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                           United Cities Gas Company



November 4, 1996



Dear Shareholder:


     I am pleased to advise you that United  Cities Gas Company and Atmos Energy
Corporation  have reached an agreement  with Southern  Union Company under which
Southern Union has agreed not to exercise dissenters' rights with respect to the
proposed  merger  between  United Cities and Atmos and has agreed not to solicit
United Cities' shareholders to exercise their dissenter's rights with respect to
the merger.  Southern Union has also agreed not to solicit  proxies  against the
merger.  United Cities and Atmos have agreed to stop contesting Southern Union's
ownership  of United  Cities  shares and the Atmos shares into which such shares
will be converted in the merger.  Atmos has also agreed to give Southern Union a
right of first offer in respect of certain  properties  it may dispose of during
the two years  following  consummation  of the merger.  Atmos does not currently
contemplate the sale of any properties.

     We are very  happy  that we will  now be able to  proceed  directly  to our
shareholders   meeting  on  November  12  to  consider  this  very  advantageous
transaction  to our  shareholders  without a proxy fight and without the risk of
litigation  delay.  I  personally  want to thank all of you for your support and
understanding during this process.


Sincerely,


Gene C. Koonce
Chairman of the Board, President and
Chief Executive Officer