EXHIBIT 10.3
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April 1, 1995
Mr. J. Charles Goodman
Atmos Energy Corporation
P.O. Box 650205
Dallas, Texas 75265
Dear Mr. Goodman:
Atmos Energy Corporation (the "Company") considers it
essential to the best interests of its shareholders to foster the
continuous employment of key management personnel. In this
connection, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist
and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of the
Company and its shareholders.
The Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including
yourself, to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company, although no
such change is now contemplated.
In order to induce you to remain in the employ of the
Company and in consideration of your agreement set forth in
Subsection 2(ii) hereof, the Company agrees that you shall
receive the severance benefits set forth in this letter agreement
("Agreement") in the event your employment with the Company
isterminated subsequent to a "change in control of the Company"
(as defined in Section 2 hereof) under the circumstances
described below.
1. Term of Agreement. This Agreement shall commence on
the date hereof and shall continue in effect through December 31,
1995; provided, however, that commencing on January 1, 1996 and
each January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not
later than July 1 of the preceding year, the Company shall have
given notice that it does not wish to extend this Agreement;
provided, further, if a change in control of the Company shall
have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period
of thirty-six (36) months beyond the month in which such change
in control occurred.
2. Change in Control. (i) No benefits shall be payable
hereunder unless there shall have been a change in control of the
Company, as set forth below. For purposes of this Agreement, a
"change in control of the Company" shall be deemed to have
occurred if (A) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a trustee or other
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fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 33 1/3% or more of the
combined voting power of the Company's then outstanding
securities; or (B) during any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (A) or (C)
of this Subsection) whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or (C) the
shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 60% of
the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation, or the shareholders of the Company
approve a plan of complete liquidation of the Company or an
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agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change in
control of the Company" shall be deemed to have occurred if (A)
the Company enters into an agreement, the consummation of which
would result in the occurrence of a change in control of the
Company, (B) any person (including the Company) publicly
announces an intention to take or to consider taking actions
which if consummated would constitute a change in control of the
Company; (C) any person, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company,
who is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 9.5% or more of the
combined voting power of the Company's then outstanding
securities, increases his beneficial ownership of such securities
by 5% or more over the percentage so owned by such person on the
date hereof; or (D) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a potential change in
control of the Company has occurred. You agree that, subject to
the terms and conditions of this Agreement, in the event of a
potential change in control of the Company, you will remain in
the employ of the Company until the earliest of (i) a date which
is six (6) months after the occurrence of such potential change
in control of the Company, (ii) the termination by you of your
employment by reason of Disability or Retirement (at your normal
retirement age), as defined in Subsection 3(i), or (iii) the
occurrence of a change in control of the Company.
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3. Termination Following Change in Control. If any of the
events described in Subsection 2(i) hereof constituting a change
of control shall have occurred, you shall be entitled to the
benefits provided in Subsection 4(iii) hereof upon the subsequent
termination of your employment during the term of this Agreement
unless such termination is (A) because of your death, Disability
or Retirement, (B) by the Company for Cause, or (C) by you other
than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from the full-time performance of your duties with the
Company for twelve (12) consecutive months, and within thirty
(30) days after written Notice of Termination (as defined in
Subsection (iv) below) is given you shall not have returned to
the full-time performance of your duties, your employment may be
terminated for "Disability." Termination by the Company or you
of your employment based on "Retirement" shall mean termination
in accordance with the Company's retirement policy, including
early retirement, generally applicable to its salaried employees
or in accordance with any retirement arrangement established with
your consent with respect to you.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and
continued failure by you to substantially perform your duties
with the Company (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of
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Termination by you for Good Reason, as defined in Subsections
3(iv) and 3(iii), respectively) after a written demand for
substantial performance is delivered to you by the Board, which
demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties,
or (B) the willful engaging by you in conduct which is
demonstrably and materially injurious to the Company, monetarily
or otherwise. For purposes of this Subsection, no act, or
failure to act, on your part shall be deemed "willful" unless
done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best
interest of the Company. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in
the good faith opinion of the Board you were guilty of conduct
set forth above in clauses (A) or (B) of the first sentence of
this Subsection and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your express written consent,
the occurrence after a change in control of the Company of any of
the following circumstances unless, in the case of Paragraphs
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(A), (E), (F), (G), or (H), such circumstances are fully
corrected prior to the Date of Termination specified in the
Notice of Termination, as defined in Subsections 3(v) and 3(iv),
respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent
with your status as a senior executive officer of the
Company or a substantial and adverse alteration in the
nature or status of your responsibilities from those in
effect immediately prior to the change in control of the
Company;
(B) a reduction by the Company in your annual base
salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board
salary reductions similarly affecting all senior executives
of the Company and all senior executives of any person in
control of the Company;
(C) the Company's requiring you to be based anywhere
other than the offices at which you were based immediately
prior to the change in control of the Company except for
required travel on the Company's business to an extent
substantially consistent with your present business travel
obligations;
(D) the failure by the Company, without your consent,
to pay to you any portion of your current compensation
except pursuant to an across-the-board compensation deferral
similarly affecting all senior executives of the Company and
all senior executives of any person in control of the
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Company, or to pay to you any portion of an installment of
deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date
such compensation is due;
(E) the failure by the Company to continue in effect
any compensation plan, in which you participate immediately
prior to the change in control of the Company which is
material to your total compensation, including, but not
limited to, the Company's Retirement Plan, Employee Stock
Ownership Plan, Incentive Stock Option Plan, Supplemental
Executive Benefits Plan and Excess Medical Expense Insurance
Plan or any substitute plans adopted prior to the change in
control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to
continue your participation therein (or in such substitute
or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other
participants, as existed at the time of the change in
control;
(F) the failure by the Company to continue to provide
you with benefits substantially similar to those enjoyed by
you under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which
you were participating at the time of the change in control
of the Company, the taking of any action by the Company
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which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the change in control of the
Company, or the failure by the Company to provide you with
the number of paid vacation days to which you are entitled
on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in
effect at the time of the change in control of the Company;
(G) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and
agree to perform this Agreement; or
(H) any purported termination of your employment which
is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and,
if applicable, the requirements of Subsection (ii) above);
for purposes of this Agreement, no such purported
termination shall be effective.
Your right to terminate your employment pursuant to this
Subsection shall not be affected by your incapacity due to
physical or mental illness. Your continued employment shall not
constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination of
your employment by the Company or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 7 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
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shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall
mean (A) if your employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that you
shall not have returned to the full-time performance of your
duties during such thirty (30) day period), and (B) if your
employment is terminated for any reason other than Disability,
thirty (30) days after Notice of Termination is given.
4. Compensation Upon Termination or During Disability.
Following a change in control of the Company, as defined by
Subsection 2(i), upon termination of your employment or during a
period of disability you shall be entitled to the following
benefits:
(i) During any period that you fail to perform your full-
time duties with the Company as a result of incapacity due to
physical or mental illness, you shall continue to receive your
base salary at the rate in effect at the commencement of any such
period, together with all compensation payable to you under any
disability plan of the Company until this Agreement is terminated
pursuant to Subsection 3(i) hereof. Thereafter, or in the event
your employment shall be terminated by the Company or by you for
Retirement, or by reason of your death, your benefits shall be
determined under the Company's retirement, insurance and other
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compensation programs then in effect in accordance with the terms
of such programs.
(ii) If your employment shall be terminated by the Company
for Cause or by you other than for Good Reason, Disability, death
or Retirement, the Company shall pay you your full base salary,
and continue to provide you with life, disability, accident,
health insurance and other benefits, through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company at the time
such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated
(a) by the Company other than for Cause, Retirement, death or
Disability or (b) by you for Good Reason, then you shall be
entitled to the benefits provided below:
(A) the Company shall pay you your full base salary,
and continue to provide you with life, disability, accident,
health insurance and other benefits, through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company, at
the time such payments are due, except as otherwise provided
below;
(B) in lieu of any further salary payments to you for
period subsequent to the Date of Termination, the Company
shall pay as severance pay to you a lump sum severance
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payment (the "Severance Payment") equal to 2.99 times your
"Base Amount", as defined in Section 280G of the Internal
Revenue Code of 1986 as amended (the "Code").
(C) Notwithstanding any other provision of this
Agreement, in the event that any payment or benefit received
or to be received by you in connection with a change in
control of the Company (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement
with (i) the Company, (ii) any person whose actions result
in a change in control, or (iii) any person affiliated with
the Company or such person) (all such payments and benefits
including the Severance Payment, being hereinafter called
"Total Payments") would be subject (in whole or part), to
the excise tax imposed under Section 4999 of the Code (the
"Excise Tax"), then the Severance Payment shall be reduced
to the extent necessary so that no portion of the Total
Payments is subject to the Excise Tax if, and only in the
event that, the amount of such Total Payments, as so
reduced, (and after deduction of the net amount of federal,
state and local income tax on such reduced Total Payments)
is greater than the excess of (i) the amount of such Total
Payments, without reduction (but after deduction of the net
amount of federal, state and local income tax on such Total
Payments), over (ii) the amount of Excise Tax to which you
would be subject in respect of such Total Payments. For
purposes of determining whether and the extent to which the
Total Payments will be subject to the Excise Tax, (i) no
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portion of the Total Payments the receipt or enjoyment of
which you shall have effectively waived in writing prior to
the date of payment of the Severance Payment shall be taken
into account; (ii) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel
selected by the Company's independent auditors does not
constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, (including by reason of
section 280G(b)(4)(A) of the Code); (iii) in calculating the
Excise Tax, no portion of such Total Payments shall be taken
into account which constitutes reasonable compensation for
services actually rendered, within the meaning of section
280G(b)(4)(B) of the Code, in excess of your base amount (as
defined in Section 280G(b)(3) of the Code) allocable to such
reasonable compensation; and (iv) the value of any non-cash
benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Company in
accordance with the principles of sections 280G(d)(3) and
(4) of the Code; and
(D) the Company also shall pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking
to obtain or enforce any right or benefit provided by this
Agreement or in connection with any tax audit or proceeding
to the extent attributable to the application of Section
4999 of the Code to any payment or benefit provided
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hereunder) except to the extent that the payment of such
fees and expenses would not be, or would cause any other
portion of the Total Payments not to be, deductible by
reason of Section 280G of the Code.
(iv) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount
claimed to be owed by you to the Company, or otherwise except as
specifically provided in this Section 4.
(v) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to all rights and benefits
provided to you under the terms of any other plan or agreement
between you and the Company.
5. Letter of Credit Preceding Termination. In the event a
potential change in control of the Company shall have occurred,
the Company will promptly (and in no event more than seven (7)
days thereafter) establish an irrevocable letter of credit (the
"Letter of Credit") in your favor in an amount equal to the
amount which would be payable to you pursuant to Subsection
4(iii) hereof as if you were immediately entitled to payment
pursuant thereto, such Letter of Credit to be issued by a
commercial bank which is not an affiliate of the Company, but
which is a national banking association or established under the
laws of one of the states of the United States, and which has
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equity in excess of $100 million (the "Bank"). The Letter of
Credit shall be in form and substance reasonably satisfactory to
you and the Company and will provide that the Bank shall pay you
the amount of your draft, at sight, on presentation to the Bank
of a statement, signed by you or your authorized representative,
setting forth (i) a statement that pursuant to Subsection 4(iii)
of this Agreement, you are entitled to payments of not less than
the amount of such draft, and (ii) the Date of Termination of
your employment. Each time you shall draw on the Letter of
Credit, you shall provide the Company with a copy of such draft
and the accompanying statement referred to above. The Company
shall maintain the Letter of Credit in effect for a period of two
years from the date on which it is issued; provided, however,
that (i) if during any such two-year period any event shall occur
which, pursuant to this Section 5, would have required the
Company to establish a Letter of Credit had none then existed,
then the Company shall maintain the Letter of Credit in effect
for a period of two years following such event, unless further
extended pursuant to this provision, and (ii) if a change in
control of the Company shall occur, then the Company shall
maintain the Letter of Credit in effect for a period of three
years following such change in control. During the period in
which a Letter of Credit is required to be maintained, the
Company shall, at six-month intervals commencing with the date
the Letter of Credit is established, calculate the amount which
would be payable to you pursuant to Subsection 4(iii) hereof as
if you were immediately entitled to payment pursuant thereto. If
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the amount exceeds the amount available to be drawn upon under
the Letter of Credit then in effect, the Company shall promptly
(and in no event later than seven (7) days thereafter) cause the
amount payable under the Letter of Credit to be increased by the
amount of such excess.
The payment by the Bank of the amount of your draft in
accordance with the terms hereof and of the Letter of Credit
shall not constitute a waiver by the Company of, or in any way
preclude the Company from asserting, any claim against you that
you are not entitled to some or all of such payment. In
addition, your drawing upon the Letter of Credit shall not
constitute a waiver by you, or in any way preclude you from
asserting, any claim against the Company that you are entitled to
amounts pursuant to this Agreement which were not paid by amounts
received under the Letter of Credit.
6. Successors; Binding Agreement. (i) The Company will
require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to expressly assume
and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason
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following a change in control of the Company, except that for
purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the
Company as herein- before defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee,
legatee or other designee or, if there is no such designee, to
your estate.
7. Notice. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention
of the Board with a copy to the Secretary of the Company, or to
such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
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8. Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by you and such
officer as may be specifically designated by the Board. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made
by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
the State of Texas. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of the Company
under Section 4 shall survive the expiration of the term of this
Agreement.
9. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
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original but all of which together will constitute one and the
same instrument.
11. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Dallas, Texas in accordance with the rules of
the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid until the Date
of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed
copy of this letter which will then constitute our agreement on
this subject.
Sincerely,
ATMOS ENERGY CORPORATION
By /s/ Robert F. Stephens
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Robert F. Stephens, President
& Chief Operating Officer
Agreed to this 23rd
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day of May , 1995.
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/s/ J. Charles Goodman
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J. Charles Goodman
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