Document:

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                                   EXHIBIT 4.1

                              REVOLVING CREDIT NOTE

$20,000,000                                                  September 11, 2000
                                                             Abingdon, Virginia

         FOR VALUE RECEIVED, VIRGINIA GAS COMPANY, a Delaware corporation (the
"BORROWER"), promises to pay to the order of NUI CAPITAL CORP., a Florida
corporation (together with its successors and assigns, the "LENDER"), at 550
Route 202-206, Bedminster, New Jersey, or at such other place as the Lender may
from time to time designate in writing, in lawful money of the United States of
America, without defense, setoff or counterclaim, the principal sum of TWENTY
MILLION AND NO/100 DOLLARS ($20,000,000), or such lesser amount as may be
advanced and outstanding from time to time, together with interest as described
below on the principal balance hereof from time to time outstanding, all in
accordance with the following terms and provisions:

         1. DEFINED TERMS. Capitalized terms used but not defined herein shall
have the meanings ascribed thereto in that certain Agreement and Plan of
Reorganization, dated as of June 13, 2000, by and among NUI Corporation, VGC
Acquisition, Inc. and the Borrower (the "MERGER AGREEMENT").

         2. REVOLVING CREDIT LOANS. Upon the terms and subject to the conditions
hereof, the Lender agrees to make loans (the "Revolving Credit Loans") to the
Borrower from time to time from the date hereof to the Maturity Date (as defined
herein), each in an amount which, when added to the sum of the principal amount
of the Revolving Credit Loans then outstanding, plus all accrued and unpaid
interest thereon, will not exceed twenty million dollars ($20,000,000) (the
"Revolving Credit Commitment"). Subject to the limitations set forth in this
Section 2 and the other terms and conditions hereof, the Borrower may borrow,
repay and re-borrow amounts constituting the Revolving Credit Commitment.

         3. REQUESTS FOR BORROWING. The Borrower shall give the Lender prior
written notice (a "Borrowing Notice") of each request for a Revolving Credit
Loan. Such notice, in order to be effective, must be received by the Lender not
later than 11:00 a.m. Eastern Time on the business day preceding the day on
which the Revolving Credit Loan is to be made and shall specify (i) the date
(which shall be a business day) on which such Revolving Credit Loan is to be
made and (ii) the aggregate principal amount of the requested Revolving Credit
Loan. Each Borrowing Notice shall be accompanied by a certificate signed by the
President and Chief Executive Officer, the Chief Operating Officer or the Chief
Financial Officer of the Borrower certifying (a) the use of the proceeds of such
advance, (b) the vendor(s), if any, to whom the proceeds of such advance shall
be paid (accompanied by true and correct copies of invoices from

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such vendors) and (c) the amounts to be paid to such vendors, if any. On the
borrowing date specified in the Borrowing Notice, the Lender shall, subject to
the provisions of Section 2 hereof, make the Revolving Credit Loan by payment by
wire transfer of immediately available funds to an account designated by the
Borrower. The Lender shall not be obligated to recognize any Borrowing Notice
unless it has been given by an officer of the Borrower who has been authorized
by the Board of Directors of the Borrower to give such notice. The Borrower has
provided a list of such officers concurrently with the execution of this Note
upon which the Lender may conclusively rely.

         4. USE OF ADVANCES. Advances made by the Lender to the Borrower
hereunder shall be used only for (i) the repayment of any amounts outstanding
under the Initial Financing, (ii) the purchase of certain real property located
in Saltville, Virginia pursuant to the Saltville Purchase Agreement and (iii)
obligations of Borrower related to pipeline and gas storage construction and
other related costs and expenses.

         5. INTEREST RATE. The unpaid principal balance of this Revolving Credit
Note (as the same may be amended, modified or supplemented from time to time,
the "NOTE") outstanding from time to time shall bear interest at a per annum
rate equal to LIBOR (as defined below) plus 3.0%, adjusted monthly on the first
business day of each calendar month to reflect LIBOR then in effect. The term
"LIBOR" shall mean the "London Interbank Offered Rate" for one month, as
reported in THE WALL STREET JOURNAL newspaper in its "Money Rates" column.
Accrued interest shall be computed for actual days elapsed on the basis of a
year of 365 or 366 days, as applicable.

         6. INTEREST PAYMENTS. Accrued interest hereunder shall be paid
quarterly in arrears on the first day of each March, June, September and
December, beginning on December 1, 2000, and on the Maturity Date (as defined
below).

         7. PRINCIPAL PAYMENTS. The principal balance outstanding hereunder
shall be due and payable on the first to occur of (i) March 1, 2002, or (ii) the
termination (for any reason whatsoever) of the Merger Agreement (the "MATURITY
DATE"). The entire unpaid principal balance hereof together with all accrued and
unpaid interest thereon shall be due and payable in full on the Maturity Date.

         8. PREPAYMENT. This Note may be prepaid in whole or in part at any
time, without premium or penalty. Principal and accrued interest in excess of
the Revolving Credit Commitment, if any, shall be subject to mandatory
prepayment upon demand by the Lender.

         9. APPLICATION OF PAYMENTS. Payments made hereunder shall be applied
first to any accrued late charges and collection costs and expenses, next to
accrued interest hereon and any remainder to the principal balance hereof.

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         10. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender on the date hereof and as of the date of each borrowing that:

             (a) The Borrower is (i) duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, (ii) duly
qualified as a foreign corporation to do business and in good standing under the
laws of each jurisdiction, other than the jurisdiction of its incorporation,
wherein it owns or leases any properties or conducts any business and (iii)
entitled to own its properties and carry on its business as now conducted and
presently contemplated.

             (b) The Borrower has all necessary corporate power to enter into,
and has taken all necessary corporate action to authorize the execution,
delivery and performance of, this Note and all of the transactions contemplated
herein.

             (c) This Note constitutes a valid obligation of the Borrower,
legally binding upon it and enforceable in accordance with its terms. No
consent, other than those consents already obtained, of any other party
(including, without limitation, stockholders and creditors of the Borrower) and
no consent, license, approval or authorization of, or registration or
declaration with, any governmental authority is required in connection with the
execution, delivery, performance, validity or enforceability of this Note.

             (d) Neither the execution and delivery by the Borrower of this
Note, nor the performance by the Borrower of its obligations hereunder, (i)
conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default under (A) any term or provision of the
certificate of incorporation or by-laws of the Borrower, (B) any material term
or provision of any agreement, contract, instrument or indenture to which the
Borrower is a party or by which it is bound, or (C) any law, rule, regulation,
order, judgment, writ, injunction, or decree of any court or governmental
authority having jurisdiction over the Borrower or the property of the Borrower
or (ii) results or will result in the creation or imposition of any lien, charge
or encumbrance on the property or assets of the Borrower.

             (e) No litigation, arbitration, investigation or administrative
proceeding of or before any court, arbitrator or governmental authority is
currently pending or, to the knowledge of the Borrower, threatened (i) with
respect to this Note or (ii) against or affecting the Borrower or any of its
properties or assets, which, if adversely determined, would individually or in
the aggregate have a material adverse effect on the business, operations, assets
or condition, financial or otherwise, of the Borrower, or the ability of the
Borrower to perform its obligations under this Note.

             (f) Except as set forth in Exhibit 5.6 to the Merger Agreement, no
event has occurred that would, with or without the passage of time or compliance
with any applicable notice requirements or both, constitute a default by the
Borrower under the Merger Agreement or any other material contract to which the
Borrower is a party or by which it is bound, including,

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without limitation, that certain Credit Agreement, dated as of July 14, 1998,
between the Borrower and Wachovia Bank, N.A. ("Wachovia") (the "Wachovia Credit
Agreement") and that certain Note Purchase Agreement, dated as of March 19,
1998, by and between the Borrower and John Hancock Mutual Life Insurance
Company, John Hancock Variable Life Insurance Company (collectively, "Hancock")
and Mellon Bank, N.A. (the "Hancock Agreement").

             (g) The representations and warranties of the Borrower contained
in the Merger Agreement are true and correct in all respects (as to
representations and warranties qualified or limited by the term "Material
Adverse Effect," the word "material," or phrases of like import) and in all
material respects (as to representations and warranties not so qualified or
limited).

         11. COVENANTS. The Borrower covenants that for so long as this Note is
outstanding:

             (a) The Borrower shall comply with the Affirmative Covenants
contained in Section 5 of the Wachovia Credit Agreement and the Negative
Covenants contained in Section 6 of the Wachovia Credit Agreement, as such
covenants are in effect on the date hereof (without regard to any future
modification or amendment thereto or waiver thereof) (collectively, the
"Wachovia Covenants"), as if such covenants were set forth in their entirety
herein, except that all references to the "Bank" in such covenants shall be
deemed to refer to the Lender herein; PROVIDED, HOWEVER, that Borrower shall not
be required to comply with the covenants set forth in Sections 6.1(b) and (c) of
the Wachovia Credit Agreement or Sections 9.1.2 and 9.1.3 of the Hancock
Agreement for so long as Wachovia does not require Borrower to comply with such
covenants. Defined terms contained in the Wachovia Covenants shall have the
meanings ascribed to such terms in the Wachovia Credit Agreement.

             (b) The Borrower shall comply with the covenants applicable to it
contained in Section 6 of the Merger Agreement as if such covenants were set
forth in their entirety herein.

             (c) The Borrower shall use all advances hereunder only for the
purposes described in Section 4 hereof.

         12. OTHER AGREEMENTS. The execution of this Note and the Stock Option
Agreement and the fulfillment of Borrower's obligations hereunder and thereunder
shall not be deemed to be a violation of the terms of, or the representations
and warranties made by, Borrower under the Merger Agreement or any document
related thereto.

         13. EVENTS OF DEFAULT. Each of the following shall constitute an "EVENT
OF DEFAULT" under this Note unless waived by Lender:

             (a) FAILURE TO PAY PRINCIPAL. The Borrower shall default in any
payment of the principal when and as due hereunder;

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             (b) OTHER PAYMENT DEFAULT. The Borrower shall default in the
payment of interest or any other payment obligation when and as due hereunder
and such default shall continue unremedied for five days;

             (c) FAILURE TO OBSERVE OTHER COVENANTS. The Borrower shall fail to
perform or observe any other term, covenant, warranty or agreement contained (or
incorporated by reference) herein and such failure shall continue for a period
of 10 days after written notice of such failure has been given to the Borrower;

             (d) REPRESENTATIONS AND WARRANTIES. Any representation or warranty
of the Borrower contained (or incorporated by reference) herein shall prove to
have been untrue when made;

             (e) DEFAULTS UNDER PIPELINE COMPANY CONTRACTS. A breach or event
of default shall occur under either of the Pipeline Company Contracts, which
breach or event of default shall not have been cured within any applicable grace
period or waived;

             (f) DEFAULTS UNDER LOAN AGREEMENTS. (i) An event of default shall
occur under the Wachovia Credit Agreement or the Hancock Agreement (other than
the pending events of default described in Exhibit 5.6 to the Merger Agreement
and events of defaults that result from Borrower's execution and delivery of
this Note, and its performance hereunder, and the advancement of funds by Lender
pursuant hereto), which event of default shall not have been cured within any
applicable grace period or waived, or (ii) either Wachovia or Hancock commences
judicial proceedings or otherwise takes action to exercise their respective
remedies following an event of default under the Wachovia Credit Agreement or
the Hancock Agreement, respectively, including, without limitation, the pending
events of default described in Exhibit 5.6 to the Merger Agreement;

             (g) ADVERSE RECOMMENDATION OF MERGER AGREEMENT. The board of
directors of the Borrower withdraws or modifies in any manner adverse to NUI
Corporation its recommendation of the transactions contemplated by the Merger
Agreement;

             (h) FAILURE OF SHAREHOLDER VOTE. The transactions contemplated by
the Merger Agreement shall have been voted on by the shareholders of the
Borrower at a meeting duly convened therefor, and the votes shall not have been
sufficient to satisfy the condition set forth in Section 7.1(a) of the Merger
Agreement;

             (i) VOLUNTARY BANKRUPTCY. The Borrower makes an assignment for the
benefit of creditors, files a petition in bankruptcy, petitions or applies to
any tribunal for any receiver or any trustee of the Borrower or any substantial
part of the property of the Borrower or commences any proceeding relating to the
Borrower under any reorganization, arrangement, composition, readjustment,
liquidation or dissolution law or statute of any jurisdiction, whether in effect
now or after this Note is executed;

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             (j) INVOLUNTARY BANKRUPTCY. If, within 60 days after the filing of
a bankruptcy petition or the commencement of any proceeding against the Borrower
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, the proceeding shall not have been dismissed, or, if within 60 days
after the appointment, without the consent or acquiescence of the Borrower, of
any trustee, receiver or liquidator of the Borrower or all or any substantial
part of the properties of the Borrower, the appointment shall not have been
vacated; or

             (k) DISSOLUTION. Any action is taken that is intended to result,
or results, in the dissolution, liquidation or termination of the existence of
the Borrower.

         14. REMEDIES UPON DEFAULT.

             (a) Upon the occurrence of an Event of Default pursuant to
Sections 13(i) or 13(j) hereunder, the Revolving Credit Commitment shall
automatically immediately terminate and the outstanding principal amount of all
Revolving Credit Loans, all accrued interest thereon and all other amounts
payable hereunder shall automatically be and become immediately due and payable,
without notice or demand to the Borrower.

             (b) Upon the occurrence of an Event of Default pursuant to
Sections 13(a) through 13(h) and 13(k) hereunder, the Lender may declare the
entire outstanding principal balance of all Revolving Credit Loans, all accrued
interest thereon and all other amounts payable hereunder immediately due and
payable; PROVIDED, HOWEVER, that the Lender shall give contemporaneous notice of
any such action to Borrower. Any delay by the Lender in exercising or any
failure of the Lender to exercise its rights hereunder to accelerate upon the
occurrence of an Event of Default pursuant to this Section 14(b) shall not
constitute a waiver of its right to exercise such right with respect to that or
any subsequent Event of Default. Acceleration of maturity, once claimed
hereunder by the Lender hereof may be rescinded, at the Lender's option, by
written acknowledgment to that effect, but the tender and acceptance of partial
payment or partial performance alone shall not in any way affect or rescind such
acceleration of maturity. After the occurrence of an Event of Default, interest
shall accrue on all amounts due hereunder at a rate of 2% per annum above the
rate or rates of interest then payable hereunder.

         15. LATE CHARGE. The Borrower shall pay to the Lender a late charge
equal to 5% of any amount due hereunder that is not received by the Lender
within five days after the date on which such amount is due.

         16. WAIVER; EXTENSIONS. Presentment, demand, notice of dishonor and
protest and all other exemptions provided debtors are hereby waived. The
Borrower agrees that it shall remain liable for the payment hereof
notwithstanding any agreement for the extension of the due date of any amount
payable hereunder made by the Lender after the maturity thereof.

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         17. INDEMNIFICATION. The Borrower agrees to indemnify and save the
Lender, NUI Corporation and each of their respective subsidiaries and affiliates
harmless from, and compensate each of them for, any and all losses, liabilities,
claims, damages and expenses incurred by any of them with respect to, resulting
from or in connection with any of the transactions contemplated herein,
including, without limitation, the Borrower's use of advances hereunder.

         18. WAIVER OF JURY TRIAL. THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHT EITHER IT OR ITS SUCCESSORS OR ASSIGNS MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH THIS NOTE OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (ORAL OR WRITTEN) OR ACTIONS OF THE PARTIES RELATED
HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO MAKE THE
LOANS.

         19. COLLECTION COSTS AND EXPENSES. The Borrower shall pay all
reasonable costs, fees and expenses (including court costs and reasonable
attorneys' fees) incurred by the Lender in collecting or attempting to collect
any amount that becomes due hereunder or in seeking legal advice with respect to
such collection or an Event of Default hereunder.

         20. NOTICES. All notices, requests, demands and other communications
with respect hereto shall be in writing and shall be delivered by hand, sent
prepaid by Federal Express (or a comparable overnight delivery service) or sent
by the United States mail, certified, postage prepaid, return receipt requested,
to the following addresses:

         If to the Lender,

                 NUI Capital Corp.
                 550 Route 202-206
                 Bedminster, New Jersey 07921
                 Attention:  James R. Van Horn

         If to the Borrower,

                 Virginia Gas Company
                 200 East Main Street
                 Abingdon, Virginia  24210
                 Attention:  Michael L. Edwards

         Any notice, request, demand or other communication delivered or sent in
the manner aforesaid shall be deemed given or made (as the case may be) upon the
earliest of (i) the date it is actually received, (ii) the business day on the
day on which it is delivered by hand, (iii) the

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business day after the day on which it is properly delivered to Federal Express
(or a comparable overnight delivery service), or (iv) the third business day
after the day on which it is deposited in the United States mail, postage
prepaid. The Borrower or the Lender may change its address by notifying the
other party of the new address in any manner permitted by this Paragraph.

         21. SEVERABILITY. If any provision of this Note, or the application
thereof to any person or circumstance, shall to any extent be invalid or
unenforceable, the remainder of the provisions of this Note, or the application
of such provision to other persons or circumstances, shall not be affected
thereby, and each provision of this Note shall be valid and enforceable to the
fullest extent permitted by law.

         22. SUCCESSORS AND ASSIGNS. This Note shall be binding upon and inure
to the benefit of the Borrower and the Lender, and their respective successors
and assigns; PROVIDED, HOWEVER, that the Borrower may not assign or delegate its
obligations hereunder without the prior written consent of the Lender, which
consent may be withheld in the Lender's sole discretion.

         23. PAYMENTS. All payments due hereunder shall be made in immediately
available funds.

         24. OFFSET. If an Event of Default occurs hereunder and is not cured
within any applicable grace period, then the Lender shall have the right to
offset any amounts due hereunder against any amounts now or hereafter due from
the Lender to the Borrower.

         25. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to the
conflict of laws principles thereof. Each of the parties hereto, in respect of
itself and its properties, agrees to be subject to (and hereby irrevocably
submits to) the nonexclusive jurisdiction of the United States federal court for
the District of New Jersey or New Jersey state court in respect of any suit,
action or proceeding arising out of or relating to this Note or the transactions
contemplated herein, and irrevocably agrees that all claims in respect of any
such suit, action or proceeding may be heard and determined in any such court.
Each of the parties hereto irrevocably waives, to the fullest extent it may
effectively do so under applicable law, any objection to the laying of the venue
of any such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.

                          [SIGNATURE ON FOLLOWING PAGE]

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         IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by
its duly authorized representative as of the day and year first above written.

                                  VIRGINIA GAS COMPANY

                                  By: /s/ MICHAEL L. EDWARDS
                                     -------------------------------------------
                                  Name: MICHAEL L. EDWARDS
                                        ----------------------------------------
                                  Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                         ---------------------------------------

                                       9<PAGE>

                                   EXHIBIT 4.2

                             STOCK OPTION AGREEMENT

         STOCK OPTION AGREEMENT, dated as of September 11, 2000, between
VIRGINIA GAS COMPANY, a Delaware corporation (the "Issuer"), and NUI CAPITAL
CORP., a Florida corporation (the "Grantee").

                             W I T N E S S E T H :

         WHEREAS, as a condition to, and contemporaneous with the execution of,
that certain Revolving Credit Note, of even date herewith, made by Issuer in
favor of Grantee (the "Note"), and pursuant to that certain Agreement and Plan
of Reorganization dated as of June 13, 2000, by and among NUI Corporation
("NUI"), VGC Acquisition, Inc. and Issuer (the "Agreement"), the parties are
entering into this Stock Option Agreement pursuant to which Issuer has agreed to
grant Grantee the Option (as hereinafter defined); and

         WHEREAS, pursuant to that certain Stock Option Agreement, dated as of
July 12, 2000, Issuer granted to Grantee an unconditional, irrevocable option to
purchase up to 275,245 shares of common stock, par value $.001 (the "Common
Stock") of Issuer, which option shall remain outstanding in accordance with its
terms notwithstanding the execution of this Stock Option Agreement.

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, in the Note and in the Agreement, the
parties hereto agree as follows:

         1. Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 820,230 fully
paid and nonassessable shares of Common Stock at a price of $3.5125 per share
(such price, as adjusted if applicable, the "Option Price"); PROVIDED, HOWEVER,
that in no event shall the number of shares of Common Stock for which this
Option is exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock, without giving effect to any shares subject to or issued pursuant
to the Option. The number of shares of Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to adjustment as
herein set forth. The Grantee acknowledges and agrees that the grant of the
Option hereunder by Issuer does not violate Section 6.1(a)(i) of the Agreement.

            (a) The Grantee may exercise the Option, in whole or part, at any
time and from time to time following the occurrence of a Triggering Event (as
hereinafter defined); PROVIDED, HOWEVER, that the Option will terminate and be
of no further force or effect upon the earliest to occur of: (i) the Effective
Time or (ii) in the absence of an Event of Default (as defined in the Note)
under the Note, any termination of the Agreement under circumstances in which
NUI is entitled to the reimbursement of Out of Pocket Expenses and the
termination fee

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contemplated in the first sentence of Section 8.3(a) of the Agreement (provided
that the Option may only be terminated after such time as NUI has received full
and final payment of such amounts). The date on which the Option terminates is
referred to hereinafter as the "Exercise Termination Event." Notwithstanding the
occurrence of an Exercise Termination Event, Grantee will be entitled to
purchase the Option Shares if it has exercised the Option in accordance with the
terms hereof prior to the Exercise Termination Event and the termination of the
Option will not affect any rights hereunder which by their terms do not
terminate or expire prior to or as of such termination.

            (b) The term "Triggering Event" shall mean any of the following
events occurring after the date hereof:

            (1) Any termination of the Agreement under circumstances in which
            NUI is not entitled to the reimbursement of Out of Pocket Expenses
            and the termination fee contemplated in the first sentence of
            Section 8.3(a) of the Agreement;

            (2) Any termination of the Agreement under circumstances in which
            NUI is entitled to the reimbursement of Out of Pocket Expenses and
            the termination fee contemplated in the first sentence of Section
            8.3(a) of the Agreement but NUI did not receive full and final
            payment of such amounts when due pursuant to Section 8.3(a) of the
            Agreement; or

            (3) The occurrence of an Event of Default (as defined in the Note)
            under the Note.

            (c) Issuer shall notify Grantee promptly in writing of the
occurrence of any Triggering Event, it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Grantee to
exercise the Option.

            (d) If the Grantee is entitled to and wishes to exercise the Option,
it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date (not earlier
than three business days nor later than 60 business days from the Notice Date)
for the closing of such purchase (the "Closing Date); PROVIDED that if prior
notification to or approval of any governmental authority or regulatory or
administrative agency or commission, domestic or foreign (a "Governmental
Entity"), is required in connection with such purchase, Issuer and the Grantee
shall cooperate to promptly file the required notice or application for approval
and expeditiously process the same, and the period of time that otherwise would
run pursuant to this sentence shall run instead from the later of (A) the date
on which any required notification periods have expired or been terminated and
(B) the date on which such approvals have been obtained and any requisite
waiting period or periods shall have expired. Any exercise of the Option shall
be deemed to occur on the Notice Date relating thereto.

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            (e) At the closing referred to in subsection (d) of this Section 1,
the Grantee shall pay to Issuer the aggregate Option Price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer;
PROVIDED that failure or refusal of Issuer to designate such a bank account
shall not preclude the Grantee from exercising the Option. At Grantee's option,
Grantee may pay any portion of the Option Price by offsetting such Option Price
against amounts outstanding under the Note.

            (f) At such closing, Issuer shall deliver to the Grantee a
certificate or certificates representing the number of shares of Common Stock
purchased by the Grantee (registered in the name of the Grantee, its assignee or
other designee) and, if the Option should be exercised in part only, a new
Option evidencing the rights of the Grantee thereof to purchase the balance of
the shares purchasable hereunder.

            (g) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:

            "The transfer of the shares represented by this certificate is
            subject to resale restrictions arising under the Securities Act of
            1933, as amended. In addition, the shares represented by this
            certificate are entitled to certain benefits under an agreement
            between NUI Capital Corp. and the Issuer. A copy of such agreement
            is on file at the principal office of the Issuer and will be
            provided to the registered holder hereof without charge upon receipt
            by the Issuer of a written request therefor."

Issuer shall, upon written request of the Grantee, issue a new certificate
evidencing such shares of Common Stock without the first sentence of such legend
in the event that (i) the sale of such Common Stock has been registered pursuant
to the Securities Act of 1933, as amended (the "1933 Act"), or (ii) the Grantee
shall have delivered to Issuer an opinion of counsel, which opinion shall, in
Issuer's reasonable judgment, be satisfactory in form and substance to Issuer,
to the effect that subsequent transfers of such shares of Common Stock may be
effected without registration under the 1933 Act.

            (h) Upon the giving by the Grantee to Issuer of the written notice
of exercise of the Option provided for under subsection (d) of this Section 1
and the tender of the applicable purchase price in immediately available funds,
the Grantee shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Grantee. Issuer shall
pay all expenses, and any and all United States Federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 1 in the name of the
Grantee or its assignee, transferee or designee.

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         2. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by amendment to its Certificate of Incorporation or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including (A) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (B) in the event prior approval of or
notice to any Governmental Entity is necessary before the Option may be
exercised, cooperating fully with the Grantee in preparing such applications or
notices and providing such information to each such Governmental Entity as it
may require) in order to permit the Grantee to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights of the Grantee
against dilution.

         3. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Stock Option Agreement, and
(in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Stock Option
Agreement, if mutilated, Issuer will execute and deliver a new Stock Option
Agreement of like tenor and date. Any such new Stock Option Agreement executed
and delivered shall constitute an additional contractual obligation on the part
of Issuer, whether or not the Stock Option Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.

         4. The number of shares of Common Stock purchasable upon the exercise
of the Option shall be subject to adjustment from time to time as provided in
this Section 4. In the event of any change in the Common Stock prior to an
Exercise Termination Event by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchange of shares or the like, the type and
number of shares or securities subject to the Option, and the purchase price per
share provided in Section 1 of this Stock Option Agreement, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction, so that Grantee shall receive, upon exercise of the Option,
the number and class of shares or other securities or property that Grantee
would have received in respect of the Common Stock if the Option had been
exercised immediately prior to such event or the record date therefor, as
applicable. In the event of an election or similar arrangement with respect to
the type of consideration to be received by the holders of the Common Stock,
subject to the foregoing, proper provision shall be made so that the Grantee
would have the same election or similar rights as would the holder of the number
of shares of the Common Stock for which the Option is then exercisable.

         5. Upon the occurrence of a Triggering Event, Issuer shall, at the
request of Grantee delivered within two years (or such later date as may be
provided pursuant to Section 6) of such Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly

                                       4
<PAGE>

prepare, file and keep current a shelf registration statement under the 1933 Act
covering any shares issued and issuable pursuant to this Option and shall use
its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
any shares of Common Stock issued upon total or partial exercise of this Option
("Option Shares") in accordance with any plan of disposition requested by
Grantee. Issuer will use its reasonable best efforts to cause such registration
statement first to become effective and then to remain effective until such time
as all Option Shares have been sold or otherwise disposed of by Grantee. Grantee
shall have the right to demand two such registrations. If requested by any such
Grantee in connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements. The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in the
process of registration with respect to an underwritten public offering of
shares of Common Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole underwriter or
underwriters, of such offering the inclusion of the Grantee's Option Shares
would interfere with the successful marketing of the shares of Common Stock
offered by Issuer, the number of Option Shares otherwise to be covered in the
registration statement contemplated hereby may be reduced; PROVIDED, HOWEVER,
that, after any such required reduction, the number of Option Shares to be
included in such offering for the account of the Grantee shall constitute at
least 25% of the total number of shares to be sold by the Grantee and Issuer in
the aggregate; PROVIDED, FURTHER, HOWEVER, that if such reduction occurs, then
the Issuer shall file a registration statement for the balance of such Option
Shares as promptly as practicable and no reduction shall thereafter occur.

         6. The time periods for exercise of certain rights under Sections 1 and
5 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; (ii) during the pendency of any temporary restraining
order, injunction or other legal ban to the exercise of such rights; and (iii)
to the extent necessary to avoid liability under Section 16(b) of the Exchange
Act of 1934, as amended (the "1934 Act"), by reason of such exercise.

         7. Issuer hereby represents and warrants to Grantee as follows:

            (i) Issuer has full corporate power and authority to execute and
deliver this Stock Option Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Stock Option Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Stock Option
Agreement or to consummate the transactions contemplated hereby. This Stock
Option Agreement has been duly and validly executed and delivered by Issuer.

            (j) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Stock Option Agreement in accordance with its terms will
have reserved for issuance upon the exercise

                                       5
<PAGE>

of the Option, that number of shares of Common Stock equal to the maximum number
of shares of Common Stock at any time and from time to time issuable hereunder,
and all such shares, upon issuance pursuant hereto, will be duly authorized,
validly issued, fully paid, nonassessable, and will be delivered free and clear
of all claims, liens, encumbrances and security interests and not subject to any
preemptive rights.

         8. This Stock Option Agreement shall bind, and be enforceable by or
against, the parties hereto and their successors and permitted assigns. The
rights and obligations of the parties hereto may only be assigned as follows:

            (k) The rights and obligations of Issuer hereunder may not be
assigned; PROVIDED, HOWEVER, that, notwithstanding the foregoing, such rights
and obligations shall be automatically assigned to, and assumed by, any
successor to all or substantially all of the assets of Issuer (whether by
merger, consolidation, purchase of Issuer's capital stock or otherwise) and
proper provision shall be made in the agreements governing any such transaction
to give effect to the foregoing.

            (l) The rights and obligations of the Grantee hereunder may be
assigned, in whole or in part and at any time, at the discretion of the Grantee,
in which event all references to "Grantee" shall mean and include any such
assignee thereof.

            (m) Any attempted assignment not in accord with the foregoing
provisions shall be void and of no effect.

         9. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and Governmental
Entities necessary to the consummation of the transactions contemplated by this
Stock Option Agreement, including, without limitation, making application to
list the shares of Common Stock issuable hereunder on The Nasdaq SmallCap Market
or such other exchange or market on which the Common Stock of Issuer may be
listed upon official notice of issuance and making any necessary applications to
any Governmental Entities for approval to acquire the shares issuable hereunder.

         10. The parties recognize and agree that if for any reason any of the
provisions of this Stock Option Agreement are not performed in accordance with
their specific terms or are otherwise breached, immediate and irreparable harm
or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction or injunctions restraining any
violation or threatened violation of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof.

         11. If any term, provision, covenant or restriction contained in this
Stock Option Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Stock Option Agreement shall remain in full force and effect, and shall in
no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Grantee is not permitted to acquire the
full number of shares of

                                       6
<PAGE>

Common Stock provided in Section 1 hereof (as adjusted pursuant to Section 4
hereof), it is the express intention of Issuer to allow the Grantee to acquire
or to require Issuer to repurchase the maximum number of shares as may be
permissible.

         12. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Agreement.

         13. This Stock Option Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.

         14. This Stock Option Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.

         15. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.

         16. Except as otherwise expressly provided herein or in the
Agreement or the Note, this Stock Option Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. Nothing in this Stock Option Agreement, expressed or implied,
is intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Stock Option Agreement, except as
expressly provided herein.

         17. Capitalized terms used in this Stock Option Agreement and not
defined herein shall have the meanings assigned thereto in the Agreement.

                  [Remainder of page intentionally left blank]

                                       7
<PAGE>

         IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.

                                 VIRGINIA GAS COMPANY, as Issuer

                                 By: /s/ MICHAEL L. EDWARDS
                                     ----------------------------------------
                                 Name: MICHAEL L. EDWARDS
                                       --------------------------------------
                                 Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                        -------------------------------------

                                 NUI CAPITAL CORP., as Grantee

                                 By:  /s/ JAMES R. VAN HORN
                                    -------------------------------
                                 Name: JAMES R. VAN HORN
                                       ----------------------------
                                 Title:  VICE PRESIDENT
                                        ---------------------------

                                       8

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