Document:

<PAGE>
                                                                    EXHIBIT 10.3

                              WAIVER AND AMENDMENT

         THIS WAIVER AND AMENDMENT ("Waiver"), dated effective as of March 18,
2002, is made by and between VENUS EXPLORATION, INC. (the "Borrower"), and
HIBERNIA NATIONAL BANK (the "Lender"), who agree as follows:

                                    RECITALS

         A. Borrower and Lender have heretofore executed a Loan Agreement dated
as of July 6, 2001, as amended by a Waiver and Amendment dated as of December
11, 2001, and an Amendment to Loan Agreement and to Note dated as of January 29,
2002 (as amended, the "Loan Agreement").

         B. The Borrower has requested that the Lender waive certain financial
covenants for the period ending December 31, 2001.

         C. The Lender is willing to accept the Borrower's request on the terms
and conditions set forth below.

         D. Capitalized terms used herein, and not otherwise defined herein,
shall have the meanings defined in the Loan Agreement.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the mutual covenants and
undertakings, the parties hereby agree as follows:

                                    ARTICLE 1
                                     WAIVER

         1.1 The Borrower has advised the Lender that notwithstanding the
provisions of Section 5.15(a), (b) and (c) of the Loan Agreement, requiring a
minimum current ratio, a minimum net worth and a minimum EBITDAX to interest
expense ratio for the fiscal quarter ended December 31, 2001, in fact the
Borrower's financial condition failed to meet each of those requirements. At the
Borrower's request, Lender hereby grants a one-time waiver of the minimum
current ratio covenant, the minimum net worth covenant and the minimum EBITDAX
to interest expense ratio covenant in Section 5.15(a), (b) and (c) for the
fiscal quarter ended December 31, 2001. Such waiver shall not constitute either
an amendment of the Loan Agreement or a precedent for any subsequent requested
waiver of these or any other covenants or other provision of the Loan Agreement.
Without limiting the preceding sentence, the Borrower specifically acknowledges
that the minimum current ratio requirement, the minimum net worth requirement
and the minimum EBITDAX to interest expense ratio requirement for the fiscal
quarter to end March 31, 2002, are not waived by the Lender.

<PAGE>

                                    ARTICLE 2
                                     AMOUNT

         2.1 In consideration of the granting of the waiver set forth above, the
Borrower and the Lender agree that the definition of "Amount" in Loan Agreement
Section 1.2, as previously amended by paragraph 2.1 of the Waiver and Amendment
dated effective as of December 11, 2001, is hereby amended and restated to read
in its entirety as follows:

             "Amount" shall mean, effective as of March 18, 2002, nine hundred
             thirty eight thousand four hundred fifty three and 91/100ths
             ($938,453.91) dollars, subject to further reduction as provided in
             the following sentences. The Borrower and the Lender agree that
             upon the expiration on April 1 of the $100,000.00 standby letter of
             credit issued by the Lender to Enron for the account of the
             Borrower as a portion of the line of credit availability, such
             letter of credit shall not be renewed and the Amount shall
             thereafter be reduced on April 2 by that $100,000.00 portion of the
             line of credit availability. Furthermore, the Borrower and the
             Lender agree that the Amount shall be automatically reduced by the
             Monthly Borrowing Base Reduction of $50,000.00 commencing on March
             31, 2002, and continuing on the last day of each successive month.
             (For the avoidance of doubt, the Borrower and the Lender agree that
             although the definition of "Monthly Borrowing Base Reduction" by
             its terms applies only to an automatic monthly reduction to the
             Borrowing Base, the Monthly Borrowing Base Reduction of $50,000.00
             shall also be an amount of an automatic monthly reduction to the
             Amount.) Accordingly, by example, on April 2, 2002, the Amount
             shall be seven hundred eighty eight thousand four hundred fifty
             three and 91/100ths ($788,453.91) dollars.

         2.2 The Borrower acknowledges that as of March 14, 2002, the Borrowing
Base is limited to an amount not to exceed nine hundred thirty eight thousand
four hundred fifty three and 91/100ths ($938,453.91) dollars. As provided in
Loan Agreement Subsection 2.4(c), this Borrowing Base amount shall be subject to
the automatic Monthly Borrowing Base Reductions continuing on March 31, 2002,
and continuing on the last day of each successive month. Furthermore, upon the
expiration of the line of credit described in paragraph 2.1 of this Waiver, the
Borrower acknowledges that the Borrowing Base shall be reduced by $100,000.00 on
April 2, 2002. In addition, as provided in the Loan Agreement the Borrowing Base
may be further revised by Lender in its sole discretion from time to time.
Without limiting the foregoing, the Borrower acknowledges that the Lender may
consider the status of the Borrower's accounts payable, the title opinions
submitted to the Lender, and all of the other facts and matters set forth in a
definition of "Borrower Base" in the Loan Agreement.

<PAGE>

                                    ARTICLE 3
                                       FEE

         3.1 In further consideration of the granting of the waiver set forth
above, the Borrower shall pay the Lender a waiver fee in the amount equal to
four thousand ($4,000.00) dollars immediately upon execution of this Waiver by
the Lender.

                                    ARTICLE 4
                          ACKNOWLEDGMENT OF COLLATERAL

         4.1 Borrower hereby specifically reaffirms all of the Collateral
Documents.

                                    ARTICLE 5
                                  MISCELLANEOUS

         5.1 The Borrower represents and warrants to the Lender (which
representations and warranties will survive the execution of this Waiver) that
(i) all representations and warranties contained in the Loan Agreement and the
Collateral Documents are true and correct on and as of the date hereof as though
made on and as of such date, (ii) no event has occurred and is continuing as of
the date hereof which constitutes a Default or Event of Default (taking into
account the specific waiver set forth in paragraph 1.1 in this Waiver), and
(iii) there is no defense, offset, compensation, counterclaim or reconventional
demand with respect to amounts due under, or performance of, the terms of the
Note. To the extent any such defense, offset, compensation, counterclaim or
reconventional demand or other causes of action by the Borrower against the
Lender might exist, whether known or unknown, such items are hereby waived by
the Borrower.

<PAGE>
         5.2 Borrower hereby and forever settles, compromises, transacts,
satisfies, waives, releases, acquits, discharges, surrenders and cancels any and
all Claims (as defined hereinafter) against the Lender, its insurers or
insureds, subrogors or subrogees, assignors or assignees, nominees,
representatives, joint venturers, directors, officers, agents, employees,
attorneys, shareholders, principals, parent companies, subsidiary companies,
other affiliates, and any other person or entity which has or might have
derivative, secondary or vicarious liability for their acts or omissions whose
rights are derived from them (all of such released parties being collectively
referred to as the "Released Parties"), it being hereby specifically agreed and
understood that the execution of this Waiver is not to be construed as an
acknowledgment or admission of any fact of any liability or responsibility by
the Lender, and the Lender hereby expressly denies any liability to the
Borrower. For the purpose of this Agreement, "Claims" shall mean (i) any and all
claims, demands, losses, damages, causes of action, and rights of action
whatsoever, liquidated or unliquidated, choate or inchoate, matured or
unmatured, contingent or exigible, asserted or unasserted, direct or indirect,
known or unknown, anticipated or unanticipated, arising before or on the date of
the Borrower's execution hereof whether based upon tort, negligence, intentional
conduct, contract, equity, bankruptcy, indemnity, contribution, reimbursement,
unjust enrichment, and/or any other legal theory, which any party may be
entitled to in any way, and (ii) arising out of or relating to the Loan
Agreement, the Note and the Collateral Documents from time to time executed in
connection therewith (collectively the "Loan Documents"), but (iii) excluding
any Claims (as defined in preceding clauses (i) and (ii)) against the Released
Parties based upon fraudulent or dishonest acts of the Lender, and Claims to
require the Released Parties to perform any contractual undertakings under the
Loan Documents.

         5.3 Subject to the specific waiver set forth in paragraph 1.1 of this
Waiver and the provisions contained in this Waiver, all terms and provisions of
the Loan Agreement and Note are hereby ratified and confirmed, and shall be and
shall remain in full force and effect, enforceable in accordance with their
terms.

         5.4. THIS WAIVER IS A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA AND THE
STATE OF LOUISIANA.

         5.5 This Waiver may be executed in any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one in
the same instrument.

         IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed as of the date first above written.

BORROWER:                                    VENUS EXPLORATION, INC.

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

LENDER:                                      HIBERNIA NATIONAL BANK

                                             By:
                                                -------------------------------
                                                Name:
                                                Title:<PAGE>
                                                                    EXHIBIT 10.1

                            ATMOS ENERGY CORPORATION

                          1998 LONG-TERM INCENTIVE PLAN

                           EFFECTIVE: OCTOBER 1, 1998
                   (AS AMENDED AND RESTATED FEBRUARY 14, 2002)

<PAGE>
                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                        PAGE
                                                                                                        ----
<S>                  <C>                                                                                 <C>
ARTICLE 1            PURPOSE..............................................................................1

ARTICLE 2            DEFINITIONS..........................................................................2

ARTICLE 3            ADMINISTRATION.......................................................................8

ARTICLE 4            ELIGIBILITY..........................................................................9

ARTICLE 5            SHARES SUBJECT TO PLAN...............................................................9

ARTICLE 6            GRANT OF AWARDS.....................................................................10
                             6.1   In General............................................................10
                             6.2   Maximum ISO Grants....................................................10
                             6.3   Maximum Individual Grants.............................................10
                             6.4   Restricted Stock/Restricted Stock Units...............................10
                             6.5   SAR...................................................................13
                             6.6   Tandem Awards.........................................................13
                             6.7   Performance Based Awards..............................................13
                             6.8   Bonus Stock...........................................................14
                             6.9   Other Stock Based Awards..............................................15

ARTICLE 7            OPTION PRICE; SAR PRICE.............................................................16

ARTICLE 8            AWARD PERIOD; VESTING...............................................................16
                             8.1   Award Period..........................................................16
                             8.2   Vesting...............................................................17

ARTICLE 9            TERMINATION OF SERVICE..............................................................17

ARTICLE 10           EXERCISE OF INCENTIVE...............................................................17
                              10.1   In General..........................................................17
                              10.2   Disqualifying Disposition of ISO....................................19

ARTICLE 11           SPECIAL PROVISIONS APPLICABLE TO COVERED PARTICIPANTS...............................20

ARTICLE 12           AMENDMENT OR DISCONTINUANCE.........................................................22

ARTICLE 13           TERM................................................................................23
</Table>

                                        i
<PAGE>

<Table>
<S>                  <C>                                                                                <C>
ARTICLE 14           CAPITAL ADJUSTMENTS.................................................................23

ARTICLE 15           RECAPITALIZATION, MERGER AND CONSOLIDATION; CHANGE IN CONTROL.......................24

ARTICLE 16           LIQUIDATION OR DISSOLUTION..........................................................26

ARTICLE 17           INCENTIVES IN SUBSTITUTION FOR INCENTIVES GRANTED BY OTHER CORPORATIONS.............26

ARTICLE 18           MISCELLANEOUS PROVISIONS............................................................27
                             18.1   Investment Intent....................................................27
                             18.2   No Right to Continued Employment.....................................27
                             18.3   Indemnification of Board and Committee...............................27
                             18.4   Effect of the Plan...................................................27
                             18.5   Compliance With Other Laws and Regulations...........................27
                             18.6   Tax Requirements.....................................................28
                             18.7   Assignability........................................................28
                             18.8   Use of Proceeds......................................................29
                             18.9   Governing Law........................................................29
                             18.10  Successors and Assigns...............................................29
                             18.11  Effective Date.......................................................29
                             18.12  Legend...............................................................29
</Table>

                                       ii
<PAGE>

                            ATMOS ENERGY CORPORATION
                          1998 LONG-TERM INCENTIVE PLAN
                   (AS AMENDED AND RESTATED FEBRUARY 14, 2002)

         The Atmos Energy Corporation 1998 Long-Term Incentive Plan (hereinafter
called the "Plan") was adopted by the Board of Directors of Atmos Energy
Corporation, a Texas and Virginia corporation (hereinafter called the "Company")
on August 12, 1998 to be effective October 1, 1998, and was approved by the
Company's shareholders on February 10, 1999. The Plan was amended by the Board
of Directors on August 8, 2001 to provide for an increase of 2,500,000
additional shares available for issuance under the Plan, which amendment was
approved by the Company's shareholders on February 13, 2002.

                                    ARTICLE 1

                                     PURPOSE

         The purpose of the Plan is to attract and retain the services of able
persons as employees of the Company and its Subsidiaries and as Non-employee
Directors (as herein defined), to provide such persons with a proprietary
interest in the Company through the granting of incentive stock options,
non-qualified stock options, stock appreciation rights, or restricted stock, and
to motivate employees and Non-employee Directors using performance-related
incentives linked to longer-range performance goals and the interests of the
Company's shareholders, whether granted singly, or in combination, or in tandem,
that will

                  (a) increase the interest of such persons in the Company's
         welfare;

                  (b) furnish an incentive to such persons to continue their
         services for the Company; and

                  (c) provide a means through which the Company may attract able
         persons as employees and Non-employee Directors.

         With respect to Reporting Participants, the Plan and all transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (the "1934 Act"). To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void ab initio, to the extent permitted by
law and deemed advisable by the Committee. Further, any Awards granted

1

<PAGE>

under the Plan to a Non-employee Director shall be solely to compensate said
Director for his services to the Company as a Non-employee Director.

                                    ARTICLE 2

                                   DEFINITIONS

         For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:

         2.1 "Award" means the grant of any Incentive Stock Option,
Non-qualified Stock Option, SAR, Restricted Stock, Restricted Stock Unit,
Performance Unit, Performance Share, Bonus Stock or other Stock Unit Award
whether granted singly, in combination or in tandem (each individually referred
to herein as an "Incentive"). "Award" also means any Incentive to which an award
under the Management Incentive Plan is made or converted.

         2.2 "Award Agreement" means a written agreement between a Participant
and the Company, which sets out the terms of the grant of an Award.

         2.3 "Award Period" means the period during which one or more Incentives
granted under an Award may be exercised or earned.

         2.4 "Board" means the Board of Directors of the Company.

         2.5 "Bonus Stock" means an Award granted pursuant to Section 6.8 of the
Plan expressed as a share of Common Stock which may or may not be subject to
restrictions.

         2.6 (a) "Change in Control" of the Company shall be deemed to have
occurred if:

                  (i) Any "Person" (as defined in Section 2.6(b)(i) below),
         other than (1) the Company or any of its Subsidiaries, (2) a trustee or
         other fiduciary holding securities under an employee benefit plan of
         the Company or any of its Affiliates, (3) an underwriter temporarily
         holding securities pursuant to an offering of such securities, or (4) a
         corporation owned, directly or indirectly, by the shareholders of the
         Company in substantially the same proportions as their ownership of
         stock of the Company, is or becomes the "beneficial owner" (as defined
         in Section 2.6(b)(ii) below), directly or indirectly, of securities of
         the Company (not including in the securities

                                       2

<PAGE>

         beneficially owned by such person any securities acquired directly from
         the Company or its Affiliates) representing 33-1/3% or more of the
         combined voting power of the Company's then outstanding securities, or
         33-1/3% or more of the then outstanding common stock of the Company,
         excluding any Person who becomes such a beneficial owner in connection
         with a transaction described in subparagraph (iii)(A) below.

                  (ii) During any period of two consecutive years (the
         "Period"), individuals who at the beginning of the Period constitute
         the Board of Directors of the Company and any "new director" (as
         defined in Section 2.6(b)(iii) below) cease for any reason to
         constitute a majority of the Board of Directors.

                  (iii) There is consummated a merger or consolidation of the
         Company or any direct or indirect subsidiary of the Company with any
         other corporation, except if:

                           (A) the merger or consolidation would result in the
                  voting securities of the Company outstanding immediately prior
                  thereto continuing to represent (either by remaining
                  outstanding or by being converted into voting securities of
                  the surviving entity or any parent thereof) at least sixty
                  percent (60%) of the combined voting power of the voting
                  securities of the Company or such surviving entity or any
                  parent thereof outstanding immediately after such merger or
                  consolidation; or

                           (B) the merger or consolidation is effected to
                  implement a recapitalization of the Company (or similar
                  transaction) in which no Person is or becomes the beneficial
                  owner, directly or indirectly, of securities of the Company
                  (not including in the securities beneficially owned by such
                  Person any securities acquired directly from the Company or
                  its Affiliates other than in connection with the acquisition
                  by the Company or its Affiliates of a business) representing
                  60% or more of the combined voting power of the Company's then
                  outstanding securities;

                                      3
<PAGE>

                  (iv) The shareholders of the Company approve a plan of
         complete liquidation or dissolution of the Company or an agreement for
         the sale or disposition by the Company of all or substantially all the
         Company's assets, other than a sale or disposition by the Company of
         all or substantially all of the Company's assets to an entity, at least
         60% of the combined voting power of the voting securities of which are
         owned by the stockholders of the Company in substantially the same
         proportions as their ownership of the Company immediately prior to such
         sale.

         (b) Definitions. For purposes of Section 2.6(a) above,

                  (i) "Person" shall have the meaning given in Section 3(a)(9)
         of the 1934 Act as modified and used in Sections 13(d) and 14(d) of the
         1934 Act.

                  (ii) "Beneficial owner" shall have the meaning provided in
         Rule 13d-3 under the 1934 Act.

                  (iii) "New director" shall mean an individual whose election
         by the Company's Board of Directors or nomination for election by the
         Company's shareholders was approved by a vote of at least two-thirds
         (2/3) of the directors then still in office who either were directors
         at the beginning of the Period or whose election or nomination for
         election was previously so approved or recommended. However, "new
         director" shall not include a director whose initial assumption of
         office is in connection with an actual or threatened election contest,
         including but not limited to a consent solicitation relating to the
         election of directors of the Company.

                  (iv) "Affiliate" shall have the meaning set forth in Rule
         12b-2 promulgated under Section 12 of the 1934 Act.

         2.7 "Code" means the Internal Revenue Code of 1986, as amended,
together with the published rulings, regulations, and interpretations duly
promulgated thereunder.

         2.8 "Committee" means the committee appointed or designated by the
Board to administer the Plan in accordance with Article 3 of this Plan.

         2.9 "Common Stock" means the common stock, with no par value (stated
value of $.005 per share), which the Company is currently authorized to issue or
may in the future be authorized to issue.

                                       4
<PAGE>

         2.10 "Company" means Atmos Energy Corporation, a Texas and Virginia
corporation, and any successor entity.

         2.11 "Covered Participant" means a Participant who is a "covered
employee" as defined in Section 162(m)(3) of the Code, and the regulations
promulgated thereunder, or who the Committee believes will be such a covered
employee for a Performance Period, and who the Committee believes will have
remuneration in excess of $1,000,000 for the Performance Period, as provided in
Section 162(m) of the Code.

         2.12 "Date of Grant" means the effective date on which an Award is made
to a Participant as set forth in the applicable Award Agreement; provided,
however, that solely for purposes of Section 16 of the 1934 Act and the rules
and regulations promulgated thereunder, the Date of Grant of an Award shall be
the date of stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.

         2.13 "Employee" means common law employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section 3401(c)
of the Code) of the Company or any Subsidiary of the Company.

         2.14 "Fair Market Value" of a share of Common Stock is the mean of the
highest and lowest prices per share on the New York Stock Exchange Consolidated
Tape, or such reporting service as the Board may select, on the appropriate
date, or in the absence of reported sales on such day, the most recent previous
day for which sales were reported.

         2.15 "Incentive Stock Option" or "ISO" means an incentive stock option
within the meaning of Section 422 of the Code, granted pursuant to this Plan.

         2.16 "Management Incentive Plan" means the Atmos Energy Corporation
Annual Incentive Plan for Management, as amended from time to time.

         2.17 "Non-employee Director" means a member of the Board who is not an
Employee and who satisfies the requirements of Rule 16b-3(b)(3) promulgated
under the 1934 Act or any successor provision.

         2.18 "Non-qualified Stock Option" or "NQSO" means a non-qualified stock
option, granted pursuant to this Plan.

         2.19 "Option Price" means the price which must be paid by a Participant
upon exercise of a Stock Option to purchase a share of Common Stock.

                                       5
<PAGE>

         2.20 "Participant" shall mean an Employee or Non-employee Director to
whom an Award is granted under this Plan.

         2.21 "Performance Award" means a performance-based Award, which may be
in the form of either Performance Shares or Performance Units.

         2.22 "Performance Criteria" or "Performance Goals" or "Performance
Measures" mean the objectives established by the Committee for a Performance
Period, for the purpose of determining when an Award subject to such objectives
is earned.

         2.23 "Performance Period" means the time period designated by the
Committee during which performance goals must be met.

         2.24 "Performance Share" means an Award, designated as a Performance
Share, granted to a Participant pursuant to Section 6.7 hereof, the value of
which is determined, in whole or in part, by the value of Common Stock in a
manner deemed appropriate by the Committee and described in the Agreement.

         2.25 "Performance Unit" means an Award, designated as a Performance
Unit, granted to a Participant pursuant to Section 6.7 hereof, the value of
which is determined, in whole or in part, by the attainment of pre-established
goals relating to Company financial or operating performance as deemed
appropriate by the Committee and described in the Award Agreement.

         2.26 "Plan" means The Atmos Energy Corporation 1998 Long-Term Incentive
Plan, as amended from time to time.

         2.27 "Reporting Participant" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.

         2.28 "Restricted Stock" means shares of Common Stock issued or
transferred to a Participant pursuant to Section 6.4 of this Plan which are
subject to restrictions or limitations set forth in this Plan and in the related
Award Agreement.

         2.29 "Restricted Stock Unit" means a fixed or variable dollar
denominated right to acquire Common Stock, which may or may not be subject to
restrictions, contingently awarded under Section 6.4 of the Plan.

         2.30 "Retirement" means any Termination of Service solely due to
retirement upon attainment of age 65, or permitted early retirement as
determined by the Committee.

                                       6
<PAGE>

         2.31 "SAR" means the right to receive a payment, in cash and/or
Common Stock, equal to the excess of the Fair Market Value of a specified number
of shares of Common Stock on the date the SAR is exercised over the SAR Price
for such shares.

         2.32 "SAR Price" means the Fair Market Value of each share of Common
Stock covered by an SAR, determined on the Date of Grant of the SAR.

         2.33 "Stock Option" means a Non-qualified Stock Option or an Incentive
Stock Option.

         2.34 "Stock Unit Award" means awards of Common Stock or other awards
pursuant to Section 6.9 hereof that are valued in whole or in part by reference
to, or are otherwise based on, shares of Common Stock or other securities of the
Company.

         2.35 "Subsidiary" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the partners or members
thereof are composed only of the Company, any corporation listed in item (i)
above or any limited partnership listed in item (ii) above. "Subsidiaries" means
more than one of any such corporations, limited partnerships, partnerships or
limited liability companies.

         2.36 "Termination of Service" occurs when a Participant who is an
Employee or Non-employee Director shall cease to serve as an Employee or
Non-employee Director for any reason.

         2.37 "Total and Permanent Disability" means a Participant is qualified
for long-term disability benefits under The Atmos Energy Corporation Group
Long-Term Disability Plan as in effect from time to time; or, if such Plan is
not then in existence, that the Participant, because of ill health, physical or
mental disability or any other reason beyond his or her control, is unable to
perform his or her duties of employment for a period of six (6) continuous
months, as determined in good faith by the Committee; provided that, with
respect to any Incentive Stock Option, Total and Permanent Disability shall have
the meaning given it under the rules governing Incentive Stock Options under the
Code.

                                       7
<PAGE>
                                    ARTICLE 3

                                 ADMINISTRATION

         The Plan shall be administered by the Human Resources Committee of the
Board (the "Committee") unless otherwise determined by the Board. If said Human
Resources Committee does not so serve, the Committee shall consist of not fewer
than two persons; any member of the Committee may be removed at any time, with
or without cause, by resolution of the Board; and any vacancy occurring in the
membership of the Committee may be filled by appointment by the Board.

         All actions to be taken by the Committee under this Plan, insofar as
such actions affect compliance with Section 162(m) of the Code, shall be limited
to those members of the Board who are Non-employee Directors and who are
"outside directors" under Section 162(m). The Committee shall select one of its
members to act as its Chairman. A majority of the Committee shall constitute a
quorum, and the act of a majority of the members of the Committee present at a
meeting at which a quorum is present shall be the act of the Committee.

         The Committee shall determine and designate from time to time the
eligible persons to whom Awards will be granted and shall set forth in each
related Award Agreement the Award Period, the Date of Grant, and such other
terms, provisions, limitations, and performance requirements, as are approved by
the Committee, but not inconsistent with the Plan, including, but not limited
to, any rights of the Committee to cancel or rescind any such Award. The
Committee shall determine whether an Award shall include one type of Incentive,
two or more Incentives granted in combination, or two or more Incentives granted
in tandem (that is, a joint grant where exercise of one Incentive results in
cancellation of all or a portion of the other Incentive).

         The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and (iii) make such other determinations and
take such other action as it deems necessary or advisable in the administration
of the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.

         With respect to restrictions in the Plan that are based on the
requirements of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the
Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer
quotation system upon which the Company's securities are listed or quoted, or
any other applicable law, rule or restriction (collectively, "applicable law"),
to the extent that any such restrictions are no longer required by applicable
law,

                                        8
<PAGE>

the Committee shall have the sole discretion and authority to grant Awards
that are not subject to such mandated restrictions and/or to waive any such
mandated restrictions with respect to outstanding Awards.

                                    ARTICLE 4

                                   ELIGIBILITY

         Any Employee (including an Employee who is also a director or an
officer) and any Non-employee Director is eligible to participate in the Plan.
The Committee, upon its own action, may grant, but shall not be required to
grant, an Award to any Employee or any Non-employee Director. Awards may be
granted by the Committee at any time and from time to time to new Participants,
or to then Participants, or to a greater or lesser number of Participants, and
may include or exclude previous Participants, as the Committee shall determine.
Except as required by this Plan, different Awards need not contain similar
provisions. The Committee's determinations under the Plan (including without
limitation determinations of which Employees or Non-employee Directors, if any,
are to receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the agreements evidencing same) need not be
uniform and may be made by it selectively among Employees and Non-employee
Directors who receive, or are eligible to receive, Awards under the Plan.

                                    ARTICLE 5

                             SHARES SUBJECT TO PLAN

         Subject to adjustment as provided in Articles 14 and 15, the maximum
number of shares of Common Stock that may be delivered pursuant to Awards
granted under the Plan is (a) 4,000,000 shares; plus (b) shares of Common Stock
previously subject to Awards which are forfeited, terminated, cancelled or
rescinded, settled in cash in lieu of Common Stock, or exchanged for Awards that
do not involve Common Stock, or expired unexercised.

         Shares to be issued may be made available from authorized but unissued
Common Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the Company on the open market or otherwise. During the term of
this Plan, the Company will at all times reserve and keep available the number
of shares of Common Stock that shall be sufficient to satisfy the requirements
of this Plan.

                                       9

<PAGE>
                                    ARTICLE 6

                                 GRANT OF AWARDS

         6.1 IN GENERAL. The grant of an Award shall be authorized by the
Committee and shall be evidenced by an Award Agreement setting forth the
Incentive or Incentives being granted, the total number of shares of Common
Stock subject to the Incentive(s), the Option Price (if applicable), the Award
Period, the Date of Grant, and such other terms, provisions, limitations, and
performance objectives, as are approved by the Committee, but not inconsistent
with the Plan. The Company shall execute an Award Agreement with a Participant
after the Committee approves the issuance of an Award. Any Award granted
pursuant to this Plan must be granted within ten (10) years of the date of
adoption of this Plan. The grant of an Award to a Participant shall not be
deemed either to entitle the Participant to, or to disqualify the Participant
from, receipt of any other Award under the Plan.

         If the Committee establishes a purchase price for an Award, the
Participant must accept such Award within a period of 30 days (or such shorter
period as the Committee may specify) after the Date of Grant by executing the
applicable Award Agreement and paying such purchase price.

         6.2 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant) of the Common Stock with respect
to which Incentive Stock Options (under this and any other plan of the Company
and its Subsidiaries) are exercisable for the first time by such Employee during
any calendar year to exceed $100,000. To the extent any Stock Option granted
under this Plan, which is designated as an Incentive Stock Option exceeds this
limit or otherwise fails to qualify as an Incentive Stock Option, such Stock
Option shall be a Non-qualified Stock Option. The Committee may not grant
Incentive Stock Options to Non-employee Directors.

         6.3 MAXIMUM INDIVIDUAL GRANTS. No Participant may receive during any
fiscal year of the Company Awards of Stock Options and SARs covering an
aggregate of more than five hundred thousand (500,000) shares of Common Stock.

         6.4 RESTRICTED STOCK/RESTRICTED STOCK UNITS. If Restricted Stock and/or
Restricted Stock Units are granted to a Participant under an Award, the
Committee shall set forth in the related Award Agreement: (i) the number of
shares of Common Stock and/or the number of Restricted Stock Units awarded, (ii)
the price, if any, to be paid by the Participant for such Restricted Stock
and/or Restricted Stock Units, (iii) the time or times within which such Award
may be subject to forfeiture, (iv) specified Performance Goals

                                       10
<PAGE>

of the Company, a Subsidiary, any division thereof or any group of Employees of
the Company, or other criteria, which the Committee determines must be met in
order to remove any restrictions (including vesting) on such Award, and (v) all
other terms, limitations, restrictions, and conditions of the Restricted Stock
and/or Restricted Stock Units, which shall be consistent with this Plan. The
provisions of Restricted Stock and/or Restricted Stock Units need not be the
same with respect to each Participant.

                  (a) Legend on Shares. Each Participant who is awarded
         Restricted Stock shall be issued a stock certificate or certificates in
         respect of such shares of Common Stock. Such certificate(s) shall be
         registered in the name of the Participant, and shall bear an
         appropriate legend referring to the terms, conditions, and restrictions
         applicable to such Restricted Stock, substantially as provided in
         Section 18.12 of the Plan. The Committee may require that the stock
         certificates evidencing shares of Restricted Stock be held in custody
         by the Company until the restrictions thereon shall have lapsed, and
         that the Participant deliver to the Committee a stock power or stock
         powers, endorsed in blank, relating to the shares of Restricted Stock.

                  (b) Restrictions and Conditions. Shares of Restricted Stock
         and Restricted Stock Units shall be subject to the following
         restrictions and conditions:

                           (i) Subject to the other provisions of this Plan and
                  the terms of the particular Award Agreements, during such
                  period as may be determined by the Committee commencing on the
                  Date of Grant (the "Restriction Period"), the Participant
                  shall not be permitted to sell, transfer, pledge or assign
                  shares of Restricted Stock and/or Restricted Stock Units.
                  Except for these limitations, the Committee may in its sole
                  discretion, remove any or all of the restrictions on such
                  Restricted Stock and/or Restricted Stock Units whenever it may
                  determine that, by reason of changes in applicable laws or
                  other changes in circumstances arising after the date of the
                  Award, such action is appropriate.

                           (ii) Except as provided in subparagraph (i) above,
                  the Participant shall have, with respect to his or her
                  Restricted Stock, all of the rights of a stockholder of the
                  Company, including the right to vote the shares, and the right
                  to receive any dividends thereon. Certificates for shares of
                  Common Stock free of restriction under this Plan shall be
                  delivered to the Participant promptly after, and

                                       11
<PAGE>
                  only after, the Restriction Period shall expire without
                  forfeiture in respect of such shares of Common Stock.
                  Certificates for the shares of Common Stock forfeited under
                  the provisions of the Plan and the applicable Award Agreement
                  shall be promptly returned to the Company by the forfeiting
                  Participant. Each Award Agreement shall require that (x) each
                  Participant, by his or her acceptance of Restricted Stock,
                  shall irrevocably grant to the Company a power of attorney to
                  transfer any shares so forfeited to the Company and agrees to
                  execute any documents requested by the Company in connection
                  with such forfeiture and transfer, and (y) such provisions
                  regarding returns and transfers of stock certificates with
                  respect to forfeited shares of Common Stock shall be
                  specifically performable by the Company in a court of equity
                  or law.

                           (iii) The Restriction Period of Restricted Stock
                  and/or Restricted Stock Units shall commence on the Date of
                  Grant and, subject to Article 15 of the Plan, unless otherwise
                  established by the Committee in the Award Agreement setting
                  forth the terms of the Restricted Stock and/or Restricted
                  Stock Units, shall expire upon satisfaction of the conditions
                  set forth in the Award Agreement; such conditions may provide
                  for vesting based on (i) length of continuous service, (ii)
                  achievement of specific business objectives, (iii) increases
                  in specified indices, (iv) attainment of specified growth
                  rates, or (v) other comparable Performance Measurements, as
                  may be determined by the Committee in its sole discretion.

                           (iv) Subject to the provisions of the particular
                  Award Agreement, upon Termination of Service for any reason
                  during the Restriction Period, the nonvested shares of
                  Restricted Stock and/or Restricted Stock Units shall be
                  forfeited by the Participant. In the event a Participant has
                  paid any consideration to the Company for such forfeited
                  Restricted Stock and/or Restricted Stock Units, the Company
                  shall, as soon as practicable after the event causing
                  forfeiture (but in any event within 5 business days), pay to
                  the Participant, in cash, an amount equal to the total
                  consideration paid by the Participant for such forfeited
                  shares and/or units. Upon any forfeiture, all rights of a
                  Participant with respect to the forfeited shares of the
                  Restricted Stock shall cease and terminate, without any
                  further obligation on the part of the Company.

                                       12
<PAGE>

         6.5 SAR. An SAR shall entitle the Participant at his election to
surrender to the Company the SAR, or portion thereof, as the Participant shall
choose, and to receive from the Company in exchange therefor cash in an amount
equal to the excess (if any) of the Fair Market Value (as of the date of the
exercise of the SAR) per share over the SAR Price per share specified in such
SAR, multiplied by the total number of shares of the SAR being surrendered. In
the discretion of the Committee, the Company may satisfy its obligation upon
exercise of an SAR by the distribution of that number of shares of Common Stock
having an aggregate Fair Market Value (as of the date of the exercise of the
SAR) equal to the amount of cash otherwise payable to the Participant, with a
cash settlement to be made for any fractional share interests, or the Company
may settle such obligation in part with shares of Common Stock and in part with
cash.

         6.6 TANDEM AWARDS. The Committee may grant two or more Incentives in
one Award in the form of a "tandem award," so that the right of the Participant
to exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and an SAR are issued in
a tandem Award, and the Participant exercises the SAR with respect to 100 shares
of Common Stock, the right of the Participant to exercise the related Stock
Option shall be canceled to the extent of 100 shares of Common Stock.

         6.7 PERFORMANCE BASED AWARDS.

                  (a) Grant of Performance Awards. The Committee may issue
         Performance Awards in the form of either Performance Units or
         Performance Shares to Participants subject to the Performance Goals and
         Performance Period as it shall determine. The terms and conditions of
         each Performance Award will be set forth in the related Award
         Agreement. The Committee shall have complete discretion in determining
         the number and value of Performance Units or Performance Shares granted
         to each Participant. Participants receiving Performance Awards are not
         required to pay the Company thereof (except for applicable tax
         withholding) other than the rendering of services.

                  (b) Value of Performance Awards. The Committee shall set
         performance goals in its discretion for each Participant who is granted
         a Performance Award. Such Performance Goals may be particular to a
         Participant, may relate to the performance of the Subsidiary which
         employs him or her, may be based on the division which employs him or
         her, may be based on the performance of the Company generally, or a
         combination of the foregoing. The Performance Goals may be based on
         achievement of balance sheet or income statement objectives, or any
         other

                                       13
<PAGE>

         objectives established by the Committee. The Performance Goals may be
         absolute in their terms or measured against or in relationship to other
         companies comparably, similarly or otherwise situated. The extent to
         which such Performance Goals are met will determine the value of the
         Performance Unit or Performance Share to the Participant.

                  (c) Form of Payment. Payment of the amount to which a
         Participant shall be entitled upon the settlement of a Performance
         Award shall be made in a lump sum or installments in cash, shares of
         Common Stock, or a combination thereof as determined by the Committee.

         6.8 BONUS STOCK. The Committee may award shares of Bonus Stock to
Participants under the Plan without cash consideration. The Committee shall
determine and indicate in the related Award Agreement whether such shares of
Bonus Stock awarded under the Plan shall be unencumbered of any restrictions
(other than those advisable to comply with law) or shall be subject to
restrictions and limitations similar to those referred to in Section 6.7 hereof.
In the event the Committee assigns any restrictions on the shares of Bonus Stock
awarded under the Plan, then such shares shall be subject to at least the
following restrictions:

                  (a) No shares of Bonus Stock may be sold, transferred,
         pledged, assigned or otherwise alienated or hypothecated if such shares
         are subject to restrictions which have not lapsed or have not been
         vested.

                  (b) If any condition of vesting of the shares of Bonus Stock
         are not met, all such shares subject to such vesting shall be delivered
         to the Company (in a manner determined by the Committee) within 60 days
         of the failure to meet such conditions without any payment from the
         Company.

                                       14
<PAGE>
         6.9 OTHER STOCK BASED AWARDS.

                  (a) Grant of Other Stock Based Awards. The Committee may issue
         to Participants, either alone or in addition to other Awards made under
         the Plan, Stock Unit Awards which may be in the form of Common Stock or
         other securities. The value of each such Award shall be based, in whole
         or in part, on the value of the underlying Common Stock or other
         securities. The Committee, in its sole and complete discretion, may
         determine that an Award, either in the form of a Stock Unit Award under
         this Section 6.9 or as an Award granted pursuant to the other
         provisions of this Article 6, may provide to the Participant (i)
         dividends or dividend equivalents (payable on a current or deferred
         basis) and (ii) cash payments in lieu of or in addition to an Award.
         The Committee shall determine the terms, restrictions, conditions,
         vesting requirements, and payment rules (all of which are sometimes
         hereinafter collectively referred to as "rules") of the Award and shall
         set forth those rules in the related Award Agreement.

                  (b) Rules. The Committee, in its sole and complete discretion,
         may grant a Stock Unit Award subject to the following rules:

                           (i) Common Stock or other securities issued pursuant
                  to Stock Unit Awards may not be sold, transferred, pledged,
                  assigned or otherwise alienated or hypothecated by a
                  Participant until the expiration of at least six months from
                  the Award Date, except that such limitation shall not apply in
                  the case of death or disability of the Participant. To the
                  extent Stock Unit Awards are deemed to be derivative
                  securities within the meaning of Rule 16b-3 under the 1934
                  Act, a Participant's rights with respect to such Awards shall
                  not vest or be exercisable until the expiration of at least
                  six months from the Award Date. To the extent a Stock Unit
                  Award granted under the Plan is deemed to be a derivative
                  security within the meaning of Rule 16b-3 under the 1934 Act,
                  it may not be sold, transferred, pledged, assigned, or
                  otherwise alienated or hypothecated, otherwise than by will or
                  by laws of descent and distribution. All rights with respect
                  to such Stock Unit Awards granted to a Participant under the
                  Plan shall be exercisable during his or her lifetime only by
                  such Participant or his or her guardian or legal
                  representative.

                                       15
<PAGE>
                           (ii) Stock Unit Awards may require the payment of
                  cash consideration by the Participant in receipt of the Award
                  or provide that the Award, and any Common Stock or other
                  securities issued in conjunction with the Award be delivered
                  without the payment of cash consideration.

                           (iii) The Committee, in its sole and complete
                  discretion, may establish certain Performance Criteria that
                  may relate in whole or in part to receipt of the Stock Unit
                  Awards.

                           (iv) Stock Unit Awards may be subject to a deferred
                  payment schedule and/or vesting over a specified employment
                  period.

                           (v) The Committee as a result of certain
                  circumstances, may waive or otherwise remove, in whole or in
                  part, any restriction or condition imposed on a Stock Unit
                  Award at the time of Award.

                                    ARTICLE 7

                             OPTION PRICE; SAR PRICE

         The Option Price for any share of Common Stock which may be purchased
under a Stock Option and the SAR Price for any share of Common Stock subject to
an SAR shall be at least One Hundred Percent (100%) of the Fair Market Value of
the share on the Date of Grant. If an Incentive Stock Option is granted to an
Employee who owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company (or any parent or Subsidiary), the Option Price
shall be at least 110% of the Fair Market Value of the Common Stock on the Date
of Grant.

                                    ARTICLE 8

                              AWARD PERIOD; VESTING

         8.1 AWARD PERIOD. Subject to the other provisions of this Plan,
the Committee may, in its discretion, provide that an Incentive may not be
exercised in whole or in part for any period or periods of time or beyond any
date specified in the Award Agreement. Except as provided in the Award
Agreement, an Incentive may be exercised in whole or in part at any time during
its term. The Award Period for an Incentive shall be reduced or terminated upon
Termination of Service in accordance with this Article 8

                                       16
<PAGE>
and Article 9. No Incentive granted under the Plan may be exercised at any time
after the end of its Award Period. No portion of any Incentive may be exercised
after the expiration of ten (10) years from its Date of Grant. However, if an
Employee owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company (or any parent or Subsidiary) and an Incentive Stock Option
is granted to such Employee, the term of such Incentive Stock Option (to the
extent required by the Code at the time of grant) shall be no more than five (5)
years from the Date of Grant.

         8.2 VESTING. The Committee, in its sole discretion, may determine that
an Incentive will be immediately exercisable, in whole or in part, or that all
or any portion may not be exercised until a date, or dates, subsequent to its
Date of Grant, or until the occurrence of one or more specified events, subject
in any case to the terms of the Plan. If the Committee imposes conditions upon
exercise, then subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of the Incentive may
be exercised.

                                    ARTICLE 9

                             TERMINATION OF SERVICE

         In the event of Termination of Service of a Participant, an Incentive
may only be exercised as determined by the Committee and provided in the Award
Agreement.

                                   ARTICLE 10

                              EXERCISE OF INCENTIVE

         10.1 IN GENERAL. A vested Incentive may be exercised during its
Award Period, subject to limitations and restrictions set forth therein and in
Article 9. A vested Incentive may be exercised at such times and in such amounts
as provided in this Plan and the applicable Award Agreement, subject to the
terms, conditions, and restrictions of the Plan.

         In no event may an Incentive be exercised or shares of Common Stock be
issued pursuant to an Award if a necessary listing or quotation of the shares of
Common Stock on a stock exchange or inter-dealer quotation system or any
registration under state or federal securities laws required under the
circumstances has not been accomplished. No Incentive may be exercised for a
fractional share of Common Stock. The granting of an Incentive shall impose no
obligation upon the Participant to exercise that Incentive.

                                       17
<PAGE>

                  (a) Stock Options. Subject to such administrative regulations
         as the Committee may from time to time adopt, a Stock Option may be
         exercised by the delivery of written notice to the Committee setting
         forth the number of shares of Common Stock with respect to which the
         Stock Option is to be exercised and the date of exercise thereof (the
         "Exercise Date") which shall be at least three (3) days after giving
         such notice unless an earlier time shall have been mutually agreed
         upon. On the Exercise Date, the Participant shall deliver to the
         Company consideration with a value equal to the total Option Price of
         the shares to be purchased, payable as follows: (a) cash, check, bank
         draft, or money order payable to the order of the Company, (b) Common
         Stock (including Restricted Stock) owned by the Participant on the
         Exercise Date, valued at its Fair Market Value on the Exercise Date,
         (c) by delivery (including by FAX) to the Company or its designated
         agent of an executed irrevocable option exercise form together with
         irrevocable instructions from the Participant to a broker or dealer,
         reasonably acceptable to the Company, to sell certain of the shares of
         Common Stock purchased upon exercise of the Stock Option or to pledge
         such shares as collateral for a loan and promptly deliver to the
         Company the amount of sale or loan proceeds necessary to pay such
         purchase price (otherwise known as a "cashless exercise"), and/or (d)
         in any other form of valid consideration that is acceptable to the
         Committee in its sole discretion. In the event that shares of
         Restricted Stock are tendered as consideration for the exercise of a
         Stock Option, a number of shares of Common Stock issued upon the
         exercise of the Stock Option equal to the number of shares of
         Restricted Stock used as consideration therefor shall be subject to the
         same restrictions and provisions as the Restricted Stock so submitted.

                  Upon payment of all amounts due from the Participant, the
         Company shall cause certificates for the Common Stock then being
         purchased to be delivered as directed by the Participant (or the person
         exercising the Participant's Stock Option in the event of his death) at
         its principal business office promptly after the Exercise Date;
         provided that if the Participant has exercised an Incentive Stock
         Option, the Company may at its option retain physical possession of the
         certificate evidencing the shares acquired upon exercise until the
         expiration of the holding periods described in Section 422(a)(1) of the
         Code. The obligation of the Company to deliver shares of Common Stock
         shall, however, be subject to the condition that if at any time the
         Committee shall determine in its discretion that the listing,
         registration, or qualification of the Stock Option or the Common Stock
         upon any

                                       18
<PAGE>

         securities exchange or inter-dealer quotation system or under any state
         or federal law, or the consent or approval of any governmental
         regulatory body, is necessary or desirable as a condition of, or in
         connection with, the Stock Option or the issuance or purchase of shares
         of Common Stock thereunder, the Stock Option may not be exercised in
         whole or in part unless such listing, registration, qualification,
         consent, or approval shall have been effected or obtained free of any
         conditions not acceptable to the Committee.

                  If the Participant fails to pay for any of the Common Stock
         specified in such notice or fails to accept delivery thereof, the
         Participant's right to purchase such Common Stock may be terminated by
         the Company.

                  (b) SARs. Subject to the conditions of this Section 10.1(b)
         and such administrative regulations as the Committee may from time to
         time adopt, an SAR may be exercised by the delivery (including by FAX)
         of written notice to the Committee setting forth the number of shares
         of Common Stock with respect to which the SAR is to be exercised and
         the date of exercise thereof (the "Exercise Date") which shall be at
         least three (3) days after giving such notice unless an earlier time
         shall have been mutually agreed upon. On the Exercise Date, the
         Participant shall receive from the Company in exchange therefor cash in
         an amount equal to the excess (if any) of the Fair Market Value (as of
         the date of the exercise of the SAR) per share of Common Stock over the
         SAR Price per share specified in such SAR, multiplied by the total
         number of shares of Common Stock of the SAR being surrendered. In the
         discretion of the Committee, the Company may satisfy its obligation
         upon exercise of an SAR by the distribution of that number of shares of
         Common Stock having an aggregate Fair Market Value (as of the date of
         the exercise of the SAR) equal to the amount of cash otherwise payable
         to the Participant, with a cash settlement to be made for any
         fractional share interests, or the Company may settle such obligation
         in part with shares of Common Stock and in part with cash.

         10.2 DISQUALIFYING DISPOSITION OF ISO. If shares of Common Stock
acquired upon exercise of an Incentive Stock Option are disposed of by a
Participant prior to the expiration of either two (2) years from the Date of
Grant of such Stock Option or one (1) year from the transfer of shares of Common
Stock to the Participant pursuant to the exercise of such Stock Option, or in
any other disqualifying disposition within the meaning of Section 422 of the
Code, such Participant shall notify the Company in writing of the date and terms
of such disposition. A disqualifying disposition by a Participant shall not

                                       19
<PAGE>
affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.

                                   ARTICLE 11

              SPECIAL PROVISIONS APPLICABLE TO COVERED PARTICIPANTS

         Awards subject to Performance Criteria paid to Covered Participants
under this Plan shall be governed by the conditions of this Section 11 in
addition to the requirements of Sections 6.4, 6.7, 6.8 and 6.9 above. Should
conditions set forth under this Section 11 conflict with the requirements of
Sections 6.4, 6.7, 6.8 and 6.9, the conditions of this Section 11 shall prevail.

                  (a) All Performance Measures, Goals, or Criteria relating to
         Covered Participants for a relevant Performance Period shall be
         established by the Committee in writing prior to the beginning of the
         Performance Period, or by such other later date for the Performance
         Period as may be permitted under Section 162(m) of the Code. The
         Performance Goals may be identical for all Participants or, at the
         discretion of the Committee, may be different to reflect more
         appropriate measures of individual performance.

                  (b) The Performance Goals relating to Covered Participants for
         a Performance Period shall be established by the Committee in writing.
         Performance Goals may include alternative and multiple Performance
         Goals and may be based on one or more business and/or financial
         criteria. In establishing the Performance Goals for the Performance
         Period, the Committee in its discretion may include one or any
         combination of the following criteria in either absolute or relative
         terms, for the Company or any Subsidiary:

                           (i) Total shareholder return;

                           (ii) Return on assets, equity, capital, or
                  investment;

                           (iii) Pre-tax or after-tax profit levels, including:
                  earnings per share; earnings before interest and taxes;
                  earnings before interest, taxes, depreciation and
                  amortization; net operating profits after tax, and net income;

                                       20
<PAGE>
                           (iv) Cash flow and cash flow return on investment;

                           (v) Economic value added and economic profit;

                           (vi) Growth in earnings per share;

                           (vii) Levels of operating expense or other expense
                  items as reported on the income statement, including operating
                  and maintenance expense; or

                           (viii) Measures of customer satisfaction and customer
                  service as surveyed from time to time, including the relative
                  improvement therein.

                  (c) The Performance Goals must be objective and must satisfy
         third party "objectivity" standards under Section 162(m) of the Code,
         and the regulations promulgated thereunder.

                  (d) The Committee is authorized to make adjustments in the
         method of calculating attainment of Performance Goals in recognition
         of: (i) extraordinary or non-recurring items, (ii) changes in tax laws,
         (iii) changes in generally accepted accounting principles or changes in
         accounting principles, (iv) charges related to restructured or
         discontinued operations, (v) restatement of prior period financial
         results, and (vi) any other unusual, non-recurring gain or loss that is
         separately identified and quantified in the Company's financial
         statements. Notwithstanding the foregoing, the Committee may, at its
         sole discretion, reduce the performance results upon which Awards are
         based under the Plan, to offset any unintended result(s) arising from
         events not anticipated when the Performance Goals were established,
         provided that such adjustment is permitted by Section 162(m) of the
         Code.

                  (e) The Performance Goals shall not allow for any discretion
         by the Committee as to an increase in any Award, but discretion to
         lower an Award is permissible.

                  (f) The Award and payment of any Award under this Plan to a
         Covered Participant with respect to a relevant Performance Period shall
         be contingent upon the attainment of the Performance Goals that are
         applicable to such Covered Participant. The Committee shall certify in
         writing prior to payment of any such Award that such applicable
         Performance

                                       21
<PAGE>

         Goals relating to the Award are satisfied. Approved minutes of the
         Committee may be used for this purpose.

                  (g) The maximum Award that may be paid to any Covered
         Participant under the Plan pursuant to Sections 6.4, 6.7, 6.8 and 6.9
         for any Performance Period shall be (i) if in cash, One Million Dollars
         ($1,000,000.00) and (ii) if in shares of Common Stock, five hundred
         thousand (500,000) shares.

                  (h) All Awards to Covered Participants under this Plan shall
         be further subject to such other conditions, restrictions, and
         requirements as the Committee may determine to be necessary to carry
         out the purpose of this Section 11.

                                   ARTICLE 12

                           AMENDMENT OR DISCONTINUANCE

         Subject to the limitations set forth in this Article 12, the Board may
at any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval in
order for the Plan and Incentives awarded under the Plan to continue to comply
with Section 162(m) of the Code, including any successors to such Section, shall
be effective unless such amendment shall be approved by the requisite vote of
the stockholders of the Company entitled to vote thereon. Any such amendment
shall, to the extent deemed necessary or advisable by the Committee, be
applicable to any outstanding Incentives theretofore granted under the Plan,
notwithstanding any contrary provisions contained in any Award Agreement. In the
event of any such amendment to the Plan, the holder of any Incentive outstanding
under the Plan shall, upon request of the Committee and as a condition to the
exercisability thereof, execute a conforming amendment in the form prescribed by
the Committee to any Award Agreement relating thereto. Notwithstanding anything
contained in this Plan to the contrary, unless required by law, no action
contemplated or permitted by this Article 12 shall adversely affect any rights
of Participants or obligations of the Company to Participants with respect to
any Incentive theretofore granted under the Plan without the consent of the
affected Participant.

                                       22
<PAGE>
                                   ARTICLE 13

                                      TERM

         The Plan shall be effective as set forth in Section 18.11. Unless
sooner terminated by action of the Board, the Plan will terminate on October 1,
2008, but Incentives granted before that date will continue to be effective in
accordance with their terms and conditions.

                                   ARTICLE 14

                               CAPITAL ADJUSTMENTS

         If at any time while the Plan is in effect, or Incentives are
outstanding, there shall be any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from (1) the declaration or payment
of a stock dividend, (2) any recapitalization resulting in a stock split-up,
combination, or exchange of shares of Common Stock, or (3) other increase or
decrease in such shares of Common Stock effected without receipt of
consideration by the Company, then and in such event:

                  (a) An appropriate adjustment shall be made in the maximum
         number of shares of Common Stock then subject to being awarded under
         the Plan and in the maximum number of shares of Common Stock that may
         be awarded to a Participant to the end that the same proportion of the
         Company's issued and outstanding shares of Common Stock shall continue
         to be subject to being so awarded.

                  (b) Appropriate adjustments shall be made in the number of
         shares of Common Stock and the Option Price thereof then subject to
         purchase pursuant to each such Stock Option previously granted and
         unexercised, to the end that the same proportion of the Company's
         issued and outstanding shares of Common Stock in each such instance
         shall remain subject to purchase at the same aggregate Option Price.

                  (c) Appropriate adjustments shall be made in the number of
         SARs and the SAR Price thereof then subject to exercise pursuant to
         each such SAR previously granted and unexercised, to the end that the
         same proportion of the Company's issued and outstanding shares of
         Common Stock in each instance shall remain subject to exercise at the
         same aggregate SAR Price.

                                       23
<PAGE>
                  (d) Appropriate adjustments shall be made in the number of
         outstanding shares of Restricted Stock with respect to which
         restrictions have not yet lapsed prior to any such change.

                  (e) Appropriate adjustments shall be made with respect to
         shares of Common Stock applicable to any other Incentives previously
         awarded under the Plan as the Committee, in its sole discretion, deems
         appropriate, consistent with the event.

         Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to (i) the number of or Option Price of shares of Common
Stock then subject to outstanding Stock Options granted under the Plan, (ii) the
number of or SAR Price or SARs then subject to outstanding SARs granted under
the Plan, (iii) the number of outstanding shares of Restricted Stock, or (iv)
the number of shares of Common Stock otherwise payable under any other
Incentive.

         Upon the occurrence of each event requiring an adjustment with respect
to any Incentive, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.

                                   ARTICLE 15

                          RECAPITALIZATION, MERGER AND
                        CONSOLIDATION; CHANGE IN CONTROL

                  (a) The existence of this Plan and Incentives granted
         hereunder shall not affect in any way the right or power of the Company
         or its stockholders to make or authorize any or all adjustments,
         recapitalizations, reorganizations, or other changes in the Company's
         capital structure and its business, or any merger or consolidation of
         the Company, or any issue of bonds, debentures, preferred or preference
         stocks ranking prior to or otherwise affecting the Common Stock or the
         rights thereof (or any rights, options, or warrants to purchase same),
         or the dissolution or liquidation of the Company, or any sale or
         transfer of all or any part of its assets or business, or any other
         corporate act or proceeding, whether of a similar character or
         otherwise.

                                       24
<PAGE>
                  (b) Subject to any required action by the stockholders, if the
         Company shall be the surviving or resulting corporation in any merger,
         consolidation or share exchange, any Incentive granted hereunder shall
         pertain to and apply to the securities or rights (including cash,
         property, or assets) to which a holder of the number of shares of
         Common Stock subject to the Incentive would have been entitled.

                  (c) In the event of any merger, consolidation or share
         exchange pursuant to which the Company is not the surviving or
         resulting corporation, there shall be substituted for each share of
         Common Stock subject to the unexercised portions of such outstanding
         Incentives, that number of shares of each class of stock or other
         securities or that amount of cash, property, or assets of the
         surviving, resulting or consolidated company which were distributed or
         distributable to the stockholders of the Company in respect to each
         share of Common Stock held by them, such outstanding Incentives to be
         thereafter exercisable for such stock, securities, cash, or property in
         accordance with their terms. Notwithstanding the foregoing, however,
         all Stock Options and SARs may be canceled by the Company immediately
         prior to the effective date of any such reorganization, merger,
         consolidation, share exchange or any dissolution or liquidation of the
         Company by giving notice to each holder thereof or his personal
         representative of its intention to do so and by permitting the purchase
         during the thirty (30) day period next preceding such effective date of
         all or any portion of all of the shares of Common Stock subject to such
         outstanding Incentives whether or not such Incentives are then vested
         or exercisable.

                  (d) In the event of a Change in Control, notwithstanding any
         other provision in this Plan to the contrary all unmatured installments
         of Incentives outstanding and not otherwise canceled in accordance with
         Section 15(c) above, shall thereupon automatically be accelerated and
         exercisable in full and all Restriction Periods applicable to Awards of
         Restricted Stock and/or Restricted Stock Units shall automatically
         expire. The determination of the Committee that any of the foregoing
         conditions has been met shall be binding and conclusive on all parties.

                                       25
<PAGE>
                                   ARTICLE 16

                           LIQUIDATION OR DISSOLUTION

         In case the Company shall, at any time while any Incentive under this
Plan shall be in force and remain unexpired, (i) sell all or substantially all
of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant shall be thereafter entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the expiration
of any Incentive, make any partial distribution of its assets, in the nature of
a partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) then in such event the Option Prices or SAR Prices then in effect with
respect to each Stock Option or SAR shall be reduced, on the payment date of
such distribution, in proportion to the percentage reduction in the tangible
book value of the shares of the Company's Common Stock (determined in accordance
with generally accepted accounting principles) resulting by reason of such
distribution.

                                   ARTICLE 17

                         INCENTIVES IN SUBSTITUTION FOR
                    INCENTIVES GRANTED BY OTHER CORPORATIONS

         Incentives may be granted under the Plan from time to time in
substitution for similar instruments held by employees of a corporation who
become or are about to become Employees of the Company or any Subsidiary as a
result of a merger or consolidation of the employing corporation with the
Company or the acquisition by the Company of stock of the employing corporation.
The terms and conditions of the substitute Incentives so granted may vary from
the terms and conditions set forth in this Plan to such extent as the Board at
the time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the Incentives in substitution for which they are granted.

                                       26
<PAGE>
                                   ARTICLE 18

                            MISCELLANEOUS PROVISIONS

         18.1 INVESTMENT INTENT. The Company may require that there be presented
to and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the Incentives granted or the shares of Common
Stock to be purchased or transferred are being acquired for investment and not
with a view to their distribution.

         18.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
Incentive granted under the Plan shall confer upon any Participant any right
with respect to continuance of employment by the Company or any Subsidiary.

         18.3 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or
the Committee, nor any officer or employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination, or interpretation.

         18.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any
action of the Board or the Committee shall be deemed to give any person any
right to be granted an Award or any other rights except as may be evidenced by
an Award Agreement, or any amendment thereto, duly authorized by the Committee
and executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.

         18.5 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Incentive if the issuance thereof
would constitute a violation by the Participant or the Company of any provisions
of any law or regulation of any governmental authority or any national
securities exchange or inter-dealer quotation system or other forum in which
shares of Common Stock are quoted or traded (including without limitation
Section 16 of the 1934 Act and Section 162(m) of the Code); and, as a condition
of any sale or issuance of shares of Common Stock under an Incentive, the
Committee may require such agreements or undertakings, if any, as the Committee
may deem necessary or advisable to assure compliance with any such law or
regulation. The Plan, the grant and exercise of Incentives hereunder, and the
obligation of the Company to sell and deliver shares of Common Stock, shall be
subject to all applicable federal and

                                       27
<PAGE>
state laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required.

         18.6 TAX REQUIREMENTS. The Company shall have the right to deduct from
all amounts hereunder paid in cash or other form, any Federal, state, or local
taxes required by law to be withheld with respect to such payments. The
Participant receiving shares of Common Stock issued under the Plan shall be
required to pay the Company the amount of any taxes which the Company is
required to withhold with respect to such shares of Common Stock.
Notwithstanding the foregoing, in the event of an assignment of a Non-qualified
Stock Option or SAR pursuant to Section 18.7, the Participant who assigns the
Non-qualified Stock Option or SAR shall remain subject to withholding taxes upon
exercise of the Non-qualified Stock Option or SAR by the transferee to the
extent required by the Code or the rules and regulations promulgated thereunder.
Such payments shall be required to be made prior to the delivery of any
certificate representing such shares of Common Stock. Such payment may be made
in cash, by check, or through the delivery of shares of Common Stock owned by
the Participant (which may be effected by the actual delivery of shares of
Common Stock by the Participant or by the Company's withholding a number of
shares to be issued upon the exercise of a Stock Option, if applicable), which
shares have an aggregate Fair Market Value equal to the required minimum
withholding payment, or any combination thereof.

         18.7 ASSIGNABILITY. Incentive Stock Options may not be transferred or
assigned other than by will or the laws of descent and distribution and may be
exercised during the lifetime of the Participant only by the Participant or the
Participant's legally authorized representative, and each Award Agreement in
respect of an Incentive Stock Option shall so provide. The designation by a
Participant of a beneficiary will not constitute a transfer of the Stock Option.
The Committee may waive or modify any limitation contained in the preceding
sentences of this Section 18.7 that is not required for compliance with Section
422 of the Code. The Committee may, in its discretion, authorize all or a
portion of a Non-qualified Stock Option or SAR to be granted to a Participant to
be on terms which permit transfer by such Participant to (i) the spouse,
children or grandchildren of the Participant ("Immediate Family Members"), (ii)
a trust or trusts for the exclusive benefit of such Immediate Family Members, or
(iii) a partnership in which such Immediate Family Members are the only
partners, (iv) an entity exempt from federal income tax pursuant to Section
501(c)(3) of the Code or any successor provision, or (v) a split interest trust
or pooled income fund described in Section 2522(c)(2) of the Code or any
successor provision, provided that (x) there shall be no consideration for any
such transfer, (y) the Award Agreement pursuant to which such Non-qualified
Stock Option or SAR is granted must be approved by the Committee and must
expressly provide for transferability in a manner consistent with this Section,
and (z) subsequent transfers of transferred Non-qualified Stock Options or

                                       28
<PAGE>
SARs shall be prohibited except those by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended. Following transfer, any such Non-qualified Stock Option and SAR shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Articles 10, 12,
14, 16 and 18 hereof the term "Participant" shall be deemed to include the
transferee. The events of Termination of Service shall continue to be applied
with respect to the original Participant, following which the Non-qualified
Stock Options and SARs shall be exercisable by the transferee only to the extent
and for the periods specified in the Award Agreement. The Committee and the
Company shall have no obligation to inform any transferee of a Non-qualified
Stock Option or SAR of any expiration, termination, lapse or acceleration of
such Option. The Company shall have no obligation to register with any federal
or state securities commission or agency any Common Stock issuable or issued
under a Non-qualified Stock Option or SAR that has been transferred by a
Participant under this Section 18.7.

         18.8 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds of
the Company.

         18.9 GOVERNING LAW. The validity, construction and effect of the Plan
and any actions taken or relating to the Plan shall be determined in accordance
with the laws of the State of Texas and applicable Federal law.

         18.10 SUCCESSORS AND ASSIGNS. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, expressly
to assume and agree to perform the Company's obligation under this Plan in the
same manner and to the same extent that the Company would be required to perform
them if no such succession had taken place. As used herein, the "Company" shall
mean the Company as hereinbefore defined and any aforesaid successor to its
business and/or assets.

         18.11 EFFECTIVE DATE. The Plan shall be effective as of October 1,
1998. Subject to earlier termination pursuant to Article 12, the Plan shall have
a term of ten (10) years from its effective date. After termination of the Plan,
no future Awards may be made.

         18.12 LEGEND. Each certificate representing shares of Restricted Stock
issued to a Participant shall bear the following legend, or a similar legend
deemed by the Company to constitute an appropriate notice of the provisions
hereof (any such certificate not having such legend shall be surrendered upon
demand by the Company and so endorsed):

                                       29
<PAGE>
         On the face of the certificate:

                  "Transfer of this stock is restricted in accordance with
                  conditions printed on the reverse of this certificate."

         On the reverse:

                  "The shares of stock evidenced by this certificate are subject
                  to and transferrable only in accordance with that certain
                  Atmos Energy Corporation 1998 Long-Term Incentive Plan, a copy
                  of which is on file at the principal office of the Company in
                  Dallas, Texas. No transfer or pledge of the shares evidenced
                  hereby may be made except in accordance with and subject to
                  the provisions of said Plan. By acceptance of this
                  certificate, any holder, transferee or pledgee hereof agrees
                  to be bound by all of the provisions of said Plan."

         The following legend shall be inserted on a certificate evidencing
Common Stock issued under the Plan if the shares were not issued in a
transaction registered under the applicable federal and state securities laws:

                  "Shares of stock represented by this certificate have been
                  acquired by the holder for investment and not for resale,
                  transfer or distribution, have been issued pursuant to
                  exemptions from the registration requirements of applicable
                  state and federal securities laws, and may not be offered for
                  sale, sold or transferred other than pursuant to effective
                  registration under such laws, or in transactions otherwise in
                  compliance with such laws, and upon evidence satisfactory to
                  the Company of compliance with such laws, as to which the
                  Company may rely upon an opinion of counsel satisfactory to
                  the Company."

         A copy of this Plan shall be kept on file in the principal office of
the Company in Dallas, Texas.

                               * * * * * * * * * *

                                       30
<PAGE>
         IN WITNESS WHEREOF, the Company has caused this instrument to be
executed as of February 14, 2002.

                                        ATMOS ENERGY CORPORATION

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

Attest:

/s/ SHIRLEY A. HINES
--------------------
Shirley A. Hines
Corporate Secretary

                                       31

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