Document:

<PAGE>   1

                                                                   EXHIBIT 10.20

                     THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

     The Employment Agreement (the "Agreement") between ICO, Inc., a Texas
corporation (the "Company") and Asher O. Pacholder (the "Executive") dated April
1, 1995, as amended by the First Amendment to Employment Agreement dated June
14, 1996 and as amended by the Second Amendment to Employment Agreement dated
February 7, 1997, is amended hereby as follows:

     Paragraph 3(a) of the Agreement is deleted in its entirety and the
following paragraph 3(a) substituted in its place.

          (a) During the Employment Period, Executive shall be engaged as the
     Chairman of the Board of the Company, and the Company agrees to use its
     best efforts to cause Executive to be nominated and elected as a director
     of the Company; subject, however, to the Executive's reelection by the
     shareholders of the Company at the annual shareholders' meeting when his
     applicable class of directors is to be voted upon by the shareholders. In
     addition, during the Employment Period, Executive shall be engaged as the
     Chief Financial Officer of the Company. In such positions, executive shall
     have such duties and authority as are reasonably accorded and expected of a
     Chairman of the Board and Chief Financial Officer consistent with the
     By-Laws of the Company and shall have such other duties and authority as
     shall be reasonably determined form time to time by the Board.

     Paragraph 5(c)(i) of the Agreement is deleted in its entirety and the
following paragraph 5(c)(i) substituted in its place.

     (i)  Executive ceasing for any reason to be either the Chairman of the
          Board or Chief Financial Officer of the Company, other than by death,
          disability or termination by the Executive of employment with the
          Company other than for Good Reason;

     Paragraph 6(b) of the Agreement is amended to replace the words
"three-year" in the first sentence thereof with "five-year."

     Paragraph 6(d)(i)(C) of the Agreement is amended to replace the first word
thereof "three" with "five."

     Paragraph 6(d)(iv) of the Agreement is amended to replace the fourth word
thereof "three" with "five."

     Paragraph 6(d)(i)(B) of the Agreement is amended to replace the words "a
particular year" in the fourth line thereof with "the particular year in which
the termination occurs."

<PAGE>   2

     Except as amended by this Third Amendment, all other provisions of the
Agreement, as amended to date, hereby are ratified and affirmed.

     In witness whereof, the Executive has set his hand hereunto, and, pursuant
to the authorization from the Compensation Committee of the Board of Directors,
the Company has caused these presents to be executed in its name on its behalf,
this 4th day of September, 1998.

                                       /s/ Asher O. Pacholder
                                       -----------------------
                                       Asher O. Pacholder

                                       ICO, Inc.

                                       By: /s/ Jon C. Biro
                                           -------------------
                                       Name: Jon C. Biro
                                             -----------------
                                       Title:  SVP - Treasurer
                                               ---------------<PAGE>   1

                                                                   EXHIBIT 10.21

                     THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

     The Employment Agreement (the "Agreement") between ICO, Inc., a Texas
corporation (the "Company") and Sylvia A. Pacholder (the "Executive") dated
April 1, 1995, as amended by the First Amendment to Employment Agreement dated
June 14, 1996 and as amended by the Second Amendment to Employment Agreement
dated February 7, 1997, is amended hereby as follows:

     Paragraph 6(b) of the Agreement is amended to replace the words
"three-year" in the first sentence thereof with "five-year."

     Paragraph 6(d)(i)(C) of the Agreement is amended to replace the first word
thereof "three" with "five."

     Paragraph 6(d)(iv) of the Agreement is amended to replace the fourth word
thereof "three" with "five."

     Paragraph 6(d)(i)(B) of the Agreement is amended to replace the words "a
particular year" in the fourth line thereof with "the particular year in which
the termination occurs."

     Except as amended by this Third Amendment, all other provisions of the
Agreement, as amended to date, hereby are ratified and affirmed.

     In witness whereof, the Executive has set her hand hereunto, and, pursuant
to the authorization from the Compensation Committee of the Board of Directors,
the Company has caused these presents to be executed in its name on its behalf,
this 4th day of September, 1998.

                                       /s/ Sylvia A. Pacholder
                                       -----------------------------------
                                       Sylvia A. Pacholder

                                       ICO, Inc.

                                       By: /s/ Jon C. Biro
                                           -------------------------------
                                       Name: Jon C. Biro
                                             -----------------------------
                                       Title: Sr. Vice President/Treasurer
                                              ----------------------------<PAGE>   1
                                                                     EXHIBIT 4.1
================================================================================

                          SOUTHERN NATURAL GAS COMPANY

                                     ISSUER

                                      AND

                            THE CHASE MANHATTAN BANK

                                    TRUSTEE

                                  -----------

                         SECOND SUPPLEMENTAL INDENTURE

                         DATED AS OF FEBRUARY 13, 2001

                                       TO

                                   INDENTURE

                            DATED AS OF JUNE 1, 1987

                                  -----------

                        7.35% NOTES DUE FEBRUARY 15, 2031

                                  -----------

================================================================================

<PAGE>   2

SECOND SUPPLEMENTAL INDENTURE, dated as of February 13, 2001 (herein called the
"Second Supplemental Indenture"), between SOUTHERN NATURAL GAS COMPANY, a
Delaware corporation (herein called the "Company"), having its principal office
at 1001 Louisiana Street, Houston, Texas 77002 and THE CHASE MANHATTAN BANK, a
banking corporation duly organized and existing under the laws of the State of
New York, as trustee under the Indenture referred to below (herein called the
"Trustee").

                             RECITALS OF THE COMPANY

         WHEREAS, the Company has heretofore executed and delivered to the
Trustee (as successor to Manufacturers Hanover Trust Company) the Indenture,
dated as of June 1, 1987 (such Indenture as amended through the date hereof
being herein called the "Original Indenture"), providing for the issuance from
time to time of one or more series of the Company's unsecured debentures, notes
or other evidences of indebtedness (herein called the "Securities"), the terms
of which are to be determined as set forth in Section 3.01 of the Original
Indenture; and

         WHEREAS, Section 12.01 of the Original Indenture provides, among other
things, that the Company and the Trustee may enter into indentures supplemental
to the Original Indenture for, among other things, the purpose of establishing
the form or terms of Securities of any series as permitted by Sections 2.01 and
3.01 of the Original Indenture; and

         WHEREAS, the Company desires to create a series of the Securities in an
aggregate principal amount of $300,000,000, which series shall be designated the
7.35% Notes Due February 15, 2031 (the "Notes"), and all action on the part of
the Company necessary to authorize the issuance of the Notes under the Original
Indenture and this Second Supplemental Indenture has been duly taken; and

         WHEREAS, all acts and things necessary to make the Notes, when executed
by the Company and completed, authenticated and delivered by the Trustee as
provided in the Original Indenture and this Second Supplemental Indenture, the
valid and binding obligations of the Company and to constitute these presents a
valid and binding supplemental indenture and agreement according to its terms,
have been done and performed;

         NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:

         That in consideration of the premises and the issuance of the Notes,
the Company covenants and agrees with the Trustee, for the equal and
proportionate benefit of all Holders of the Notes, as follows:

                                   ARTICLE I
                TERMS AND ISSUANCE OF 7.35% SENIOR NOTES DUE 2031

         Section 1.01 Issue of Notes. A series of Securities which shall be
designated the "7.35% Notes Due February 15, 2031" shall be executed,
authenticated and delivered in accordance with the provisions of, and shall in
all respects be subject to, the terms, conditions and covenants of the Original
Indenture, including without limitation the terms set forth in this

<PAGE>   3

Second Supplemental Indenture (including the form of Notes referred to in
Section 1.02 hereof). The aggregate principal amount of Notes which may be
authenticated and delivered under the Original Indenture shall be $300,000,000,
provided, however, that this series of Notes may be reopened, without the
consent of the holders thereof, for increases in the aggregate principal amount
of the Notes and issuance of additional Notes or for the establishment of
additional terms with respect to the Notes. The entire amount of Notes may
forthwith be executed by the Company and delivered to the Trustee and shall be
authenticated by the Trustee and delivered to or upon the order of the Company
pursuant to Section 3.03 of the Indenture.

         Section 1.02 Forms of Notes and Authentication Certificate. The Notes
initially shall be issuable in the form of one or more Global Securities,
registered in the name of the Depositary or its nominee. The Depository Trust
Company shall be the Depositary for such Global Securities. The forms and terms
of the Notes and the Trustee's certificate of authentication shall be
substantially as set forth on Exhibit A hereto.

                                   ARTICLE II
                                  MISCELLANEOUS

         Section 2.01 Execution as Supplemental Indenture. This Second
Supplemental Indenture is executed and shall be construed as an indenture
supplemental to the Original Indenture and, as provided in the Original
Indenture, this Second Supplemental Indenture forms a part thereof. Except as
herein expressly otherwise defined, the use of the terms and expressions herein
is in accordance with the definitions, uses and constructions contained in the
Original Indenture.

         Section 2.02 Responsibility for Recitals, Etc. The recitals herein and
in the Notes (except in the Trustee's certificate of authentication) shall be
taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness thereof. The Trustee makes no representations
as to the validity or sufficiency of this Second Supplemental Indenture or of
the Notes. The Trustee shall not be accountable for the use or application by
the Company of the Notes or of the proceeds thereof.

         Section 2.03 Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements in this Second Supplemental
Indenture contained by the Company shall bind its successors and assigns whether
so expressed or not.

         Section 2.04 New York Contract. THIS SECOND SUPPLEMENTAL INDENTURE AND
EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.

         Section 2.05 Execution and Counterpart. This Second Supplemental
Indenture may be executed with counterpart signature pages or in any number of
counterparts, each of which shall be an original but such counterparts shall
together constitute but one and the same instrument.

         Section 2.06 Capitalized Terms. Capitalized terms not otherwise defined
in this Second Supplemental Indenture shall have the respective meanings
assigned to them in the Original Indenture.

<PAGE>   4

         IN WITNESS WHEREOF, said SOUTHERN NATURAL GAS COMPANY has caused this
Second Supplemental Indenture to be executed in its corporate name by its
Chairman of the Board or its President or one of its Vice Presidents, and said
THE CHASE MANHATTAN BANK has caused this Second Supplemental Indenture to be
executed in its corporate name by one of its authorized representatives as of
February 13, 2001.

                                       SOUTHERN NATURAL GAS COMPANY

                                       By:   /s/ JEFFREY I. BEASON
                                          --------------------------------------
                                          Name:  Jeffrey I. Beason
                                          Title: Senior Vice President
                                                 and Controller

                                       THE CHASE MANHATTAN BANK

                                       By: /s/ Patti Maner
                                           -------------------------------------
                                           Authorized Representative

<PAGE>   5

                                                                       EXHIBIT A

         [THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE TRANSFERRED TO, OR REGISTERED OR
EXCHANGED FOR SECURITIES REGISTERED IN THE NAME OF, ANY PERSON OTHER THAN THE
DEPOSITARY OR A NOMINEE THEREOF AND NO SUCH TRANSFER MAY BE REGISTERED, EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. EVERY SECURITY
AUTHENTICATED AND DELIVERED UPON REGISTRATION OF, TRANSFER OF, OR IN EXCHANGE
FOR OR IN LIEU OF, THIS SECURITY SHALL BE A GLOBAL SECURITY SUBJECT TO THE
FOREGOING, EXCEPT IN SUCH LIMITED CIRCUMSTANCES.

         UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]*

                          SOUTHERN NATURAL GAS COMPANY

                        7.35% NOTE DUE FEBRUARY 15, 2031

NO.                                                             U.S.$300,000,000
CUSIP No. 843452AY9

         SOUTHERN NATURAL GAS COMPANY, a corporation duly incorporated and
existing under the laws of Delaware (herein called the "Company," which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to CEDE & CO., or registered assigns, the
principal sum of THREE HUNDRED MILLION United States Dollars on February 15,
2031, and to pay interest thereon from February 13, 2001, or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semi-annually on February 15 and August 15 in each year, commencing August
15, 2001, at the rate of 7.35% per annum, until the principal hereof is paid or
made available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the

--------
* Insert in Global Securities only.

                                      A-1
<PAGE>   6

Regular Record Date for such interest, which shall be the February 1 or August 1
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for shall forthwith cease to be payable to the Holder on such Regular Record
Date and shall either be paid to the Person in whose name this Security (or one
or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice of which shall be given to Holders of Securities of this
series not less than 10 days prior to such Special Record Date, or be paid at
such time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in such Indenture.

         [Payment of the principal of and premium, if any, and interest on this
Security will be made by transfer of immediately available funds to a bank
account in New York, New York designated by the Holder in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts.]*

         [Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, or at such other offices or
agencies as the Company may designate; provided, however, that payment of
interest may be made at the option of the Company by check mailed to the
addresses of the Persons entitled thereto as such addresses shall appear in the
Security Register.]**

         Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

--------
*  Insert in Global Securities only.
** Insert in Definitive Securities only.

                                      A-2
<PAGE>   7

         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.

Dated:

                                       SOUTHERN NATURAL GAS COMPANY

                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:

         This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.

                                       THE CHASE MANHATTAN BANK,
                                           AS TRUSTEE

                                       By:
                                          --------------------------------------
                                          Authorized Representative

                                      A-3
<PAGE>   8

                          SOUTHERN NATURAL GAS COMPANY
                        7.35% NOTE DUE FEBRUARY 15, 2031

         This Security is one of a duly authorized issue of Securities of the
Company (the "Securities"), issued and to be issued in one or more series under
an Indenture dated as of June 1, 1987, as amended (the "Indenture"), between the
Company and The Chase Manhattan Bank (as successor to Manufacturers Hanover
Trust Company), as Trustee (the "Trustee," which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, obligations, duties and immunities thereunder of the
Company, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered. As
provided in the Indenture, the Securities may be issued in one or more series,
which different series may be issued in various aggregate principal amounts, may
mature at different times, may bear interest, if any, at different rates, may be
subject to different redemption provisions, if any, may be subject to different
sinking, purchase or analogous funds, if any, may be subject to different
covenants and Events of Default and may otherwise vary as in the Indenture
provided or permitted. This Security is one of a series of Securities designated
on the face hereof limited in aggregate principal amount to U.S. $300,000,000.

         The Securities of this series are redeemable, upon not less than 30 nor
more than 60 days' notice by mail, as a whole or in part, at the option of the
Company at any time at a Redemption Price equal to the greater of (i) 100% of
the principal amount thereof and (ii) an amount equal to, as determined by an
Independent Investment Banker, the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the date of
redemption on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued and
unpaid interest thereon to the date of redemption, but interest installments
whose Stated Maturity is on or prior to such date of redemption will be payable
to the Holders of such Securities, or one or more Predecessor Securities, of
record at the close of business on the relevant Record Dates referred to on the
face hereof, all as provided in the Indenture.

         "Adjusted Treasury Rate" means, with respect to any Redemption Date,
the rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date, plus 0.20%.

         "Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker that (i) has a maturity comparable
to the remaining term of the Securities of this series to be redeemed and (ii)
would be used, at the time of selection and in accordance with customary
financial practice, to price new issues of corporate debt securities of
comparable maturity to the remaining term of such Securities.

         "Comparable Treasury Price" means, with respect to any Redemption Date,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.

                                      A-4
<PAGE>   9

Government Securities," or (ii) if such release (or any successor release) is
not published or does not contain such prices on such Business Day, (A) the
average of the Reference Treasury Dealer Quotations for such Redemption Date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such Reference Treasury Dealer
Quotations.

         "Independent Investment Banker" means one of the Reference Treasury
Dealers appointed by the Trustee after consultation with the Company.

         "Reference Treasury Dealer" means each of Credit Suisse First Boston
and Salomon Smith Barney and their respective successors; provided, however,
that if any of the foregoing shall not be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), the Company shall
substitute therefor another Primary Treasury Dealer.

         "Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such Redemption Date.

         Notwithstanding Section 4.01 of the Indenture, the notice of redemption
with respect to the foregoing redemption need not set forth the Redemption Price
but only the manner of calculation thereof.

         Promptly after the calculation thereof, the Company shall give the
Trustee written notice of the Redemption Price for the foregoing redemption.

         In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.

         If an Event of Default with respect to the Securities of this series
shall occur and be continuing, the principal of the Securities of this series
may be declared due and payable in the manner and with the effect provided in
the Indenture.

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in aggregate principal amount of the
Outstanding Securities of all series to be affected (voting as one class). The
Indenture also contains provisions permitting the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all affected series
(voting as one class), on behalf of the Holders of all Securities of such
series, to waive compliance by the Company with certain provisions of the
Indenture. The Indenture permits, with certain exceptions as therein provided,
the Holders of a majority in aggregate principal amount of Securities of any
series then Outstanding to waive past defaults under the Indenture with respect
to such series and their consequences. Any such consent or waiver by the Holder
of this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security

                                      A-5
<PAGE>   10

issued upon the registration of transfer hereof or in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Security.

         As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
the Securities of this series at the time Outstanding a direction inconsistent
with such request, and shall have failed to institute any such proceeding, for
60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or interest hereon on or
after the respective due dates expressed herein.

         No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Security at the times, place(s) and rate, and in the coin or
currency, herein prescribed.

         [This Global Security or portion hereof may not be exchanged for
Definitive Securities except in the limited circumstances provided in the
Indenture.

         The holders of beneficial interests in this Global Security will not be
entitled to receive physical delivery of Definitive Securities except as
described in the Indenture and will not be considered the Holders hereof for any
purpose under the Indenture.]*

         [As provided in the Indenture and subject to certain limitations set
forth, the transfer of this Security is registerable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in the Borough of Manhattan, The City of New York or at
such other offices or agencies as the Company may designate, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for a like
aggregate principal amount, will be issued to the designated transferee or
transferees.]**

         The Securities of this series are issuable only in registered form,
without coupons, in denominations of U.S. $1,000 and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, the Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering the same.

--------
*  Insert in Global Securities only.
** Insert in Definitive Securities only.

                                      A-6
<PAGE>   11

         No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any transfer tax or other similar governmental charge payable in connection
therewith.

         Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

         No recourse under or upon any obligation, covenant or agreement of or
contained in the Indenture or of or contained in any Security, or for any claim
based thereon or otherwise in respect thereof, or in any Security, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor Person, either directly or through
the Company or any successor Person, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment, penalty or
otherwise; it being expressly understood that all such liability is hereby
expressly waived and released by the acceptance hereof and as a condition of,
and as part of the consideration for, the Securities and the execution of the
Indenture.

         The Indenture provides that the Company (a) will be discharged from any
and all obligations in respect of the Securities (except for certain obligations
described in the Indenture), or (b) need not comply with certain restrictive
covenants of the Indenture, in each case if the Company deposits, in trust, with
the Trustee money or U.S. Government Obligations (or a combination thereof)
which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money, in an amount sufficient to pay
all the principal of and interest of the Securities, but such money need not be
segregated from other funds except to the extent required by law.

         THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.

         All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.

                                      A-7
<PAGE>   12

         [FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and

transfer(s) unto _______________________________________________________________
                    (Please Print or Typewrite Name and Address of Assignee)

the within instrument of SOUTHERN NATURAL GAS COMPANY and does hereby
irrevocably constitute and appoint ________________________ Attorney to transfer
said instrument on the books of the within-named Company, with full power of
substitution in the premises.

Please Insert Social Security or
Other Identifying Number of Assignee:

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

Dated:
      -------------------------------  -----------------------------------------
                                       (Signature)

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement or any change whatever.]**

--------
** Insert in Definitive Securities only.

                                      A-8

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