof (whether or not
similar).  No delay on the part of any party in exercising  any right,  power or
privilege hereunder shall operate as a waiver thereof.

                                      -29-
<PAGE>

         13.7. No Third-Party Beneficiary Rights. This Agreement is not intended
to and shall not be  construed  to give any  person  or  entity  other  than the
parties signatory hereto any interest or rights (including,  without limitation,
any third party  beneficiary  rights) with respect to or in connection  with any
agreement or provision contained herein or contemplated hereby.

         13.8. Sales and Transfer Taxes. Sellers, on the one hand, and Buyer, on
the  other,  shall  each  be  responsible  for  and pay  one-half  (1/2)  of all
applicable sales, transfer,  documentary,  or use taxes and recording and filing
fees ("Transfer  Taxes") that may become due or payable as a result of the sale,
conveyance, assignment, transfer or delivery of any of the Transferred Assets or
the  transactions  contemplated  hereby whether levied on Buyer,  Sellers or any
Affiliate of Sellers. At the Closing, Sellers shall execute and deliver to Buyer
any  certificates  or other  documents as Buyer may reasonably  request to claim
available exemptions from the payment of Transfer Taxes under applicable law.

         13.9. Expenses.  Except as expressly provided otherwise herein, each of
Sellers  and Buyer  shall pay all costs and  expenses  incurred  by it or on its
behalf in  connection  with this  Agreement  and the  transactions  contemplated
hereby,  including,  without limiting the generality of the foregoing,  fees and
expenses of its own financial consultants, accountants and counsel.

         13.10.   Waiver  of  Conditions.    The  conditions  to  each   party's
obligations  hereunder are for the sole benefit of such party  and may be waived
by such party in whole or in part to the extent permitted by applicable law.

         13.11. Notices. Any notice,  request,  instruction or other document to
be given hereunder by either party hereto to the other party shall be in writing
and shall be sent by telefax  (with  confirmation  received  of the  recipient's
number) to the number  stated below or shall be delivered  personally or sent by
registered or certified mail (postage  prepaid and return receipt  requested) to
the address stated below.

         If to either Seller, to:

         Southwestern Energy Company
         1083 Sain Street
         Fayetteville, AR 72703
         Attention:        Greg D. Kerley
                           Senior Vice President and
                           Chief Financial Officer
         Telephone:        (501) 521-1141
         Telefax:          (501) 521-1147

         With a copy to:

         Cahill Gordon & Reindel
         80 Pine Street
         New York, New York 10005
         Attention:        Gary W. Wolf, Esq.
         Telephone:        (212) 701-3000
         Telefax:          (212) 269-5420


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<PAGE>

         If to Buyer, to:

         Atmos Energy Corporation
         1800 Three Lincoln Center
         5430 LBJ Freeway
         Dallas, Texas 75240
         Attention:        John P. Reddy
         Telephone:        (972) 934-9227
         Telefax:          (972) 855-3080

         With a copy to:

         Gibson, Dunn & Crutcher LLP
         1717 Main Street, Suite 5400
         Dallas, Texas 75201-7390
         Attention:        Irwin F. Sentilles, III, Esq.
         Telephone:        (214) 698-3100
         Telefax:          (214) 698-3400

or at such other telefax  number or address for a party as shall be specified by
like notice.  Any notice which is delivered  personally  in the manner  provided
herein  shall be  deemed  to have  been  duly  given to the  party to whom it is
directed upon actual receipt by such party.  Any notice which is sent by telefax
or addressed  and mailed in the manner  herein  provided  shall be  conclusively
presumed  to have been duly given to the party to which it is  addressed  on the
date indicated on the telefax confirmation or the postal receipt.

         13.12.   Knowledge  of  Sellers.   For  purposes  of  this   Agreement,
"knowledge of Sellers" or any similar term shall mean the actual knowledge of an
executive officer of Parent or of  Charles V. Stevens,  Senior Vice President of
AWG, after reasonable inquiry.

         13.13.  Governing Law. This Agreement  shall be construed in accordance
with and governed by the laws of the State of Arkansas  applicable to agreements
made and to be performed wholly within such  jurisdiction  without regard to the
conflicts  of laws  provisions  thereof.  Each of the parties  agrees to (i) the
irrevocable  designation  of the  Secretary of State of the State of Arkansas as
its  agent  upon  whom  process  against  it may be  served  and  (ii)  personal
jurisdiction  in any action brought in any court,  Federal or State,  within the
State of Arkansas having subject matter  jurisdiction over matters arising under
this  Agreement.  Any suit,  action or proceeding  arising out of or relating to
this  Agreement  shall only be instituted in a Federal or State court located in
the State of Arkansas.  Each party waives any objection which it may have now or
hereafter  to the laying of the venue of such suit,  action or  proceeding,  and
irrevocably  submits  to the  jurisdiction  of any such  court in any such suit,
action or proceeding.

         13.14.  Waiver  of  Jury  Trial.  Each  of  Sellers  and  Buyer  hereby
irrevocably  waives  all  right to trial by jury in any  action,  proceeding  or
counterclaim  (whether based on contract,  tort or otherwise)  arising out of or
relating  to  this  Agreement  or  the  actions  of  Sellers  or  Buyer  in  the
negotiations, administration, performance and enforcement thereof.

         13.15. Announcements. No party hereto shall make any public statements,
including, without limitation, any press release, with respect to this Agreement
and the  transactions  contemplated  hereby

                                      -31-
<PAGE>

without the  prior written  consent of the other parties,  other than  as may be
required by law, which consent shall not be unreasonably withheld.

         13.16.  Severability.  If any term or other provision of this Agreement
is held to be  invalid,  illegal or  incapable  of being  enforced  by any court
having jurisdiction, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect.

         IN  WITNESS  WHEREOF,  each  of the  parties  hereto  has  caused  this
Agreement to be executed on its behalf as of the date first above written.

                                    SELLERS:

                                    SOUTHWESTERN ENERGY COMPANY


                                    By:  /s/GREG D. KERLEY
                                       -----------------------------------
                                           Greg D. Kerley
                                           Senior Vice President

                                    ARKANSAS WESTERN GAS COMPANY


                                    By:  /s/GREG D. KERLEY
                                       -----------------------------------
                                           Greg D. Kerley
                                           Senior Vice President


                                    BUYER:

                                    ATMOS ENERGY CORPORATION


                                    By:  /s/LARRY J. DAGLEY
                                       -----------------------------------
                                           Larry J. Dagley
                                           Executive Vice President and
                                           Chief Financial Officer









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