RGC RESOURCES INC
EXHIBIT 10.1 TO FORM 8-K
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>frm8k1104ex10-1.txt
<DESCRIPTION>EXHIBIT 10.1 TO FORM 8-K
<TEXT>
                                                                  Exhibit 10.1















                     NATURAL GAS ASSET MANAGEMENT AGREEMENT

                                     BETWEEN

                               ROANOKE GAS COMPANY

                                       AND

                         SEQUENT ENERGY MANAGEMENT, L.P.




<PAGE>





                     NATURAL GAS ASSET MANAGEMENT AGREEMENT
                                    PREAMBLE


This Natural Gas Asset Management Agreement (the "AGREEMENT") is made and
entered into effective as of November 1, 2004, (the "EFFECTIVE DATE") by and
between Roanoke Gas Company ("COUNTERPARTY"), a Virginia corporation, and
Sequent Energy Management, L.P. ("MANAGER"), a Georgia limited partnership.
Counterparty and Manager are sometimes hereinafter referred to collectively as
the "Parties" and singularly as a "Party".

WHEREAS, Counterparty has certain Firm natural gas transportation and storage
rights and gas supply inventories and utilizes such transportation, storage
rights and gas supply inventories (hereafter referred to collectively as the
"Asset Portfolio") to provide a secure and reliable source of natural gas supply
available for delivery to Counterparty;

WHEREAS, Counterparty desires to optimize the use of such Asset Portfolio;

WHEREAS, Counterparty has chosen Manager to assist Counterparty in optimizing
the use of such Asset Portfolio, and

WHEREAS, in order to accomplish the results described above, Manager is prepared
to provide to Counterparty services substantially the same as those embedded in
such Asset Portfolio; and

NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained in this Agreement, Counterparty and Manager agree as follows:

                                    ARTICLE
                                 I DEFINITIONS

                               1.01 Defined Terms

The terms set forth below shall have the meaning ascribed to them below. Other
terms are also defined elsewhere in this Agreement, and shall have the meanings
ascribed to them therein.

"Agreement" shall mean this document and all attachments and exhibits hereto, as
each of the same may be amended from time to time.

"Asset Manager" or "Manager" shall mean Sequent Energy Management, L.P.

"Bankruptcy Default" shall mean, with respect to either Party, such Party (or
its Guarantor, if applicable) (i) makes an assignment or any general arrangement
for the benefit of creditors; (ii) files a petition or otherwise commences,
authorizes, or acquiesces in the commencement of a bankruptcy proceeding against
it; (iii) otherwise becomes bankrupt or insolvent (however


<PAGE>



evidenced); (iv) becomes unable to pay its debts as they fall due; or (v)
defaults in the payment or performance of any obligation to the other Party
under this Agreement (which remains uncured for a period of two (2) consecutive
Business Days).

"Baseload Gas" shall mean a Firm, fixed volume of Gas which Counterparty commits
to purchase each Day of a given Month, and which Manager commits to deliver and
sell at a price calculated according to the methodology set forth in Article IV
and as shown in Exhibit G.

"British Thermal Unit (Btu)" shall mean the amount of heat required to raise the
temperature of one (1) pound of pure water one (1) degree Fahrenheit at sixty
(60) degrees Fahrenheit measured on a dry basis at fourteen and seventy-three
hundredths (14.73) pounds per square inch absolute (psia). For reporting
purposes, Btu conversion factors of not less than three (3) decimal places shall
be used.

"Business Day" shall mean a calendar day on which both Parties are open for
business.

"Capacity Release" shall mean those contract rights released to Manager, as
specifically set forth in Section 2.01 of this Agreement.

"Central Prevailing Time" or "CPT" shall mean Central Standard Time adjusted for
Daylight Savings Time.

"Counterparty City Gate" or "City Gate" shall mean any interconnection
between the facilities of a Transporter and the facilities of Counterparty.

"Counterparty Storage Account" shall mean the account created by Manager to
record, on a Storage Service basis, the initial Gas inventory assigned by agency
agreement to Manager by Counterparty and all subsequent injections and
withdrawals.

"Cubic Foot" and "Standard Cubic Foot" shall mean that quantity of natural
gas that occupies one (1) cubic foot of volume at a temperature of sixty (60)
degrees Fahrenheit and at an absolute pressure of fourteen and seventy-three
hundredths (14.73) pounds per square inch (psi).

"Day" or "Gas Day" shall mean a period of twenty-four (24) consecutive
hours beginning and ending at nine o'clock (9:00) a.m. Central Prevailing Time,
or such other time as may be specified in the applicable Transporter's Tariff.

"Delivery Point(s)" shall mean any point or points on a Transporter's
pipeline system at which Counterparty has the right to receive or deliver Gas,
such point or points to be designated by Counterparty from time to time pursuant
to the nomination process.

"Effective Date" shall mean the Day on which this Agreement becomes
effective, as set forth in the Preamble of this Agreement.

"Federal Funds Rate" shall mean, for any Day, an interest rate per annum
equal to either (a) the


<PAGE>



rate published as the Overnight Federal Funds Effective Rate that appears
on the Telerate Page 118 for such day (or, if such day is not a Business Day,
for the preceding Business Day) or (b) if such rate is not so published for any
day which is a Business Day, the Federal Funds Rate as published by the Federal
Reserve Bank in H.15 (519).

"FERC" shall mean the Federal Energy Regulatory Commission or any successor
regulatory agency or body which has authority to regulate the rates and/or the
services of the Parties.

"Firm" means that either Party may only interrupt its performance to the
extent caused by an applicable Force Majeure event.

"Force Majeure", as employed within this Agreement, shall mean acts of God,
including epidemics, landslides, lightning, earthquakes, hurricanes, storms,
fires, floods, washouts and other similar unusual and severe natural calamities;
acts of the public enemy, wars, blockades, insurrections, riots, civil
disturbances, arrests and any laws, orders, rules, regulations, acts, restraints
of any government or governmental body or authority, civil or military, which
have the effect of prohibiting or substantially impairing performance of a
Party's obligations hereunder; strikes, lockouts, or other labor disturbances;
explosions, breakage or accidents to wells, machinery or lines of pipe; the
necessity for making non-routine repairs or alterations to machinery or lines of
pipe, freezing of lines of pipe; inability to obtain materials, supplies,
permits, or labor to perform or comply with any obligation or condition of this
Agreement, or the unavailability, interruption or curtailment of services
provided by a Service Provider under any of the contract rights released to
Manager pursuant to this Agreement. Force Majeure shall not include the
unavailability of capacity under any released contract to the extent the
unavailability is the result of Manager-utilizing the capacity to deliver Gas to
a third party, the inability to inject or to withdraw Gas to the extent such
inability is the result of the actual storage inventory under such Storage
Agreements being inadequate for such purposes as a result of acts or omissions
by Manager, or any other cause, whether of the kind herein enumerated or
otherwise, not within the control of the Party claiming suspension and which by
the exercise of due diligence such Party is unable to prevent or overcome. Force
Majeure shall also not include: (1) failure or loss of Counterparty's market(s),
(2) the inability of Manager to perform its obligations at a profit, (3) any
unanticipated increases in Manager's cost of Gas, or (4) the loss of any
particular source of supply, unless caused by an event of Force Majeure
affecting a geographic region.

"Gas" or "Natural Gas" shall mean any mixture of hydrocarbons or of
hydrocarbons and non- combustible gases, in a gaseous state, consisting
essentially of methane, which is of pipeline quality.

"Heating Value" shall mean the gross heating value on a dry basis which is
the number of Btu produced by the complete combustion at constant pressure of
the amount of dry gas which would occupy a volume of one (1) cubic foot at an
absolute pressure of fourteen and seventy-three hundredths (14.73) psi and sixty
(60) degrees Fahrenheit with combustion air at the same temperature and pressure
as the gas, the products of combustion being cooled to the initial temperature
of the gas and air, and the water formed by combustion condensed to the liquid
state.



<PAGE>



"Initial Storage Refill" shall mean and have the definition as provided in
Section 4.02.

"Interest Charges" shall mean long and short term interest expense.

"Intra-Day Gas" shall mean that volume of Gas which Counterparty may
request for delivery during any particular Gas delivery Day after 8:30 a.m. CPT
on the last Business Day prior to the Day(s) of Gas flow. If the Parties agree
to a quantity of Intra-Day Gas, the obligations of the Parties shall be Firm.
The price for Intra-Day Gas shall be a negotiated price based on then- current
market prices.

"MMBtu" shall mean one million (1,000,000) British Thermal Units.

"Month" shall mean a period beginning at nine o'clock (9:00) a.m. CPT, on
the first Day of a calendar month and shall end at the aforesaid time on the
first Day of the next succeeding calendar month, or such other period as may be
agreed to by the Parties.

"Physical Storage Balance" shall mean the actual DTH balance of the
aggregated pipeline storage agreements.

"Service Provider(s)" shall mean either a Storage Provider or a
Transporter, or both, individually or collectively, as the context requires.

"Storage Accounts" shall mean the accountings performed by Manager for each
of the Storage Facilities in which Gas assigned by agency agreement to Manager
by Counterparty is stored, into which Gas is injected or out of which Gas is
withdrawn. Such accountings shall reflect the initial Counterparty Storage
balance and subsequent injections and withdrawals whether or not such injections
or withdrawals actually occur.

"Storage Agreements" shall mean those agreements for Storage Services as
listed in Exhibit A.

"Storage Equivalent Injection Volumes" or "SEIVS" shall mean volumes of
Baseload Gas which Manager injects into Counterparty's Storage Accounts. SEIVs
are reported volumes of Gas owed by Manager to Counterparty as set forth in
Section 4.02 of this Agreement.

"Storage Equivalent Withdrawal Volumes" or "SEWVS" shall mean volumes of
Baseload Gas to be delivered to and received by Counterparty on a Firm basis
from the reported volumes of Gas held in Counterparty Storage Accounts pursuant
to Section 4.02.

"Storage Facilities" shall mean, collectively, the storage facilities
covered by the Storage Agreements.

"Storage Provider" means any provider of storage services, including, but
not limited to, a provider of storage services under the Storage Agreements.

"Storage Reserve" shall be the logical (contractual) position in the
Counterparty Storage Account on April 1 of each year.


<PAGE>




"Storage Services" shall mean, collectively, the pipeline storage services
provided according to Tariff, covered by the assigned Storage Agreements listed
in Exhibit A.

"Summer Refill Quantity" shall be defined as a set portion of the total
storage quantity.

"Swing Gas" shall mean a volume of Gas which Counterparty may nominate for
delivery no later than 8:30 a.m. CPT on the last Business Day prior to the
day(s) of Gas flow. Upon a proper nomination, the Parties' obligations to
deliver and receive Swing Gas shall be Firm and Manager shall commit to deliver
and sell Swing Gas at a price using the methodology set forth in Article IV and
as shown in Exhibit G.

"Tariff" shall mean the applicable FERC approved tariff of any Service
Provider or the applicable Public Service Commission approved tariff of
Counterparty.

"Term" shall have the meaning set forth in Section 9.01.

"Transporter" shall mean any pipeline transporter of Natural Gas.

"Utilization Fee" means the payment from Manager to Counterparty pursuant
to Section 7.03.

"Unit of Measurement" means one million (1,000,000) British Thermal Units
(MMBtus) on a dry basis.

"Weighted Average Storage Variable Costs" shall mean those costs identified
on Exhibit E as variable cost components of the calculation of the cost of
Baseload Gas and Swing Gas.

"Weighted Average Transportation Variable Costs" shall mean the weighted
average of all applicable variable pipeline transportation charges and
surcharges, including fuel, for each transportation contract released to
Manager, assuming full utilization of those assets. An example is set forth on
Exhibit D.

"Year" shall mean a period of three hundred sixty-five (365) consecutive
calendar days provided, however, that any such year that contains a date of
February 29th shall consist of three hundred sixty-six (366) consecutive
calendar days.

                                   ARTICLE II
                         RELEASE OF CONTRACTUAL CAPACITY

                              2.01 Capacity Release

Counterparty shall release to Manager the portion of Counterparty's right,
title and interest in and to those contracts and agreements for Firm
transportation and storage transportation capacity listed in Exhibit A, and any
and all amendments or modifications thereto. Counterparty's LNG


<PAGE>



facility at Daleville, VA shall be used solely by Counterparty and is not
an included Asset under this Agreement to be managed by Manager. The releases
are on more than one pipeline and are intended to represent, in so far as
operationally feasible, all of Counterparty's transportation and storage
transportation assets. Counterparty shall not terminate or materially modify or
amend any contract or agreement without prior consultation with Manager. The
Parties shall negotiate appropriate and comparable adjustments if the Manager's
ability to render service is reduced and, if unable to reach agreement, the
appropriate adjustments shall be submitted to arbitration pursuant to Article
XVI.

                          2.02 Term of Capacity Release

The Capacity Release shall be accomplished in a manner that shall provide
Manager with the appropriate capacity for a term of thirty-six (36) months. The
Capacity Release shall be released at the maximum reservation rates and
reservation surcharges under the applicable contracts and in accordance with the
terms and conditions of the document or documents evidencing the releases. The
releases may be revoked pursuant to Article X if there is a material breach or
early termination of this Agreement. Upon revocation, Counterparty reassumes all
rights and obligations that had been released to Manager.

                   2.03 Responsibility for Payment of Charges

During the term of the Capacity Release, Manager shall pay to each Service
Provider, as applicable, all amounts due and payable under the released
agreement(s) including, without limitation, reservation charges, reservation
surcharges, commodity charges, gathering and offshore charges, fuel adjustments,
overrun charges, and any other applicable charges and penalties attributable to
the Capacity Release. All amounts so paid by Manager during the term of the
Capacity Release shall be paid in accordance with various applicable payment
terms and provisions of the contracts released as those terms and provisions
have been disclosed to Manager, and applicable Tariffs. With respect to the
Capacity Release asset, Manager shall pay directly to Counterparty all pipeline
refunds or credits received (1) for periods prior to November 1, 2004, (2) for
demand charges and surcharges through the term of this Agreement, and (3)
refunds or credits for commodity charges and surcharges which are related to
shipments of Gas received by Counterparty during the term of this Agreement.

                                   ARTICLE III
                      STORAGE INVENTORY AGENCY DESIGNATION

                             3.01 Storage Inventory

Counterparty shall designate Manager as agent for its storage capacity and
all gas balances in storage of October 31, 2004. The inventory of Gas in each
Storage Facility is listed in Exhibit B. Manager shall provide agency service
and provide for utilization of storage assets as set forth in paragraph 4.02.




<PAGE>



                                   ARTICLE IV
                         FIRM SALES SERVICES AND PRICING

                             4.01 Firm Sales Service

Manager shall provide Firm Gas sales service to Counterparty at the
Counterparty receipt points on the applicable Transporter up to the volume and
reliability of transportation capacity released to Manager, as provided in this
Agreement. Subject to this supply obligation and the constraints of the relevant
Tariffs, Manager shall have the right to manage the released assets in any
manner it chooses. Gas sold to Counterparty shall be priced at a single
delivered price for Baseload Gas, a single delivered price for Swing Gas and a
single delivered price for Intra-Day Gas. The price for Baseload Gas shall be
determined monthly; the price for Swing Gas shall be determined daily, and the
price for Intra-Day Gas shall be determined at the applicable day and hour of an
Intra-Day request. The price for Baseload Gas and Swing Gas shall be determined
by adding (1) the Weighted Average Transportation Variable Costs on Exhibit D to
(2) a gas commodity charge for each level of service. For Baseload Gas, the gas
commodity charge shall be the weighted average, as allocated on Exhibit C, of
the following indices for the applicable supply area: (a) the Inside F.E.R.C.
Gas Market Report first of the month index price, and (b) the price listed in
NATURAL GAS INTELLIGENCE "Weekly Gas Price Index" under heading "Spot Gas Prices
- Midweek Chicago Citygate, Bidweek Average." For Swing Gas, the gas commodity
charge shall be the Gas Daily daily mid-point price for each applicable supply
area for the Day of Gas delivery. Exhibit C details the indices to be used in
calculating Baseload and Swing Gas prices. An example of Baseload Gas and Swing
Gas price calculations are attached as Exhibit G. Any requirements, intra day
shall be priced at market determined at the applicable day and hour of an
Intra-Day request. If there is no single price published for one of the
locations specified in Exhibit C on a particular Day, then the Manager and
Counterparty shall promptly negotiate a price that most fairly represents then
current market conditions.

With respect to Gas delivered off of Columbia Gas Pipeline, to the extent
Counterparty fails to take nominated Gas or takes Gas in excess of its nominated
volume and such amounts are within the greater of (i) 7,000 MMBtu of the
nominated amount for the applicable Day of delivery or (ii) the applicable
Transporter storage ratchets (the "Balancing Tolerance"), the following shall
apply:

Manager shall allow a daily variance of 7,000 dekatherms (DTH) +/- from
scheduled volumes off Columbia Gas Pipeline, unless the variance is over the
maximum daily quantity (MDQ) or over the maximum daily injection quantity
(MDIQ). For quantities within this tolerance, Counterparty shall be subject to
the following "cash out" schedule:


<TABLE>
<CAPTION>

   Balancing Situation within                                           Pricing
    DAILY BALANCING tolerance
<S>     <C>    <C>    <C>    <C>    <C>    <C>
   UNDERTAKES by Counterparty                                          Lesser of
                                             GAS DAILY MIDPOINT Columbia Gas Appalachian (for the day of)
                                                               MINUS four cents (-$0.04)
                                                                          Or
                                            GAS DAILY MIDPOINT Columbia Gas Appalachian (for the day after)
                                                               MINUS four cents (-$0.04)



<PAGE>




    OVERTAKES by Counterparty                                         Greater of
                                             GAS DAILY MIDPOINT Columbia Gas Appalachian (for the day of)
                                             PLUS four cents (+$0.04) plus variables and fuel to Citygate
                                                                          Or
                                            GAS DAILY MIDPOINT Columbia Gas Appalachian (for the day after)
                                             PLUS four cents (+$0.04) plus variables and fuel to Citygate
</TABLE>

For quantities in excess of the agreed to DAILY BALANCING tolerance and
still within pipeline contracts and not on days of pipeline restrictions,
Counterparty shall be subject to the following "cash out" schedule:

<TABLE>
<CAPTION>


   Balancing Situation outside                                          Pricing
    DAILY BALANCING tolerance
<S>     <C>    <C>    <C>    <C>    <C>    <C>

   UNDERTAKES by Counterparty                                          Lesser of
                                           GAS DAILY ABSOLUTE LOW Columbia Gas Appalachian (for the day of)
                                                               MINUS four cents (-$0.04)
                                                                          Or
                                          GAS DAILY ABSOLUTE LOW Columbia Gas Appalachian (for the day after)
                                                               MINUS four cents (-$0.04)
    OVERTAKES by Counterparty                                         Greater of
                                          GAS DAILY ABSOLUTE HIGH Columbia Gas Appalachian (for the day of)
                                             PLUS four cents (+$0.04) plus variables and fuel to Citygate
                                                                          Or
                                             GAS DAILY ABSOLUTE HIGH Columbia Gas Appalachian (for the day
                                                                        after)
                                             PLUS four cents (+$0.04) plus variables and fuel to Citygate
</TABLE>

Manager shall provide Counterparty with a report detailing the balancing
conducted pursuant to this Section by e-mail or facsimile upon request by the
Counterparty. Such report shall be substantially in the form of Exhibit M.

For nominated Gas which Counterparty fails to take and which does not fall
within the above Balancing Situations for such Day and Gas delivered off of
pipelines other than Columbia Gas Pipeline, Counterparty shall compensate
Manager for the positive difference, if any, between the price for such Gas
under this Agreement and the market price for such Gas as determined by Manager
in its sole discretion. The Parties understand that component rates and pipeline
charges shall change from time to time and that Exhibits D and E are
representative only. Manager shall have discretion, subject to the applicable
Tariffs and Counterparty operational constraints, to determine the source and
routing of the Gas delivered on behalf of Counterparty. IN THE EVENT THE
PROJECTED DAILY FORECAST PURSUANT TO SECTION 5.05 EXCEEDS THE FIRM CAPACITY
AVAILABLE UNDER THE CAPACITY RELEASE, COUNTERPARTY AND MANAGER SHALL WORK
TOGETHER TO REVIEW ALTERNATIVES THAT MAY INCLUDE ADDITIONAL FIRM GAS SALES
SERVICE TO COUNTERPARTY. In the event that a Transporter determines that
Counterparty's volume entitlements at particular points are different than those
shown in Exhibit C, Manager and Counterparty shall mutually agree on an
alternate pricing mechanism. The Parties may, upon mutual agreement, agree to
fix the Gas prices under this Agreement, subject to the terms of the Trigger
Price Addendum attached hereto as Exhibit N.


<PAGE>



                       4.02 Utilization of Storage Assets

Manager shall maintain two (2) accounts for each Storage Facility, one the
"Counterparty Storage Account" and the other the "Physical Storage Balance." The
Counterparty Storage Account shall record, on a Storage Service basis, the
initial Gas inventory assigned by agency agreement to Manager and all subsequent
injections and withdrawals as set forth in Exhibits I and J. Manager shall
manage the withdrawal and injections of Counterparty's storage assets.

Storage injections (SEIVS) and withdrawals (SEWVS) are understood by the
Parties to be paper transactions that may differ from the actual physical
volumes held in storage at any point in time. Manager has the right, subject to
Counterparty's right to receive SEWVs (which volumes may be supplied from other
sources) and limitations contained in the Tariffs, to actually inject, withdraw
and sell Gas from the Counterparty's Storage Facilities as it sees fit provided,
however, that Manager complies with the withdrawal schedule set forth below:

Counterparty shall retain physical ownership of storage and Manager shall
be named as agent on Counterparty's storage contracts. Manager shall manage
Counterparty's total Storage Inventory as detailed on Exhibit B. If the
inventory level shown in Physical Storage Balances falls below the amount
necessary to fill Counterparty's Storage Account to the required level by the
first of November without incurring penalties pursuant to Tariff rules for over
injection, ("STORAGE SHORTFALL"), then Manager shall provide Counterparty with
(1) adequate assurances of sufficient primary Firm pipeline transportation
capacity to the Counterparty receipt points on the applicable Transporter equal
to the Storage Shortfall, and (2) subject to confidentiality restrictions,
reasonable financial assurances, in the form of parent guaranties, firm
contracts for the required volumes of Gas, or letters of credit acceptable to
Counterparty of its ability to provide Gas supply equal to the Storage
Shortfall. Physical Storage Balance shall not fall to levels that would prohibit
the Manager from meeting all operational requirements of Counterparty or that
would cause Counterparty to be outside the tariff requirements of Service
Providers. Not withstanding the above, the difference between Counterparty's
Storage Account and the Physical Storage Balance shall not exceed twenty-five
percent (25%), except without limit, the Physical Storage Balance may exceed the
Counterparty's Storage Account. In the event that the difference between
Counterparty's Storage Account and the Physical Storage Balance does exceed
twenty-five percent (25%), Manager shall make necessary physical adjustments
with thirty (30) days so as to get the Physical Storage Balance back within
twenty-five percent (25%). Also, at the sole discretion of Counterparty, the
Counterparty shall have the right to allow the Manager to exceed or remain
outside the tolerance level, if the Manager satisfactorily demonstrates to
Counterparty that such exception does not prohibit the Manager from meeting all
operational requirements of Counterparty.

STORAGE WITHDRAWALS

Counterparty Storage Account shall be established and invoiced (on paper)
at a withdrawal level equal to eighty and one-half percent (80.5%) of the
Initial Storage Inventory each winter. Monthly withdrawal percentages are
identified in the table below. The remaining inventory of nineteen and one-half
percent (19.5%) will be reserved and said levels will be in place (on paper)


<PAGE>



on April 1. This reserve, hereto referred to as Storage Reserve, shall be a
logical (contractual) position in the Counterparty's Storage Account. Manager
shall manage all withdrawal levels within the operating guidelines of the
pipeline ratchet requirements.

During the Months of November through March, Manager shall invoice the
Counterparty a ratable daily amount of Baseload Gas over the respective month
according to the following schedule, including appropriate storage withdrawal
charges as reflected in Exhibit E:

<TABLE>
<CAPTION>


       MONTH                               PERCENTAGE OF INITIAL STORAGE INVENTORY TO BE WITHDRAWN
<S>     <C>    <C>    <C>    <C>    <C>    <C>
      November                                                       7 %
      December                                                      18 %
      January                                                      28.5 %
      February                                                      20 %
       March                                                         7 %
</TABLE>


STORAGE INJECTIONS

Counterparty Storage Account levels shall be at ninety five (95%) by
November 1 of each year, and is defined as "Initial Storage Inventory".

The "Summer Refill Quantity" shall be defined at eighty and one half
percent (80.5%) of the Initial Storage Inventory.

Seventy five (75%) of the Summer Refill Quantity shall be billed to
Counterparty on a ratable monthly basis (1/7) during the period April 1 through
October 31, herein referred to as "Initial Storage Refill". The prices for each
Month's Gas shall be determined by the same method as for Baseload Gas, using
the prices set forth in the Inside F.E.R.C. Gas Market Report, plus applicable
transportation fees and injection fees, both commodity and fuel. Twenty five
percent (25%) of the Summer Refill Quantity shall be billed in any one, or
number of, summer months but always remaining within the monthly pipeline tariff
requirements. Manager shall notify Counterparty within five (5) business days of
the following month of any additional storage quantity to be billed (in excess
of the Initial Storage Refill) to be billed in that respective month to the
Counterparty's Storage Account or, if directed by Counterparty, to be billed on
a monthly prorated basis to any remaining months of the respective summer
injection period (April through October). For example, additional storage
quantity in excess of the Initial Storage Refill in July could be billed (if
requested by Counterparty) in four (4) equal installments for invoices rendered
for July, August, September and October.




<PAGE>



                                    ARTICLE V
            MANAGEMENT OF CAPACITY RELEASE AGREEMENTS AND EQUIVALENT
                               NATURE OF SERVICES

                         5.01 Compliance with Agreements

Manager and Counterparty shall comply with all terms and provisions of the
agreements released to Manager and all pertinent statutes, rules, orders,
Tariffs and regulations with respect thereto. For purposes of this Agreement,
Manager's rights under the Capacity Release shall include, without limitation,
the injection of Gas into the Storage Services, the withdrawal of Gas from the
Storage Services the transportation of Gas to and from all applicable receipt
and Delivery Points and any other use which Manager sees fit, provided such use
is allowable under the applicable statutes, rules, Tariffs, orders and
regulations.

                              5.02 Indemnifications

Subject to Section 15.05 of this Agreement, Manager shall indemnify
Counterparty and hold Counterparty harmless from all liability and expense on
account of Manager's use of rights released under the Capacity Assignment,
including, without limitation, any violation or breach by Manager of the
agreements released, applicable Tariffs or pertinent statutes, rules, orders and
regulations, to the extent that such liability or expense is not the result of
Counterparty negligence or willful misconduct.

                                 5.03 Management

Manager shall manage the transferred Counterparty Storage Inventory and
Capacity Release in a prudent manner consistent with all applicable Tariffs and
the operational requirements detailed on Exhibit Q.

                            5.04 Quality of Services

Manager shall provide Gas delivered to the Counterparty receipt points on
the applicable Transporter up to the volumes and reliability of deliveries that
Counterparty would have received had these agreements not been released to
Manager, subject to the terms of this Agreement and constraints of applicable
Transporter tariffs.

                                5.05 Nominations

Counterparty shall provide to Manager the daily usage forecasts for each
upcoming Day, Month and/or season, as applicable by 8:30 am CPT on the previous
Day, consistent with the applicable nomination deadlines. The nomination
deadline for Baseload Gas is set forth in Exhibit K and the nomination deadlines
for Swing Gas and Intra-Day Gas are set forth in Exhibit L. Based on the
Counterparty forecasts, Manager shall prioritize, make and confirm all supply
contract and pipeline nominations required to effect the delivery of Gas to the
applicable Delivery Point(s). All nominations shall be made by verbal agreement
via telephonic means or by electronic mail. The


<PAGE>



Parties agree to the following procedures in the event the Parties reach
verbal agreement regarding the nomination of Gas by Counterparty. Any oral
agreement shall be binding unless superseded by a written confirmation, which
may be in the form of a telephonic facsimile transmission ("FAX"). The
telephones of the Parties may be monitored by recording equipment. The Parties
hereby consent to such recordings and any such recordings shall serve as the
best evidence of any oral agreement. Upon request by either party, Counterparty
and/or Manager shall, send a written confirmation to the other generally in the
form of Exhibit P, by Fax or other electronic transmission, reflecting the
agreed-upon terms of the particular transaction. The Parties shall resolve any
discrepancies in such confirmations as soon as reasonably possible, so they can
agree in writing to a confirmation.

                                   ARTICLE VI
                         REPRESENTATIONS AND WARRANTIES

                 6.01 Representations and Warranties of Manager

As a material inducement to entering into this Agreement, Manager
represents and warrants to Counterparty as of the date of the execution and
delivery of this Agreement and throughout the Term hereof as follows:

     (a)  There are no suits, proceedings, judgments, rulings or orders by or
          before any court or any governmental authority to which Manager is a
          party that materially adversely affect (1) its ability to perform its
          obligations under this Agreement, or (2) the rights of Counterparty
          hereunder.

     (b)  Manager is duly organized, validly existing and in good standing under
          the laws of the State of Georgia, and it has the legal right, power
          and authority and is qualified to conduct its business, and to execute
          and deliver this Agreement and perform its obligations under the same,
          and all regulatory authorizations have been obtained and/or maintained
          as necessary for it to legally perform its obligations hereunder.

     (c)  The making and performance by Manager of this Agreement is within its
          powers, has been duly authorized by all necessary action on its part,
          and does not and shall not violate any provisions of its incorporation
          or other formation, as applicable, or any other of its governing
          documents, nor shall the making or performance of this Agreement
          violate (1) any agreement or instrument to which Manager is a party or
          is bound, (2) any material provisions of any judgment, decree, or
          judicial order applicable to Manager, (3) any provision of law or any
          rule, regulation, or administrative order presently in effect and
          applicable to Manager or its governing documents. To the best of
          Manager's knowledge and belief, no consents of third parties, whether
          private, judicial or public, are required under any agreement or
          instrument to which Manager is a party or is bound; provided however,
          that if, after the execution hereof, any such third party consents are
          deemed to be necessary in order to effectuate the purposes and intent
          of this Agreement, then Manager shall use its best efforts to promptly
          obtain such consents.


<PAGE>




     (d)  This Agreement when entered into constitutes a legal, valid and
          binding act and obligation of Manager, enforceable against it in
          accordance with its terms, subject to principles of equity and
          bankruptcy, insolvency, reorganization and other laws affecting
          creditors' rights generally.

     (e)  There are no bankruptcy, insolvency, reorganization, receivership or
          other arrangements or proceedings pending or being contemplated by
          Manager, or to its knowledge, threatened against Manager.

     (f)  It is acting for its own account, has made its own independent
          decision to enter into this Agreement (including any confirmation
          accepted in accordance with Section 5.05) and as to whether this
          Agreement (including any confirmation accepted in accordance with
          Section 5.05) is appropriate or proper for it based upon its own
          judgment, is not relying upon the advice or recommendations of the
          other Party in so doing, and is capable of assessing the merits of and
          understanding, and understands and accepts, the terms, conditions and
          risks of this Agreement (including any confirmation accepted in
          accordance with Section 5.05).

     (g)  It is a "forward contract merchant" within the meaning of the United
          States Bankruptcy Code.

     (h)  It has entered into this Agreement (including each confirmation
          accepted in accordance with Section 5.05) in connection with the
          conduct of its business and it has the capacity or ability to make or
          take delivery of all Gas referred to herein.

     (i)  The material economic terms of this Agreement (and each confirmation
          accepted in accordance with Section 5.05) have been subject to
          individual negotiation by the Parties.

               6.02 Representations and Warranties of Counterparty

As a material inducement to entering into this Agreement, Counterparty
represents and warrants to Manager as of the date of execution and delivery of
this Agreement and throughout the Term hereof as follows:

     (a)  There are no suits, proceedings, judgments, rulings or orders by or
          before any court or any governmental authority to which Counterparty
          is a party that materially adversely affect (1) its ability to perform
          its obligations under this Agreement, or (2) the rights of Manager
          hereunder.

     (b)  Counterparty is duly organized, validly existing and in good standing
          under the laws of the State of Virginia, and it has the legal right,
          power and authority and is qualified to conduct its business, and to
          execute and deliver this Agreement and perform its obligations under
          the same, and all regulatory authorizations have been


<PAGE>



          obtained and/or maintained as necessary for it to legally perform its
          obligations hereunder.

     (c)  The making and performance by Counterparty of this Agreement is within
          its powers, has been duly authorized by all necessary action on its
          part, and does not and shall not violate any provisions of its
          incorporation, bylaws or any other of its governing documents, nor
          shall the making or performance of this Agreement violate (1) any
          agreement or instrument to which Counterparty is a party or is bound,
          (2) any material provisions of any judgment, decree or judicial order,
          statute, rule or regulation applicable to Counterparty, (3) any
          provision of law or any rule, regulation, or administrative order
          (including, without limitation, any applicable state or federal
          Tariffs or service certificates), presently in effect and applicable
          to Counterparty or its governing documents. To the best of
          Counterparty's knowledge and belief, no consents of third parties,
          whether private, judicial or public, are required under any agreement
          or instrument to which Counterparty is a party or is bound; other than
          consents that may be required from the Service Providers, which
          consents, to the extent required, Counterparty shall pursue the
          obtaining of with reasonable diligence from the appropriate parties;
          provided however, that if, after the execution hereof, any other third
          party consents are deemed to be necessary in order to effectuate the
          purposes and intent of this Agreement, then Counterparty shall use its
          best efforts to promptly obtain such consents.

     (d)  This Agreement when entered into constitutes a legal, valid and
          binding act and obligation of Counterparty, enforceable against it in
          accordance with its terms, subject to principles of equity and
          bankruptcy, insolvency, reorganization and other laws affecting
          creditors' rights generally.

     (e)  There are no bankruptcy, insolvency, reorganization, receivership or
          other arrangements or proceedings pending or being contemplated by
          Counterparty, or to its knowledge, threatened against Counterparty.

     (f)  Counterparty is the contract owner of the contracts listed in Exhibit
          A, those contracts are in full force and effect, have the termination
          and notice dates listed in Exhibit A, and Counterparty is not aware of
          any claims assertable under those contracts by any party to such
          agreements or otherwise that would materially and adversely affect the
          performance of Counterparty's obligations thereunder or hereunder or
          Manager's rights and obligations hereunder.

     (g)  It is acting for its own account, has made its own independent
          decision to enter into this Agreement (including any confirmation
          accepted in accordance with Section 5.05) and as to whether this
          Agreement (including any confirmation accepted in accordance with
          Section 5.05) is appropriate or proper for it based upon its own
          judgment, is not relying upon the advice or recommendations of the
          other Party in so doing, and is capable of assessing the merits of and


<PAGE>



          understanding, and understands and accepts, the terms, Conditions and
          risks of this Agreement (including any confirmation accepted in
          accordance with Section 5.05).

     (h)  It is a "forward contract merchant" within the meaning of the United
          States Bankruptcy Code.

     (i)  It has entered into this Agreement (including any confirmation
          accepted in accordance with Section 5.05) in connection with the
          conduct of its business and it has the capacity or ability to make or
          take delivery of all Gas referred to herein.

     (j)  The material economic terms of this Agreement (and each confirmation
          accepted in accordance with Section 5.05) have been subject to
          individual negotiation by the Parties.

                                   ARTICLE VII
                          FEES AND OTHER CONSIDERATION

                    7.01 Reimbursement of Reservation Charges

Each Month during the term of this Agreement, Counterparty shall reimburse
Manager, as provided herein, by payment in immediately available funds for one
hundred percent (100%) of the aggregate total of the reservation charges and
reservation surcharges, attributable to the Capacity Release during the
applicable Month, calculated on the basis of the contract rates paid to the
Service Providers by Manager. Manager shall remit to Counterparty any and all
pipeline refunds associated with the Capacity Release as set forth in Section
2.03.

                          7.02 Supporting Documentation

Manager shall furnish Counterparty with copies of the pertinent invoices
and statements from the Service Providers, along with supporting documentation
and calculations, setting forth the amount Counterparty is required to pay to
Manager in accordance with Section 7.01 no later than four (4) Business Days
prior to the applicable payment due date to the Service Providers.
Counterparty's payment to Manager in accordance with Section 7.01 shall be
deemed timely if made by wire transfer no later than two o'clock (2:00) p.m.
Central Prevailing Time on the Business Day prior to each payment due date or
three (3) Business Days after receipt of the invoices and statements, whichever
is later.

                              7.03 Utilization Fees

During the term hereof, Manager shall pay to Counterparty a Utilization Fee
as defined in Exhibit F (the "UTILIZATION FEE").

On April 1, 2005 and April 1, 2006, Counterparty shall have the option to
advise Manager for succeeding Contract year that it wishes as a price re-opener
to utilize a profit sharing methodology in place of the fixed payment schedule
provided herein. The Parties shall meet in good faith and attempt to agree on a
profit sharing methodology by June 1, 2005 and June 1,


<PAGE>



2006 respectively. In the absence of agreement on profit sharing, the fixed
price payment provided herein shall remain in effect.

                       7.04 Invoicing and Payments for Gas

The Parties shall invoice each other for Gas sold to the other Party,
whether that Gas is Firm sales service pursuant to Section 4.01 or Summer Refill
Quantity pursuant to Section 4.02. Invoices shall be rendered each Month for Gas
delivered (or in the case of Summer Refill Quantity, deemed to be delivered) in
the preceding Month, and for any other applicable charges (such as injection
fees), providing supporting documentation acceptable in industry practice to
support the amount charged. If the actual quantity is not known by the billing
date, billing shall be prepared based on the quantity of Gas scheduled to be
delivered. The invoice shall then be adjusted to the actual quantity on the
following Month's billing, or as soon thereafter as actual information is
available. Each Party shall remit the invoiced amount on the later of (a) the
twenty-fifth (25th ) day of the Month after delivery or (b) ten (10) days after
the invoice date. If the amount of an invoice is disputed in good faith, the
Party shall pay the undisputed portion. Interest on late payments of undisputed
amounts shall accrue at the rate of the then effective prime rate of interest
published under "Money Rate" by the Wall Street Journal, plus two percent (2%)
per annum from the due date until the date of payment. Payment shall be in
immediately available funds to the bank accounts set forth in this Agreement.
The Parties agree to discharge mutual debts and payment obligations due and
owing to each other whether arising under this Agreement or any other agreement,
but limited to natural gas transactions only, between the Parties through
netting. Therefore, all amounts owed by one Party to the other Party during any
given month arising from natural gas transactions shall be netted against the
amount owed by the other Party under such transactions. The Party owing the
greater amount shall pay the difference to the other Party and notify the other
Party of the amount netted using the invoice and payment procedures described
herein.

                                   7.05 Audit

Counterparty and its outside accountants shall have the right, upon
reasonable notice and at reasonable times during normal business hours, to enter
Manager's offices and inspect and copy Manager's records and books of account,
but only to the extent necessary to audit any statement provided to Counterparty
by Manager, and to assure that amounts paid or billed to Counterparty are
correct in all respects. Manager and its outside accountants shall have the
right, upon reasonable notice and at reasonable times during normal business
hours, to enter Counterparty's offices and inspect and copy Counterparty's
records and books of account, but only to the extent necessary to audit any
statement provided to Manager by Counterparty, and to assure that amounts paid
or billed to Manager are correct in all respects. Each Party shall bear all the
costs of performing its audit. Such right to audit shall be available for the
terms of this Agreement and for two (2) years thereafter. All audits shall be on
a confidential basis and shall require the execution of a confidentiality
agreement prior to commencement.




<PAGE>



                                  ARTICLE VIII
                            FINANCIAL RESPONSIBILITY

                            8.01 Financial Assurances

Prior to the commencement of performance, or at any time during the term of
this Agreement, either Party may require the other to provide financial
information reasonably needed to ascertain the other Party's ability to pay for
Gas to be received under this Agreement or to meet any other obligation which
may accrue, including without limitation the obligation to pay damages in the
event of failure to perform. If either Party's creditworthiness becomes
unsatisfactory in this regard, then the dissatisfied party (the "UNSECURED
PARTY") may require assurance of the other Party's ability to pay or require
different terms of payment. The Unsecured Party may suspend deliveries or
receipts hereunder or terminate this Agreement if, in the sole opinion of the
Unsecured Party, the other Party fails to deliver the requested credit
information or assurance of its ability to pay within two (2) Business Days of
such request. Such assurance may, at the option of the Unsecured Party, include
(i) the required posting of letter of Credit (acceptable to the Unsecured Party
and the issuing bank); (ii) cash prepayments; (iii) corporate guaranty or (iv)
other security acceptable to the Unsecured Party.

                                  8.02 Guaranty

Within five (5) Days of the execution of this Agreement, Counterparty shall
provide Manager with a guaranty (the "Guaranty") from RGC Resources (the
"Guarantor") substantially in the form attached hereto as Exhibit O.
Additionally, within five (5) Days of the execution of this Agreement, Manager
shall provide Counterparty with a guaranty (the "Guaranty") from AGL Resources
(the "Guarantor") substantially in the form attached hereto as Exhibit O.

                                   ARTICLE IX
                       TERM, DEFAULT, CURE AND TERMINATION

                                    9.01 Term

This Agreement shall be effective as of November 1, 2004 and shall continue
through and including October 31, 2007 (the "TERM"). This Agreement may be
renewed for twelve (12) months at the end of the Term, when both Parties notify
the other in writing at least ninety (90) days before the end of the Term of its
intent to renew. This Agreement shall terminate upon any date on which any
federal or state statute, regulation, order or judicial decision renders this
Agreement, or the Agreements comprising the Capacity Release, illegal, null or
void. This Agreement may be terminated before the expiration of the Term upon
either a Manager Default or a Counterparty Default, as defined herein.
Termination prior to the expiration of the Term shall be effected by a written
notice from the terminating Party, stating the reason for the termination,
including, if applicable, the failure of the other Party to cure within the
applicable period, and the effective date of termination.



<PAGE>



                            9.02 Breach and Remedies

     (a)  Unless such failure is the result of Force Majeure or the failure or
          negligence of Counterparty, each of the following shall be deemed a
          Manager Default:

          (i)  The failure of Manager to comply with the material terms and
               conditions of the Agreements, as disclosed and released to
               Manager under the Capacity Release;

          (ii) The failure of Manager to pay any undisputed amounts due any
               Service Provider under the Capacity Release and such failure
               continues for a period of ten (10) days after Manager receives
               written notice of same;

          (iii) Manager's engaging in one or more of the following acts: (a) an
               assignment or any general arrangement for the benefit of its
               creditors, (b) the filing of a petition or other commencement,
               authorization or acquiescence in the commencement of a proceeding
               or cause under any bankruptcy or similar law for the protection
               of creditors, or (c) the inability of Manager to pay its debts
               when due (a "MANAGER BANKRUPTCY DEFAULT");

          (iv) Any material inaccuracy in any representation or warranty of
               Manager set forth in this Agreement, and such inaccuracy is not
               remedied within thirty (30) days of Manager's receipt of a
               written notice from Counterparty describing the particulars of
               such inaccuracy in reasonable detail;

          (v)  The failure of Manager to perform any material covenant or
               obligation in this Agreement, other than those specified in
               clauses (i) through (iv) or through (ix), and such failure is not
               remedied within ten (10) days of Manager's receipt of a written
               notice from Counterparty describing the particulars of such
               failure in reasonable detail;

          (vi) The failure of Manager to provide Firm sales service as provided
               in Article IV;

          (vii) The failure of Manager to provide Counterparty with financial
               information requested pursuant to Section 8.01 or requested
               collateral pursuant to Section 8.02, in each case, in an amount
               and form acceptable to Counterparty.

     (b)  The occurrence of any of the following with respect to Counterparty or
          the Guarantor shall be deemed a Counterparty Default:

          (i)  The failure to pay undisputed amounts due Manager herein, and
               such failure continues for a period of ten (10) days after
               receipt of written notice of same;


<PAGE>



          (ii) Engaging in one or more of the following acts (a) an assignment
               or any general arrangement for the benefit of its creditors, (b)
               the filing of a petition or other commencement, authorization or
               acquiescence in the commencement of a proceeding or cause under
               any bankruptcy or similar law for the protection of creditors, or
               (c) the inability to pay its debts when due (a "COUNTERPARTY
               BANKRUPTCY DEFAULT");

          (iii) Any material inaccuracy in any representation or warranty set
               forth in this Agreement or the Guaranty, and such inaccuracy is
               not remedied within thirty (30) days of receipt of a written
               notice describing the particulars of such inaccuracy in
               reasonable detail;

          (iv) The failure to perform any material covenant or obligation in
               this Agreement or Guaranty (other than those specified in clauses
               (i) through (iii) and (v) through (ix)), and such failure is not
               remedied with ten (10) days of receipt of a written notice from
               Manager describing the particulars of such failure in reasonable
               detail; or

          (v)  The failure to obtain, within a reasonable time, the necessary
               consents from Service Providers specified in Section 6.02 (c).

          (vi) The failure to provide Manager with financial information
               requested pursuant to Section 8.01 or requested collateral
               pursuant to Section 8.02, in each case, in an amount and form
               acceptable to Manager.

         (vii) The failure to provide Manager with the Guaranty as set forth in
               Section 8.02 herein.

        (viii) The failure of the Guaranty to be in full force and effect for
               purposes of this Agreement (other than in accordance with its
               terms) prior to the satisfaction of all obligations of
               Counterparty without the written consent of Manager.

          (ix) The Guarantor repudiates, disaffirms, disclaims or rejects, in
               whole or in part, or challenges the validity of the Guaranty.

     (c)  Remedies for Manager Defaults or Counterparty Defaults, as applicable,
          shall be as follows:

          (i)  For a Manager Bankruptcy Default or a Counterparty Bankruptcy
               Default, automatic and immediate termination of this Agreement
               subject to and in accordance with Sections 9.02(d), 9.02(e) and
               9.04; and

          (ii) For all other Defaults, termination of this Agreement,
               termination of the Capacity Release, transfers of inventory and
               releases set forth in Articles II


<PAGE>



               and III and reversion of those transfers and releases to
               Counterparty on twenty-four (24) hours notice, subject to and in
               accordance with Sections 9.02(d), 9.02(e) and 9.04, and

          (iii) If, for any reason other than Force Majeure, Manager fails to
               deliver the volume of Gas nominated by Counterparty on any Day
               during the Term of this Agreement, then Manager shall pay to
               Counterparty an amount equal to (w) the cost, per MMBtu, of
               obtaining Gas or its equivalent using reasonable methods under
               the circumstances then prevailing, less (x) the cost, per MMBtu,
               of Baseload Gas or Swing Gas (whichever is less), times (y) the
               undelivered volume, plus (z) transportation costs and pipeline
               penalties if applicable. In addition, in the event of such an
               unexcused failure to deliver Gas to Counterparty, Manager shall
               refund to Counterparty one hundred percent (100%) of the
               reservation charges and reservation surcharges that Counterparty
               pays to Manager in accordance with Section 7.01 of this Agreement
               to the extent, and only to the extent, that such reservation
               charges and reservation surcharges are attributable to that
               portion of the volume of Gas that Manager fails to deliver.

          (iv) With respect to liquidated damages provided for in this Section,
               it is expressly stipulated by the Parties that the actual amount
               of any damages would be difficult if not impossible to determine
               accurately because of the unique nature of this Agreement, the
               unique needs and requirements of Counterparty, the uncertainties
               of the Gas market and differences of opinion with respect to such
               matters, and that the liquidated damages provided for herein are
               a fair and reasonable estimate by the Parties of such damages.
               The liquidated damages provided for in this Section are not
               intended to compensate either Party for penalties that may be
               imposed pursuant to Section 15.09.

     (d)  In the event of a termination of this Agreement pursuant to Section
          9.02(c)(i) or (ii), in addition to any other remedies available
          hereunder or pursuant to applicable law, the non-defaulting Party
          shall have the right, exercisable in its sole discretion, to withhold
          or suspend deliveries or receipts hereunder or to (i) terminate all
          agreements between the Parties (each a "Terminated Transaction"), and
          determine the Settlement Amount (as defined below) of each such
          Terminated Transaction and (ii) set off, at the election of the
          non-defaulting Party, any other amounts owed by the defaulting Party
          to the non-defaulting Party so that all such amounts are netted to a
          single liquidated amount payable immediately by one Party to the
          other. Notwithstanding the foregoing, in the event the non-defaulting
          Party is unable to terminate the Terminated Transactions during any
          bankruptcy, insolvency or reorganization proceeding, all such
          Terminated Transactions shall be deemed to have automatically
          terminated as of the Business Day immediately preceding the Day on
          which the non-defaulting Party became subject to such proceeding.
          "Settlement Amount" shall mean, with respect to one or more Terminated


<PAGE>



          Transactions and the non-defaulting Party, an amount determined on the
          basis of not less than one (1) nor more than the average of three (3)
          quotations obtained by the non-defaulting Party from dealers or other
          industry participants recognized in the industry as being
          knowledgeable in this type of transaction ("Reference Market Makers")
          for an amount, if any, that shall be payable to the non-defaulting
          Party by the defaulting Party (expressed hereunder as a positive
          number but by the Reference Market Maker as a negative number) or
          payable by the non-defaulting Party to the defaulting Party (expressed
          hereunder as a negative number but by the Reference Market Maker as a
          positive number) as consideration for an agreement between the
          non-defaulting Party and the Reference Market Maker to enter into a
          transaction that shall have the effect of preserving for the
          non-defaulting Party the economic equivalent of any payment or
          delivery (whether the underlying obligation was absolute or contingent
          and assuming the satisfaction of each applicable condition precedent).
          Notwithstanding anything to the contrary herein, the non- defaulting
          Party shall not be required to enter into any transactions with any
          dealer(s). Further, the Parties may refer to published prices which
          are representative of the economic value of this Agreement in lieu of
          reference to Reference Market Makers upon mutual agreement.

     (e)  The remedies specifically provided for in this Section 9.02 are
          cumulative of, and may be exercised without prejudice to, any other
          remedies (whether at law or in equity) to which either Party may be
          entitled for any Default hereunder, including, without limitation (i)
          suit(s) to enforce a Party's right to collect amounts owed it
          hereunder, or (ii) the exercise of offset rights.

                                 9.03 No Waiver

Termination of this Agreement for any reason shall not operate to waive any
right or claim that either Party may have against the other under this Agreement
or otherwise.

                           9.04 Winding Up Operations

At the end of the full term of the Agreement, physical gas returned to the
control of the Counterparty shall be at ninety five percent (95%) full. Should
the counterparty desire to have storage at a level above ninety five percent
(95%), the Manager will work with Counterparty and provide on a best efforts
basis.

When this Agreement terminates, whether pursuant to Sections 9.02 or 12.04
or due to the expiration of the Term, all Gas physically present in Storage
Facilities shall be transferred to Counterparty and the Parties shall reconcile
accounts as follows. If the volume of Gas physically present in inventory is
less than the volume shown in the Counterparty Storage Accounts, Manager shall
provide Counterparty with Gas, at no charge, sufficient to make up the
difference between the Gas physically present and the volume shown in
Counterparty's Storage Accounts.

The Gas shall be provided by in place transfer at the maximum injection
rate, but in all events, the difference shall be made up within thirty (30) days
of the date of termination. If the volume of Gas


<PAGE>



physically present is more than the volume shown in Counterparty Storage
Accounts, then Counterparty, at its option, may either purchase the Gas in
place, at the Gas Daily price for the applicable area on the date of
termination, or require Manager to remove the Gas within thirty (30) days of the
date of termination via in place transfer to a third party or withdrawal. The
Parties shall work together to avoid any penalties resulting from over-injection
or over- withdrawals, and Manager shall be responsible for any such penalties.

                                    ARTICLE X
                                  TITLE TO GAS

                             10.01 Passage of Title

Title to Gas delivered to Counterparty under the provisions of Article IV
shall pass from Manager to Counterparty at and when delivered to the Delivery
Point. The Party who has title to the Gas at any time shall be deemed to be in
control and possession of the Gas, and shall be responsible for any damage or
injury caused thereby, and (ii) all charges, expenses, fees, taxes, damages,
injuries, and other costs incurred in connection with or attributable to the
purchase and handling of Gas.

                             10.02 Warranty of Title

At the time title to Gas passes from one Party to the other, the Party
passing title warrants to the other that it has good title to the Gas and that
the Gas is free from all liens and adverse claims.

Each Party agrees to indemnify and hold the other Party harmless from, and
with respect to, all suits, actions, debts, accounts, damages, costs, losses and
expenses (including, but not limited to, reasonable attorneys' fees) arising
from or out of any adverse claims of any and all persons with respect to title
to Gas passing under this Agreement which attach before title passes to the
other Party. Each Party shall give the other notice of any suit, action, debt,
account, damage, cost, loss, or expense covered by this Section 10.02 and the
Party warranting title shall have the option to assume the defense or
settlement, or both, of any such contingency.

                                   ARTICLE XI
                                   ASSIGNMENT

                      11.01 Pledge, Mortgage or Assignment

Either Party may pledge or mortgage this Agreement, the Counterparty
Storage Accounts or the Capacity Release as security for its indebtedness only
with the prior written consent of the other Party, such consent not to be
unreasonably withheld. This Agreement shall be binding upon and inure to the
benefit of the successors, assigns, personal representatives, and heirs of the
respective Parties hereto, and the covenants, conditions, rights and obligations
of the Agreement shall run for the full term of this Agreement. No assignment of
this Agreement, in whole or in part, shall be made without the prior written
consent of the non-assigning Party, which consent shall not be unreasonably
withheld, provided however, either Party may transfer its interest to any
affiliate by assignment, merger or otherwise without prior written consent of
the other Party as long as such


<PAGE>



entity has a credit status which, in the non-assigning Party's sole
opinion, is at least as sound as that of the assignor. In the event of an
assignment of this Agreement, the Counterparty Storage Accounts or the Capacity
Release, the assignor shall not be relieved from the performance of its
obligations under this Agreement absent a written release issued by the
non-assigning Party. Any other assignment of this Agreement, the Counterparty
Storage Accounts or the Capacity Release other than those specifically permitted
by the foregoing parts of this Section 11.01 shall be null and void unless the
written consent of the other Party shall first have been obtained by the
assigning Party.

                                   ARTICLE XII
                             GOVERNMENTAL AUTHORITY

          12.01 Agreement Subject to Valid Laws, Rules and Regulations

This Agreement shall be subject to all valid and applicable laws of the
United States and to the applicable valid rules, regulations or orders of any
regulatory agency or governmental authority having jurisdiction over the Parties
or this Agreement. The Parties shall be entitled to regard all applicable laws,
rules and regulations (federal, state or local) as valid and may act in
accordance therewith until such time as the same may be declared invalid by a
final, non-appealable judgment of a court of competent jurisdiction.

                     12.02 Permits, Licenses, Consents, Etc.

Upon execution of this Agreement, each of the Parties agree to seek such
certificates, permits, licenses, authorizations and consents (whether from
governmental or regulatory agencies, or from private parties) which are deemed
reasonably necessary to perform the obligations of each Party under this
Agreement.

                            12.03 Regulatory Filings

Upon execution of this Agreement, and from time to time throughout its
term, each of the Parties shall make all filings on its own behalf which are
required by any regulatory bodies having jurisdiction over this Agreement and,
upon request of the other Party, shall promptly provide copies of such filings
to the other Party.

                   12.04 Termination Due to Regulatory Changes

Either Party may terminate this Agreement in the event that the FERC, the
public service commission regulating Counterparty, or a legislative body changes
its statutes, regulations or orders so as (1) to significantly restrict the
transactions contemplated in this Agreement, (2) to require Counterparty to
assign to its customers portions of the assets included in the Capacity Release,
or (3) to significantly and materially modify the nature of the services
provided by the Service Providers provided however, that the Parties shall first
endeavor to mutually agree on revisions to this Agreement to comply with such
regulatory changes. In the event the Parties elect


<PAGE>



to terminate this Agreement pursuant to this Section 12.04 such termination
shall be effected as set forth in Section 9.02(d).

                                  ARTICLE XIII
                                  FORCE MAJEURE

                   13.01 Performance Excused by Force Majeure

If either Party is rendered unable, wholly or in part, by Force Majeure to
perform its obligations under this Agreement, other than the obligation to make
payments then or subsequently due, it is mutually agreed that performance of the
respective obligations of the Parties, so far as they are affected by such Force
Majeure, shall be suspended without liability from the inception of any such
inability until it is corrected, but for no longer period, In order to suspend
by reason of Force Majeure, the Party claiming such inability shall promptly
notify the other Party of the full particulars after the occurrence of the event
relied on, and promptly correct the inability to the extent it may be corrected
through the exercise of reasonable diligence. No Party shall, however, be
required against its will to settle any labor disputes. Demand charges shall not
be waived due to a Force Majeure event declared by a Party purchasing Gas
hereunder.

                                   ARTICLE XIV
                                 CONFIDENTIALITY

                  14.01 Obligation to Maintain Confidentiality

Each Party agrees that the existence of this Agreement may be considered
public information and either Party may disclose the fact that it has entered
into this Agreement and the general purposes of the Agreement; however, any
press releases or other public announcements shall be approved by the other
Party before issuance. Furthermore, each Party shall maintain all specific parts
and contents of this Agreement in strict confidence and shall not cause or
permit disclosure thereof to any third party without the express written consent
of the other Party; provided, however, that no specific written consent is
required if (i) such information has already become public through no act or
omission on the part of either Party, (ii) such disclosure is reasonably
required in order to arrange for the Capacity Release and to effectuate the
transportation of Gas, or (iii) either Party is required to make such disclosure
by order or regulation of any court or agency exercising jurisdiction over the
Parties or the subject matter hereof Counterparty reserves the right to disclose
this Agreement and the terms hereof if Counterparty determines, in
Counterparty's reasonable discretion, that such disclosure to its regulatory
commissions is advisable, in which case Counterparty shall use its best efforts
to have this Agreement and the terms hereof disclosed only pursuant to an
agreement whereby the viewing party or parties agree to maintain the
confidentiality of the Agreement and terms hereof. Each Party hereby consents to
the disclosure of this Agreement to the outside auditors of the other Party,
provided that such auditors agree to maintain the confidentiality of this
Agreement. In the event that this Agreement or any of the terms hereof are
required to be disclosed pursuant to the provisions of this Section 14.01, the
Party who is required to make such disclosure shall as soon as reasonably
possible notify the other Party hereto of the requirement of such disclosure and
the non-disclosing Party shall be entitle to


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take all reasonable actions to prevent or to minimize such disclosure if,
in the non-disclosing Party's sole reasonable judgment, such disclosure would be
materially detrimental to such Party.

                            ARTICLE XV MISCELLANEOUS

                                  15.01 Waiver

No waiver by either Party of any one or more defaults by the other in the
performance of any provisions of this Agreement shall operate or be construed as
a waiver of any other default or defaults, whether of a like or of a different
character.

                               15.02 Governing Law

This Agreement shall be governed by and construed in accordance with the
laws of the State of Virginia without regard to principles of conflicts of law.

                             15.03 Entire Agreement

This Agreement constitutes the entire agreement between the Parties
pertaining to the subject matter hereof, supercedes all prior agreements and
understandings, whether oral or written, which the Parties may have had in
connection herewith, and may not be modified or amended except by written
agreement executed by authorized representatives of each of the Parties.

                      15.04 Provisions Found to be Invalid

If any provision of this Agreement is determined to be invalid, illegal or
otherwise unenforceable for any reason by a governmental authority or a court of
competent Jurisdiction, and in the event that the overriding purpose of this
Agreement is frustrated by such determination, then the terms and conditions of
this Agreement shall remain in full force and effect to the fullest extent
permitted by applicable law. In the event this Agreement remains in full force
and effect, the Parties agree to make a good faith effort to replace the
affected provisions with amended provisions that comply with the governmental or
judicial rulings as aforesaid.

                         15.05 Waiver of Certain Damages

EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR
PUNITIVE DAMAGES OF ANY CHARACTER, INCLUDING BUT NOT LIMITED TO LOSS OF USE,
LOST PROFITS (PAST AND FUTURE), ADDITIONAL OUT OF POCKET EXPENSES INCURRED BY
EITHER PARTY, OR TORT, CONTRACT OR OTHER CLAIMS RESULTING FROM, ARISING OUT OF,
IN CONNECTION WITH OR IN ANY WAY INCIDENT TO ANY ACT OR OMISSION OF EITHER PARTY
RELATED TO THE PROVISIONS OF THIS AGREEMENT, IRRESPECTIVE OF WHETHER CLAIMS OR
ACTIONS FOR SUCH DAMAGES ARE BASED UPON


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CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR ANY OTHER
REMEDY AT LAW OR EQUITY.

                          15.06 Measurement and Quality

     (a)  Manager and Counterparty shall rely upon measurement by the
          Transporter at the Delivery Points at pressures in Transporter's
          pipeline in existence from time-to- time and such measurements shall
          be corrected to the Unit of Measurement. Manager's deliveries of Gas
          shall be calculated from the measurements taken at the meter(s)
          installed, operated and maintained by Transporter at the Delivery
          Points, and from the heating value determined by the instruments
          operated by Transporter. Measurement and determination of Gas
          delivered under the Agreement shall be made in accordance with
          standard industry practice.

     (b)  The Gas to be delivered hereunder shall meet the applicable quality
          specifications required by each applicable Transporter. Either Party
          may refuse to accept delivery of any Gas not meeting the quality
          specifications.

                  15.07 Measurement and Allocation Inaccuracies

Counterparty and Manager recognize the inherent inaccuracies in the
measurement and allocation of Gas. Such inaccuracies may at times occur through
no fault of Counterparty or Manager such as in the case of allocations after
actual deliveries that are the result of measurement inaccuracies, or
unpresentable variations in rates of flow at the Delivery Points, and may result
in failure to deliver or receive the daily nominated volume (such inaccuracies
are hereinafter called "Measurement and Allocation Inaccuracies"). To the extent
the actual quantities delivered or received vary from the daily nominated volume
due to Measurement and Allocation Inaccuracies, the Parties agree that
Counterparty's obligation to purchase and receive and Manager's obligation sell
and deliver, insofar as liquidated damages and rights to termination of this
Agreement are concerned, shall be deemed to be fulfilled to the extent that, on
a daily and monthly basis, such deliveries and receipts are within the
applicable Transporter's Tariff for tolerances regarding imbalances to the
extent such tolerances do not impose a penalty or similar charge with respect to
such imbalances.

             15.08 Transportation to Delivery Points and Downstream

     (a)  Manager shall be responsible for arranging for transportation of all
          Gas purchased and sold to Counterparty hereunder to the Delivery
          Points and Counterparty shall be responsible for transportation
          downstream of the Delivery Points.

     (b)  In the event that any Transporter requires Manager to provide a
          ranking of markets to be served by Manager for use by such Transporter
          in allocating Manager's Gas among such markets in case of under
          delivery by Manager, or in any other instance of Transporter's
          inability to deliver all quantities nominated for delivery, Manager
          shall place deliveries for Counterparty at a level equal to


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          similarly-situated Firm customers in any such ranking; provided,
          however, that any curtailment of Manager's deliveries of Gas to
          Counterparty pursuant to such ranking shall not, in and of itself,
          excuse Manager's obligations under this Agreement, unless due to a
          Force Majeure event.

                        15.09 Service Provider Penalties

     (a)  It is understood that the Gas purchased and sold hereunder shall be
          transported and stored by third party Service Providers, and each
          Party hereto has agreed to provide notice to the other Party of
          quantities of Gas Manager intends to deliver and Counterparty intends
          to purchase and receive at each Delivery Point. Both Parties shall be
          obligated to use their best efforts to avoid the imposition by any
          Service Provider of penalties or other charges, including those for
          imbalances between receipts and deliveries or for imbalances or
          deviations from nominated or scheduled quantities. If Manager
          delivers, or causes to be delivered, for Counterparty's account, at
          any Delivery Point a quantity of Gas that is greater or less than that
          scheduled for delivery to, and transportation by, any Service Provider
          and such variable deliveries cause Counterparty to incur a penalty or
          other charges as levied by such Service Provider, then Manager shall
          bear and pay such penalties or other charges, unless such penalty or
          other charge was incurred due to a specific Counterparty request to
          Manager. If Counterparty takes, at any Delivery Point, a quantity of
          Gas that is greater or less than that scheduled for delivery to and
          transportation by any Service Provider (or, for Columbia Gas
          Transmission, a quantity which is greater or less than the Balancing
          Tolerance specified in Section 4.01 and such variable receipts cause
          Manager to incur a penalty or other charges as levied by such Service
          Provider, then Counterparty shall bear and pay such penalties or other
          charges.

     (b)  Either Party shall immediately notify the other Party of any notice
          received from any Service Provider that indicates an imbalance in
          deliveries exists or is occurring that may give rise to a penalty or
          other charges. The Parties agree to cooperate immediately to adjust
          their deliveries as necessary to bring deliveries and receipts into
          balance with nominated quantities so that any penalties or other
          charges are avoided or minimized as much as possible.

     (c)  Independent of any penalty or charge under 15.09(a), if any
          Transporter employs a cashout mechanism to resolve imbalances under
          Counterparty arrangements downstream of the Delivery Points and,
          despite the Parties' efforts under 15.09(b), an imbalance is incurred
          and cashed out, any cash-out charges or penalties assessed against
          Counterparty shall be:

          (i)  Counterparty's responsibility where such charges or penalties are
               caused by Counterparty, and



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          (ii) Manager's responsibility where such charges or penalties are
               caused by Manager.

     (d)  In the event that Counterparty receives a cash-out payment from any
          Transporter associated with over deliveries of Gas under this
          Agreement, and provided that Counterparty has not previously paid
          Manager for such over deliveries, Counterparty shall pay Manager the
          amount so received. In the event that Counterparty must purchase Gas
          from any Transporter associated with under deliveries of Gas under the
          Agreement and the price is higher than the price Counterparty would
          otherwise pay Manager, Manager shall pay Counterparty the positive
          difference, if any, between the former and latter prices.

                                  15.10 Notices

All notices required to be sent shall be sent to the Parties at the
following addresses, telephone numbers and fax numbers:

      To Manager:          Sequent Energy Management, L.P.
                           1200 Smith Street, Suite 900, Houston, TX  77002

                           Notices/Correspondence:
                           Attn: Contract Administration
                           Telephone: 832-397-1700
                           Fax:  832-397-1781

                           Invoices:
                           Attn: Gas Accounting
                           Telephone:       832-397-1700
                           Fax:     832-397-3711

     To Counterparty:      519 Kimball Ave., N.E.
                           Roanoke, VA 24016
                           Telephone:       540-777-3800
                           Fax:     540-777-3957
                           E-MAIL: GAGNETM@ROANOKEGAS.COM

                           Notices/Correspondence:
                           Attn: Michael Gagnet

                           Invoices:
                           Attn: Howard Lyon




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                             15.11 Duty to Mitigate

Each Party agrees that it has a duty to mitigate damages and covenants that
it shall use commercially reasonable efforts to minimize any damages it may
incur as a result of the other Party's performance or non-performance of this
Agreement.

                                   15.12 Taxes

Each Party shall use reasonable efforts to administer this Agreement and
implement the provisions in accordance with the intent to minimize the
imposition of taxes.

                           15.13 Waiver of Jury Trial

Each Party herein waives its respective right to any jury trial with
respect to any litigation arising under, or in connection with, this Agreement.

                        15.14 No Third Party Beneficiary

This Agreement shall not be construed to create any third party beneficiary
relationship in favor of anyone not a party to this Agreement. In addition, the
Parties waive and disclaim any third party beneficiary status as to any of the
contracts of the other Party.

                             15.15 Forward Contract

The Parties acknowledge and agree that this Agreement and each transaction
document by a confirmation notice in accordance with Section 5.05 constitutes a
"forward contract" within the meaning of the United States Bankruptcy Code.

                                   ARTICLE XVI
                       ARBITRATION AND DISPUTE RESOLUTION

                            16.01 Dispute Resolution

In the event of a dispute involving an amount under $1,000,000 or in the
event the Parties need to re-negotiate portions of this Agreement due to events
described in Section 2.01 but are unable to reach agreement, the matter shall be
submitted upon the request of either Party to binding arbitration by one (1)
qualified arbitrator who has not been previously employed by either Party or its
affiliates, and does not have a direct or indirect interest in either Party or
the subject matter of the arbitration. Such arbitrator shall either be mutually
selected by the Parties within thirty (30) days after written notice form either
Party requesting arbitration, or failing agreement, shall be selected under the
expedited rules of the American Arbitration Association ("AAA"). Such
arbitration shall be held in alternating location of the home offices of the
Parties, beginning with Manager's home office, or in any other mutually
agreeable location. The rules of the AAA shall apply to the extent not
inconsistent with the rules herein specified. Either Party may initiate
arbitration by written notice to the other Party. The arbitration shall be
conducted according to


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the following: (a) not later than seven (7) days prior to the hearing date
set by the arbitrator, each Party shall submit a brief with a single proposal
for settlement, (b) the hearing shall be conducted on a confidential basis
without continuance or adjournment, (c) the arbitrator shall be limited to
selecting one (1) of the settlement proposals submitted by the Parties, (d) each
Party shall divide equally the cost of the arbitrator and the hearing, (e) each
Party shall be responsible for its own costs and those of its counsel and
representatives, and (f) evidence concerning the financial position or
organizational make-up of the Parties, any offer made or the details of any
negotiation prior to arbitration, and the cost to the Parties of their
representatives and counsel shall not be permissible. The arbitrated award shall
not include any consequential or punitive damages.

                              16.02 Binding Effect

Each Party understands that this Agreement contains an agreement to
arbitrate with respect to certain disputes arising under this Agreement. After
signing this Agreement, each Party understands that it shall not be able to
bring a lawsuit concerning any dispute that may arise that is covered by this
arbitration provision. Instead, each Party agrees to submit such dispute to an
impartial arbitrator. Any monetary award of the arbitrator may be enforced by
the Party in whose favor such monetary award is made in any court of competent
jurisdiction.



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IN WITNESS WHEREOF, by execution in duplicate originals, the Parties hereto
have caused this Agreement to be effective as of the day and year first above
written:

                                    SEQUENT ENERGY MANAGEMENT, L.P.

                                    By: s/Douglas N. Schantz
                                    Title: President
                                    Date: 10/28/04


                                    ROANOKE GAS COMPANY

                                    By: s/John B. Williamson, III
                                    Title President & CEO
                                    Date: 11/03/04



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                                LIST OF EXHIBITS


         Exhibit A         Agreements Released
         Exhibit B         Storage Inventory Transferred
         Exhibit C         Indices for Calculating Gas Prices
         Exhibit D         Weighted Average Transportation Variable Costs
         Exhibit E         Weighted Average Storage Variable Costs
         Exhibit F         Utilization Fee
         Exhibit G         Example of Baseload and Swing Gas Price Calculation
         Exhibit H         Example of Storage Injection and Withdrawal Price
                           Calculation
         Exhibit I         Storage Withdrawal Schedule
         Exhibit J         Storage Injection Schedule
         Exhibit K         Dates for Monthly Nomination Deadlines
         Exhibit L         Daily Swing Gas and Intra-Day Nomination Deadlines
         Exhibit M         Daily Balancing Report for Citygate Deliveries
         Exhibit N         Trigger Price Addendum
         Exhibit O         Form of Guaranty
         Exhibit P         Sample Confirmation Notice
         Exhibit Q         RCG Operational Requirements



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