EGAS Gas Natural Inc. (OH) (delisted)

Merger-Related Compensation for Our Named Executive Officers

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of our named executive officers that is based on or otherwise relates to the merger. The amounts set forth below have been calculated assuming (i) the merger is consummated on November 21, 2016, (ii) the merger consideration of $13.10 per share of our common stock without interest and less any applicable withholding taxes, and (iii) that each named executive officer experiences a qualifying termination of employment as of November 21, 2016. The amounts indicated below are estimates of amounts that would be payable to the named executive officers, and the estimates are based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement. All dollar amounts set forth below have been rounded to the nearest whole number. The merger-related compensation payable to these individuals is subject to a non-binding advisory vote of Gas Natural’s shareholders, as described above in “Proposal 2: Non-Binding Compensation Advisory Proposal.” Gas Natural has existing employment agreements containing change-in-control provisions with its named executive officers as described below.

Gregory J. Osborne , President and Chief Executive Officer. We entered into an employment agreement with Mr. Osborne on July 21, 2014 for a three-year term, with automatic one year renewals thereafter, unless either party provides written notice of intent not to renew.

If Mr. Osborne’s employment is terminated by us “without cause” or if Mr. Osborne resigns with “good reason” (as defined in his employment agreement), within six months of a “change in control” (as defined in his employment agreement, which would include consummation of the merger), Mr. Osborne will be entitled to the

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following: (i) a lump sum cash payment equal to three times his annual base salary in effect at the time of termination, (ii) a lump sum cash payment equal to the pro-rated portion of his annual performance-based bonus in effect at the time of termination, and (iii) company-paid continuation of Mr. Osborne’s existing health care coverage under COBRA for a period of twenty-four months following the date of Mr. Osborne’s timely election, subject to Mr. Osborne’s execution, delivery and non-revocation of a release of claims against us.

Mr. Osborne’s employment agreement also provides that, in the event that the value of any of his severance payments and benefits would cause any amount received by Mr. Osborne to be nondeductible by Gas Natural for federal income tax purposes under Section 280G of the Internal Revenue Code of 1986, as amended (the Code), the payments will be reduced so that any payments and benefits received by Mr. Osborne will not be nondeductible by Gas Natural.

We also entered into a restricted stock award agreement with Mr. Osborne on July 21, 2014. If the merger is consummated, Mr. Osborne’s 1,666 outstanding and unvested restricted shares of common stock that were awarded pursuant to our stock plans prior to the date of the merger agreement will be vested and no longer subject to restrictions as of the effective time of the merger, and will be canceled and converted into, and constitute the right to receive the $13.10 merger consideration without interest and less any applicable withholding taxes for those shares.

The following table summarizes the potential payments and benefits that would be payable to Mr. Osborne assuming that the merger was consummated on November 21, 2016, and to the extent applicable, Mr. Osborne’s employment was terminated by us “without cause” or by him with “good reason” on that date.

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James E. Sprague , Chief Financial Officer. We entered into an employment agreement with Mr. Sprague on December 18, 2013, which was amended as of December 29, 2014. Mr. Sprague’s employment agreement does not have a fixed term.

Under the agreement, if Mr. Sprague’s employment is terminated by us “without cause,” or if Mr. Sprague resigns with “good reason” (each, as defined in his employment agreement), in either case, within six months of a “change in control” (as defined in his employment agreement, which would include consummation of the merger), Mr. Sprague will be entitled to the following: (i) a lump sum cash payment equal to three times his annual base salary in effect at the time of termination, (ii) a lump sum cash payment equal to the pro-rated portion of his annual performance-based bonus in effect at the time of termination, and (iii) the continuation of Mr. Sprague’s existing health care coverage under COBRA, less Mr. Sprague’s contribution, for a period of twenty-four months following the date of Mr. Sprague’s timely election, subject to Mr. Sprague’s execution and non-revocation of a release of claims against us. Mr. Sprague does not hold any shares of our common stock subject to outstanding equity awards.

The following table summarizes the potential payments and benefits that would be payable to Mr. Sprague pursuant to his employment agreement assuming that the merger was consummated on November 21, 2016, and to the extent applicable, Mr. Sprague’s employment was terminated by us “without cause” or by him with “good reason” on that date.

Kevin J. Degenstein , Chief Operating Officer and Chief Compliance Officer. We entered into an employment agreement with Mr. Degenstein on July 27, 2014. Mr. Degenstein’s employment agreement does not have a fixed term.

Under the agreement, if Mr. Degenstein’s employment is terminated by us “without cause” or if Mr. Degenstein resigns with “good reason” (each, as defined in his employment agreement), in either case, within six months of a “change in control” (as defined in his employment agreement, which would include consummation of the merger), Mr. Degenstein will be entitled to the following: (i) a lump sum cash payment equal to two times his annual base salary in effect at the time of termination, (ii) a lump sum cash payment equal to the pro-rated portion of his annual performance-based bonus in effect at the time of termination, and (iii) the continuation of

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Mr. Degenstein’s existing health care coverage under COBRA for a period of twenty-four months following the date of Mr. Degenstein’s timely election, subject to Mr. Degenstein’s execution and non-revocation of a release of claims against us. Mr. Degenstein does not hold any shares of our common stock subject to outstanding equity awards.

Mr. Degenstein’s employment agreement also provides that in the event that the value of any of the aforementioned severance payments and benefits would cause any amount received by Mr. Degenstein to be nondeductible by Gas Natural for federal income tax purposes related to Section 280G of the Code, such payments will be reduced such that any payments and benefits received by Mr. Degenstein will not be nondeductible by Gas Natural.

The following table summarizes the potential payments and benefits that would be payable to Mr. Degenstein assuming that the merger was consummated on November 21, 2016, and to the extent applicable, Mr. Degenstein’s employment was terminated by us “without cause” or by him with “good reason” on that date.

Jed D. Henthorne , President and General Manager of the company’s subsidiary, Energy West Montana, Inc. We entered into an employment agreement with Mr. Henthorne on December 29, 2014 in connection with his appointment as our corporate controller. Mr. Henthorne assumed his current position effective July 1, 2016 and we have maintained his existing employment agreement. Under the agreement, if the employment relationship is terminated by us “without cause” or by Mr. Henthorne with “good reason” (each, as defined in his employment agreement), in each case, within six months of a “change in control” (as defined in his employment agreement, which would include consummation of the merger), Mr. Henthorne will be entitled to the following: (i) a lump sum cash payment equal to his annual base salary in effect at the time of termination, (ii) a lump sum cash payment equal to the pro-rated portion of his performance-based bonus in effect at the time of termination, and (iii) the continuation of Mr. Henthorne’s existing health care coverage under COBRA for a period of twenty-four months following the date of Mr. Henthorne’s timely election, subject to Mr. Henthorne’s execution and non-revocation of a release of claims against us. Mr. Henthorne does not hold any shares of our common stock subject to outstanding equity awards.

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The following table summarizes the potential payments and benefits that would be payable to Mr. Henthorne pursuant to his employment agreement assuming that the merger was consummated on November 21, 2016, and to the extent applicable, Mr. Henthorne’s employment was terminated by us “without cause” or by him with “good reason” on that date.

Vincent A. Parisi , former Vice President and General Counsel. Mr. Parisi resigned as the Company’s vice president and general counsel effective October 24, 2016. Mr. Parisi’s resignation from the company constituted voluntary termination by him under the terms of his employment agreement with us, effective July 8, 2015. Under the terms of his employment agreement, Mr. Parisi is not entitled to severance compensation or any other compensation arrangements and benefits, the material terms of which have been previously described in our proxy statement filed with the Securities and Exchange Commission on June 21, 2016. At the effective time of the merger Mr. Parisi’s common stock held in our 401(k) plan will automatically be converted into the right to receive the $13.10 merger consideration in cash. As of November 21, 2016, Mr. Parisi is entitled to receive $3,144 in exchange for his 240 shares of common stock.

New Employment Arrangements

As of the date of this proxy statement, none of our executive officers has entered into any agreement, arrangement or understanding with First Reserve, Parent or any of its subsidiaries regarding employment with, or the right to purchase or participate in the equity of, First Reserve, Parent or the surviving company. Although no such agreement, arrangement or understanding exists as of the date of this proxy statement, certain of our executive officers may, prior to the closing of the merger, enter into new arrangements with First Reserve, Parent or its subsidiaries regarding employment with, or the right to purchase or participate in the equity of, First Reserve, Parent, their subsidiaries or the surviving company.

Indemnification; Directors’ and Officers’ Insurance

Pursuant to the terms of the merger agreement, directors and executive officers of Gas Natural will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies following the merger. For additional information, see “The Merger Agreement — Indemnification and Insurance” beginning on page 72 in this proxy statement.

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S UPPORT A GREEMENT

On October 10, 2016, one of our shareholders, Anita G. Zucker as trustee of the Zucker Trust, entered into a support agreement with Parent pursuant to which that shareholder has agreed to vote in favor of the merger and the transactions contemplated by the merger agreement unless the board has made an adverse recommendation change that has not been rescinded or otherwise withdrawn, in favor of the adoption of the merger and the transactions contemplated by the merger agreement. As of the record date, this shareholder beneficially owned approximately 9.89% of our outstanding common stock.

C ONSEQUENCES IF THE M ERGER IS N OT C OMPLETED

If the proposal to approve the merger and the other transactions contemplated by the merger agreement is not approved by the holders of shares representing a majority of the outstanding shares of our common stock entitled to vote or if the merger is not completed for any other reason, you will not receive any consideration for your shares of our common stock. Instead, we will remain a public company, and our common stock will continue to be listed and traded on the NYSE MKT and registered under the Exchange Act. We expect that our management will operate our business in a manner similar to that in which it is being operated today and that holders of shares of our common stock will continue to be subject to the same risks and opportunities as they currently are subject to with respect to their ownership of our common stock. If the merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of our common stock, including the risk that the market price of our common stock may decline to the extent that the current market price of our common stock reflects a market assumption that the merger will be completed. If the proposal to approve the merger and the other transactions contemplated by the merger agreement is not approved or if the merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects or results of operations will not be adversely impacted.

In addition, upon termination of the merger agreement under specified circumstances, Gas Natural would be obligated to pay Parent a termination fee of approximately $4.8 million. Conversely, in the event that all conditions precedent to the obligations of Parent to close the transaction have been satisfied or waived by Gas Natural but Parent nonetheless elects not to consummate the merger, Parent would be obligated to pay Gas Natural a termination fee of $4.8 million. For more information please see the discussion in the section entitled “The Merger Agreement — Termination Fees” beginning on page 79 in this proxy statement. In no event will either party be required to pay a termination fee on more than one occasion.

F INANCING OF THE M ERGER

The consummation of the merger is not conditioned upon Parent’s receipt of third-party financing.

We anticipate that the total amount of funds necessary to pay all of the merger consideration to our shareholders in connection with the merger will be approximately $137.8 million. Parent has entered into an equity commitment letter with First Reserve, pursuant to which First Reserve has agreed to provide Parent, contemporaneously with the closing of the merger, with an amount of cash sufficient to fund the merger consideration payable to our shareholders under the merger agreement (the commitment letter.) First Reserve may assign all or a portion of its obligation under the commitment letter to any affiliate or co-investor as long as First Reserve remains responsible for its obligations under the commitment letter to the extent not performed by such assignee. The amount of the equity commitment is capped at $137,808,437, which we expect to be the total amount of merger consideration payable under the merger agreement. The obligation of First Reserve (and any of its permitted assignees) to fund the amount contemplated by the equity commitment letter is generally subject to:

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L IMITED G UARANTY

In the event that Parent elects not to consummate the merger under the circumstances described in the first bullet under the section entitled “The Merger Agreement — Gas Natural Termination Rights” below and, as a result, becomes obligated to pay to Gas Natural the Parent termination fee that is described in the section entitled “The Merger Agreement — Termination Fees — Termination Fee Payable by Parent” below, First Reserve will fund the payment of the Parent termination fee by Parent. To secure this obligation, First Reserve has provided Gas Natural with a limited guaranty (the limited guaranty) in which First Reserve has unconditionally guaranteed the due and punctual payment by Parent as and when due of the payment obligation of Parent to pay the Parent termination fee under the merger agreement, subject to the terms and conditions of the limited guaranty. First Reserve may assign all or a portion of its obligation under the limited guaranty to any affiliate as long as First Reserve remains responsible for its obligations under the limited guaranty to the extent not performed by its affiliate. The aggregate amount of the limited guaranty is capped at the amount of the Parent termination fee, which is approximately $4.8 million.

Subject to certain exceptions, the limited guaranty will terminate upon the first to occur of:

First Reserve made customary representations and warranties to Gas Natural in the limited guaranty, including representations and warranties related to its financial capacity to perform its obligations under the limited guaranty.

A CCOUNTING T REATMENT

The merger will be accounted for as a “purchase transaction” for financial accounting purposes.

M ATERIAL U.S. F EDERAL I NCOME T AX C ONSEQUENCES OF THE M ERGER

The following are the material U.S. federal income tax consequences of the merger to “U.S. holders” and “non-U.S. holders” (in each case, as defined below) of our shareholders whose shares of common stock are converted into the right to receive cash in the merger. This discussion is based on the current provisions of the Code,

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applicable U.S. Treasury regulations promulgated under the Code, judicial authority and administrative rulings in effect as of the date of this proxy statement, all of which are subject to change, possibly with retroactive effect. Any such change could alter the tax consequences to the holders as described herein. No ruling from the Internal Revenue Service (IRS) has been or will be sought with respect to any aspect of the merger.

This discussion does not purport to be a complete analysis of all potential tax effects of the merger. For example, it does not consider the effect of any applicable state, local or foreign income tax laws, or of any non-income tax laws. In addition, this discussion does not address the tax consequences of transactions effectuated prior to or after the completion of the merger (whether or not such transactions occur in connection with the merger), including, without limitation, the acquisition or disposition of our common stock other than pursuant to the merger. This discussion does not address the U.S. federal income tax consequences to holders of shares who demand appraisal rights under Ohio law. Furthermore, this discussion applies only to holders that hold their common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). In addition, this discussion does not address all aspects of U.S. federal income tax consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules, such as:

If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) holds our common stock, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding our common stock and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences of the merger to them.

U.S. Holders

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of our common stock that is:

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The conversion of our common stock into the right to receive cash in the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder whose shares of our common stock are converted into the right to receive cash in the merger will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received with respect to such shares and the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis generally will equal the price the U.S. holder paid for such shares. Gain or loss will be determined separately for each block of our common stock (i.e., shares of our common stock acquired at the same cost in a single transaction). Such gain or loss generally will be treated as long-term capital gain or loss if the U.S. holder’s holding period in our common stock exceeds one year at the time of the completion of the merger. Long-term capital gains of non-corporate U.S. holders generally are subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. Certain U.S. holders that are individuals, trusts or estates are subject to a 3.8% U.S. federal tax on certain investment income, including gain from the conversion of our common stock into the right to receive cash in the Merger.

Non-U.S. Holders

A “non-U.S. holder” is a beneficial owner of our common stock that is not a U.S. holder or a partnership (or any other entity classified as a partnership for U.S. federal income tax purposes). Payments made to a non-U.S. holder upon the conversion of the shares of our common stock into the right to receive cash in the merger generally will not be subject to U.S. federal income tax unless:

A non-U.S. holder described in the first bullet point immediately above generally will be subject to regular U.S. federal income tax on any gain from the conversion of shares of our common stock into the right to receive cash in the merger as if the non-U.S. holder were a U.S. holder, subject to an applicable income tax treaty providing otherwise. If such non-U.S. holder is a foreign corporation, it may also be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits (or a lower treaty rate). A non-U.S. holder described in the second bullet point immediately above will be subject to tax at a rate of 30% (or a lower treaty rate) on any gain realized, which may be offset by U.S.-source capital losses recognized in the same taxable year, even though the individual is not considered a resident of the United States.

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We believe we have not been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the five-year period preceding the merger.

Information Reporting and Backup Withholding

Payments made in exchange for our common stock generally will be subject to information reporting unless the holder is an “exempt recipient” and may also be subject to backup withholding at a rate of 28%. To avoid backup withholding, U.S. holders that do not otherwise establish an exemption should complete and return Internal Revenue Service Form W-9, certifying that such U.S. holder is a U.S. person, the taxpayer identification number provided is correct and such U.S. holder is not subject to backup withholding. A non-U.S. holder that provides the applicable withholding agent with an Internal Revenue Service Form W-8BEN or W-8BEN-E (or other applicable IRS Form W-8) will generally establish an exemption from backup withholding.

Amounts withheld under the backup withholding rules are not additional taxes and may be refunded or credited against a holder’s U.S. federal income tax liability, provided the relevant information is timely furnished to the Internal Revenue Service.

THIS DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. WE URGE YOU TO CONSULT WITH YOUR OWN TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE MERGER ARISING UNDER THE FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

R EGULATORY A PPROVALS R EQUIRED FOR THE M ERGER

We currently anticipate completing the merger in the third quarter 2017. In order to complete the merger, Gas Natural and First Reserve are required to obtain certain federal and state regulatory approvals. The required regulatory approvals include (i) the expiration or termination of the waiting period under the HSR Act, and (ii) any required approvals of, or filings with, the Public Utilities Commission of Ohio (PUCO), the Maine Public Utilities Commission (MPUC), the North Carolina Utilities Commission (NCUC), and the Montana Public Service Commission (MTPSC).

We cannot definitively determine the time frame necessary to obtain the requisite authorizations, approvals and consents, as described in additional detail below, although we anticipate the timely receipt of the required approvals in the third quarter 2017. Although we believe that the required approvals will be received within that time frame, there can be no assurance as to the precise timing of or our ability to obtain the approvals.

This section sets forth a brief summary of the federal and state regulatory approvals required in order to consummate the merger.

Hart-Scott-Rodino Act

Completion of the merger is subject to expiration or termination of the waiting period under the HSR Act. Under the HSR Act and the rules and regulations promulgated thereunder, the merger may not be completed until notification and report forms have been filed with the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) by each of Gas Natural and First Reserve and the applicable waiting period has expired or been terminated.

The waiting period with respect to the notification and report forms filed under the HSR Act expires thirty calendar days after the date both parties have submitted their filings, unless otherwise terminated or extended.

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The waiting period can be earlier terminated by the DOJ and FTC. The waiting period can be extended if the DOJ or the FTC issues a Request for Additional Information and Documentary Material (a second request) to Gas Natural and First Reserve. A second request is a request that the parties to a merger or acquisition provide the DOJ or FTC with information, documents and data that allows the agency to further consider whether the proposed transaction violates the federal antitrust laws. The issuance of a second request extends the required waiting period to consummate the transaction for an additional thirty days, measured from the time both Gas Natural and First Reserve certify that they have substantially complied with the second request, unless that waiting period is earlier terminated by the DOJ and FTC, or unless the parties extend that thirty day period by agreement with the DOJ or FTC, as applicable.

At any time before or after consummation of the merger, notwithstanding the termination of the waiting period under the HSR Act, the DOJ, FTC, or any U.S. state, could take such action under the antitrust laws as each deems necessary or desirable in the public interest, including seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of Gas Natural and First Reserve. Private parties also may seek to take legal action under the antitrust laws under certain circumstances. There can be no assurance that the DOJ, the FTC or any other governmental entity or any private party will not attempt to challenge the merger on antitrust or competition grounds, and, if such a challenge is made, there can be no assurance as to its result.

Under the merger agreement, Gas Natural and First Reserve generally must use reasonable best efforts to take all necessary actions to obtain all regulatory approvals required to complete the merger, subject to certain exceptions. Gas Natural and First Reserve filed the required HSR notification and report forms with the DOJ and FTC on November 18, 2016 and requested early termination of the HSR Act waiting period.

State Regulatory Approvals

Maine Regulatory Approvals

Under Maine law, approval of the merger is governed by the Maine Revised Statutes, Title 35-A, Section 708. Section 708 sets forth the requirements for approval of all reorganizations, including mergers of an affiliated interest of a public utility such as Gas Natural. Section 708 provides an initial period of review by the MPUC of all requests for approval of a reorganization within sixty days, but allows the MPUC to extend this timeframe up to a total of one hundred and eighty days if the MPUC determines that the necessary investigation cannot be concluded within sixty days. In order to approve the reorganization, the MPUC must find that the merger or other reorganization is “consistent with the interests of the utility’s ratepayers and investors,” which the MPUC has treated as a “no net harm” standard. To ensure no net harm to any ratepayers and shareholders, the MPUC reviews the evidence to determine whether the benefits of the merger are at least equal to any risks. Section 708(2) provides that in “granting its approval, the commission shall impose such terms, conditions or requirements as, in its judgment, are necessary to protect the interests of ratepayers.” Section 708(2)(A) lists various provisions designed to protect ratepayer interests, including the MPUC’s authority to review and approve any affiliated transactions, impose limits on investment in non-utility business, and exercise reasonable remedial power. The provisions also direct the MPUC to ensure that the public utility remains able to provide safe, adequate, and reliable service, and that the public utility’s credit and ability to attract capital at reasonable terms are not impaired.

In Maine, the process will likely be initiated by the filing of a joint application of our Maine utility Bangor Natural Gas Company, Inc., Gas Natural and First Reserve along with supporting testimony. Interested parties will be permitted to intervene. The MPUC will set a procedural schedule which will allow for the submission of intervenor testimony, rebuttal testimony, and potentially a MPUC staff bench analysis. The MPUC will allow an opportunity for discovery on the joint application and each round of testimony. Parties may also participate in settlement discussions, which could include the MPUC staff. If settlement is reached, some or all of the parties would submit a stipulation to resolve all of the issues in the proceeding, or a subset of issues. The MPUC would then approve or reject the stipulation based upon the criteria set forth in the MPUC procedural rules. If a

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settlement is not reached or if some contested issues remain after settlement, the MPUC will likely hold a hearing on the unresolved issues. The parties would have an opportunity to submit post-hearing briefs and respond to any examiner’s report setting forth the MPUC staff’s position. The MPUC will deliberate and issue an order approving or denying the requested transaction. Any aggrieved party has the right to request rehearing at the MPUC within twenty days or appeal to the Maine Supreme Judicial Court within twenty one days of the date of the order.

Montana Regulatory Approvals

While there is no specific Montana statute that requires pre-approval by the MTPSC, the MTPSC has interpreted its general regulatory and supervisory powers found in Title 69 of the Montana Code Annotated as follows: “Pursuant to its authority, the Commission has jurisdiction over and must approve any sale or transfer of a public utility, its assets, or utility obligations in order to assure generally that utility customers will receive adequate service and facilities, that utility rates will not increase as a result of the sale or transfer, and that the acquiring entity is fit, willing, and able to assume the service responsibilities of a public utility.”

Generally, there are three standards that MTPSC may employ in evaluating sales, mergers, and acquisitions: the public interest standard, the no-harm to consumers standard, and the net-benefit to consumers standard. The MTPSC previously determined that it “may be impossible to enunciate a general standard that is applicable in all cases,” and instead applies one or more of the above referenced tests depending on the specific facts and circumstances presented by the specific applicants.

In Montana, the process will be initiated by the filing of a joint application of Gas Natural, Energy West Montana, Inc., Cut Bank Gas Company, First Reserve and Parent. Interested parties will be permitted to intervene, supporting testimony will be filed, a period of time for discovery and opposing testimony (if any) will be permitted, followed by a hearing on the merits of the transaction. Post-hearing briefs may be required. The MTPSC will then deliberate and issue its order approving or denying the requested transaction. Typically, this process can take from six to twelve months from start to finish, but there is no statutory deadline for the MTPSC to render its decision. Following receipt of a final order of the MTPSC, any aggrieved party has the right to appeal to the Montana courts.

North Carolina Regulatory Approvals

Under North Carolina law, the applicable statutory authority controlling mergers and combinations of regulated public utilities is Section 62-111 of the North Carolina General Statutes. Section 62-111 requires that any change of control of a public utility, whether by merger or other combination, must be “justified by the public convenience and necessity.” The statute does not include specific elements that the NCUC considers in evaluating whether Gas Natural meets this standard; rather a series of NCUC orders provide the guidelines for the evaluation. Under these orders, the NCUC’s evaluation of a merger or change of control includes, but is not limited to, the following considerations:

During the course of its investigation, Gas Natural may need to provide a market power analysis as well as a cost benefit analysis, although it could request waiver for either or both.

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Gas Natural’s regulated North Carolina subsidiary, Frontier Natural Gas Company, will file a joint application and prefiled direct testimony, along with First Reserve, for approval, after which the NCUC will issue a scheduling order setting forth the timeline and process for intervenor participation, discovery, and public hearings. Any eventual NCUC order may contain conditions that ensure the merger or combination satisfies the standards and requirements of approval.

Ohio Regulatory Approvals

The PUCO reviews these types of mergers under its general supervisory authority, Ohio Revised Code Sections 4905.04 through 4905.06. There are accordingly no specific elements governing the merger approval process. Parties typically submit merger applications which provide: (i) a general description of the terms/conditions of the merger, (ii) a general description of the financial benefits of the merger to existing Ohio customers, (iii) a general description of the administrative benefits of the merger ( e.g ., reduction of regulatory filings and avoidance of duplicating auditing/litigation matters), (iv) a discussion of the merger’s impact on the competitive natural gas market in Ohio, (v) a description of specific requests concerning pending PUCO matters that would be impacted by the merger, and (vi) a request for the PUCO to approve the merger.

After the application is filed interested parties are given the opportunity to intervene in the proceeding. Those intervenors are typically given the opportunity to file comments regarding the merger. The applicant is given the opportunity to respond to those comments. The PUCO may or may not also hold a hearing to evaluate the application. The Commission will then issue a decision as to whether or not the merger is approved, which may be subject to certain modifications demanded by the PUCO.

L ITIGATION R ELATED TO THE M ERGER

On November 3, 2016, a putative derivative and class action lawsuit was filed in the Cuyahoga County Court of Common Pleas, Case Number CV16871400, captioned Alison D. “Sunny” Masters vs. Michael B. Bender et. al. , naming our board of directors, James E. Sprague (our chief financial officer), Kevin J. Degenstein (our chief operating officer), Jennifer Haberman (our corporate controller), Jed D. Henthorne (our former corporate controller and currently president of our Energy West Montana subsidiary), Vincent A. Parisi (our former general counsel), Parent, Merger Sub, First Reserve, Anita G. Zucker, individually, the Zucker Trust, InterTech, NIL Funding, as defendants, and Gas Natural, as a nominal defendant. NIL Funding is an affiliate of InterTech. The chairperson and chief executive officer of InterTech, Anita G. Zucker, beneficially owns nearly 10% of our outstanding stock through the Zucker Trust. Two members of our board of directors, Mr. Bender and Mr. Johnston, currently serve as officers of InterTech. On November 17, 2016, plaintiff filed an amended complaint.

The amended complaint alleges, among other things, that (i) our board breached its fiduciary duties and acted in bad faith by failing to undertake an adequate sales process during the time leading up to the execution of the merger agreement, (ii) our officers violated their fiduciary duty of loyalty, (iii) the merger agreement contains preclusive deal protection devices, (iv) our board failed to act with due care, loyalty, good faith, and independence owed to our shareholders, (v) that our executive officers, board members, InterTech, NIL Funding, and First Reserve conspired and aided and abetted such breaches of fiduciary duties, and (vi) that our board breached their fiduciary duties and violated related federal securities laws by omitting and misrepresenting material information in the company’s preliminary proxy statement filed on November 9, 2016. The amended complaint further alleges various claims against the Zucker Trust and First Reserve including, as applicable, claims for breach of fiduciary duties, violations of Section 13(d) of the Exchange Act and Exchange Act Rule 13d-2(a).

This lawsuit seeks, among other things, declaration of the action as a proper class action, relief that would enjoin the consummation of the merger, extend the go-shop period, prohibit a shareholder vote at the special meeting until the expiration of an extended go-shop period, prohibit the payment of Gas Natural’s termination fee should it enter into a merger agreement with another potential buyer during the go-shop period, lower the termination

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fees, prohibit First Reserve from having the right to match competing bids, modify the vote required to approve the merger and the transactions contemplated by the merger agreement, remove the standstill provisions in the confidentiality agreement, require our named executive officers to forgo the compensation that is based on or otherwise relates to the merger that will be payable to them, and require that any material omissions or misrepresentations in the proxy statement be remedied. In addition, the amended complaint seeks rescission of the merger agreement, assuming the merger is approved by our shareholders prior to the resolution of this lawsuit, and an award of rescissory damages, fees and costs associated with the litigation, including attorneys’ and experts fees and expenses.

We intend to vigorously contest this lawsuit and believe it is without merit.

THE MERGER AGREEMENT

E XPLANATORY N OTE R EGARDING THE M ERGER A GREEMENT

In this portion of the proxy statement, we have summarized the material provisions of the merger agreement. Our summary of the merger agreement is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this proxy statement as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully in its entirety.

The representations, warranties and covenants made in the merger agreement by Gas Natural, Parent and Merger Sub are qualified and subject to important limitations agreed to by Gas Natural, Parent and Merger Sub in negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were made only for purposes of the merger agreement and as of specific dates and are solely for the benefit of the parties to the merger agreement. In addition, certain representations and warranties were used for the purpose of allocating risk between the parties to the merger agreement, rather than establishing matters of fact. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to shareholders and to reports and documents filed with the SEC, and, in some cases, are qualified by disclosures that were made by each party to the others, which disclosures may not be reflected in the merger agreement. Investors and shareholders are not third-party beneficiaries under the merger agreement and should not rely on the representations, warranties, covenants and agreements or their descriptions as characterizations of the actual state of facts or condition of Gas Natural, Parent or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties, which only purport to be accurate as of the date of the merger agreement, may have changed since the date of the merger agreement, which subsequent developments or new information may or may not be included in this proxy statement or other public disclosures by Gas Natural.

The merger agreement is described in this proxy statement and included as Annex A only to provide you with information regarding its terms and conditions and not to provide any other factual information regarding Gas Natural and its businesses. You should not rely on the covenants in the merger agreement as actual limitations on the respective businesses of Gas Natural, Parent and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosures to the merger agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. In addition, if specific material facts arise that contradict the representations and warranties in the merger agreement, Gas Natural will only disclose those material facts in the public filings that it makes with the SEC if required by applicable law. Accordingly, the representations, warranties, covenants and other agreements in the merger agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding Gas Natural and our business. Such information can be

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found elsewhere in this proxy statement and in the public filings that Gas Natural makes with the SEC, which are available without charge through the SEC’s website at www.sec.gov. For more information please see the discussion in the section entitled “Where You Can Find More Information” beginning on page 88 in this proxy statement.

D ATE OF THE M ERGER A GREEMENT

The merger agreement was executed by Gas Natural, Parent and Merger Sub on October 8, 2016 (the date of the merger agreement).

T HE M ERGER

The merger agreement provides that, upon the terms and subject to the conditions of the merger agreement, and in accordance with Ohio law, at the effective time of the merger, Merger Sub will be merged with and into Gas Natural, the separate corporate existence of Merger Sub will cease and Gas Natural will continue as the surviving corporation and a wholly-owned subsidiary of Parent (the surviving corporation).

C LOSING AND E FFECTIVE T IME OF THE M ERGER

The closing of the merger (effective time of the merger) will take place no later than the third business day after the satisfaction or waiver of all of the conditions to the closing of the merger specified in the merger agreement and described in this proxy statement (other than those conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions), unless another date is agreed to in writing by the parties (closing date).

On the closing date, Gas Natural and Merger Sub will file, with respect to the merger, a certificate of merger with the Office of the Secretary of State of the State of Ohio in accordance with Ohio law (at which time the merger will become effective, unless another date and time permitted by Ohio law is agreed to by the parties and specified in the certificate of merger).

O RGANIZATIONAL D OCUMENTS ; D IRECTORS AND O FFICERS

At the effective time of the merger, the articles of incorporation of Gas Natural will be amended and restated in their entirety in the form attached to the merger agreement, and the code of regulations of Merger Sub, as in effect immediately prior to the effective time of the merger, will become the code of regulations of the surviving corporation, unless subsequently amended.

At the effective time of the merger, the officers of Gas Natural will be the officers of the surviving corporation and the directors of Merger Sub as of immediately prior to the effective time will be the directors of the surviving corporation, in each case until their respective successors are duly elected or appointed and qualified, or their earlier death, resignation or removal.

E FFECTS OF THE M ERGER ; M ERGER C ONSIDERATION

Outstanding Gas Natural Common Stock

Except for shares owned by Gas Natural, Parent or Merger Sub and dissenting shares, as described below, at the effective time of the merger, each share of Gas Natural common stock issued and outstanding immediately prior to the effective time of the merger will automatically be converted into the right to receive the $13.10 merger consideration in cash, without interest and subject to any required withholding taxes (merger consideration).

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Shares Owned by Gas Natural or Parent

At the effective time of the merger, each share of Gas Natural common stock (i) owned by Gas Natural or any of our wholly-owned subsidiaries or (ii) owned by Parent or Merger Sub or any of their wholly-owned subsidiaries will, in each case, be cancelled and cease to exist, and no payment will be made with respect to those shares.

T REATMENT OF D ISSENTING S HARES

Any shareholder of ours who is the record holder of shares of Gas Natural common stock as of the record date of the special meeting may deliver to us, before the special meeting, a written demand to be paid the fair cash value for such shares of Gas Natural common stock in accordance with Sections 1701.84 and 1701.85 of the Ohio Revised Code, provided such shares are not voted in favor of the proposal to adopt the merger agreement at the special meeting (we refer to any such shareholder as a dissenting shareholder and to the shares of Gas Natural common stock of any such dissenting shareholder as dissenting shares). As provided by Ohio law, the dissenting shares of a dissenting shareholder will not be converted into the right to receive the merger consideration unless and until such dissenting shareholder fails to perfect or otherwise waives, withdraws or loses his, her or its rights as a dissenting shareholder, if any, under the Ohio general corporation law. If any such dissenting shareholder fails to perfect or otherwise waives, withdraws or loses any such rights as a dissenting shareholder, then that shareholder’s shares of our common stock will be deemed to have been converted as of the effective time of the merger into only the right to receive the merger consideration. Subject to the preceding sentence, from and after the effective time of the merger, each shareholder who has properly asserted rights as a dissenting shareholder as provided in Sections 1701.84 and 1701.85 of the Ohio Revised Code will be entitled only to such rights as are granted under those statutes.

Parent will have the right to participate in and direct all negotiations and proceedings with respect to any demands or claims made by dissenting shareholders, and to consent to any payment or commitment or agreement to make any payment, or to any settlement or commitment or offer to settle, any rights of a dissenting shareholder asserted under those statutes.

T REATMENT OF O UTSTANDING E QUITY A WARDS

As a result of the merger, all restricted shares of Gas Natural common stock (restricted shares) that were awarded pursuant to any of Gas Natural’s stock plans or otherwise prior to the date of the merger agreement that are outstanding as of immediately prior to the effective time of the merger will be vested and no longer subject to restrictions as of the effective time of the merger, and will be canceled and converted into, and constitute the right to receive the merger consideration for those shares. In addition, the merger agreement provides that, prior to the effective time of the merger, our board will adopt such resolutions and take such actions as are necessary to effect such treatment of outstanding restricted shares.

At the effective time of the merger, Parent will deposit with the surviving corporation cash in the amount necessary to make payments with respect to the restricted shares in accordance with the foregoing, and Parent will cause the surviving corporation to make such payments as promptly as practicable after the effective time of the merger (but not later than the later of the fifth business day following the closing date and the first regular payroll date immediately following the closing date).

R ESTRICTION OF F URTHER I SSUANCES UNDER G AS N ATURAL S TOCK P LANS

As of the date of the merger agreement, Gas Natural is restricted from issuing any incentive awards, options, additional restricted shares, or any other equity-based awards or rights with respect to shares of Gas Natural common stock without the consent of Parent. Commencing with the quarter ending December 31, 2016, the quarterly compensation owed to members of our board will be paid in cash rather than shares of fully vested common stock, payable on the same schedule as, and subject to the same terms and conditions pursuant to which, such grants had been made, consistent with past practice.

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E XCHANGE P ROCEDURES

Prior to the effective time of the merger, Parent will appoint a paying agent reasonably acceptable to Gas Natural and, at or prior to the effective time of the merger, will deposit with the paying agent the cash amount necessary to fund the aggregate merger consideration to be paid to the holders of Gas Natural common stock in connection with the merger.

Promptly after the effective time of the merger, but no later than the third business day thereafter, Parent will cause the paying agent to mail to each record holder of a certificate representing any shares of Gas Natural common stock and each record holder of uncertificated shares of Gas Natural common stock represented by book entry (in each case other than dissenting shares) that were converted into a right to receive the merger consideration, a letter of transmittal and instructions for surrendering the certificates or book-entry shares in exchange for payment of such merger consideration. Upon surrender of a certificate (or an affidavit of loss in lieu of a certificate) or a book-entry share and upon delivery of a duly executed letter of transmittal in proper form, the holder of such certificate or book-entry shares will be entitled to receive the portion of the aggregate merger consideration payable to such holder pursuant to the merger (without interest and less required withholding taxes). The surrendered certificates representing shares of Gas Natural common stock will be cancelled.

You should not return your stock certificates with the enclosed proxy card, and you should not send in your stock certificates to the paying agent until you receive a letter of transmittal from the paying agent with instructions for the surrender of your stock certificates.

At the effective time of the merger, our stock transfer books will be closed, and there will be no further registration of transfers of Gas Natural common stock.

No interest will be paid or will accrue on the cash payable in respect of the shares of Gas Natural common stock represented by any certificate representing such shares or any book-entry shares. The merger consideration paid upon surrender of any such certificate or book-entry shares will be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Gas Natural common stock formerly represented by such certificate or book-entry share.

None of Gas Natural, the paying agent, Parent, Merger Sub or the surviving corporation will be liable to any person for any merger consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Any portion of the merger consideration deposited with the paying agent that is not disbursed to the former holders of Gas Natural common stock following the first anniversary of the effective time of the merger will be delivered to the surviving corporation. Any former holders of Gas Natural common stock who have not complied with the exchange and payment procedures contained in the merger agreement within twelve months after the effective time of the merger may look to the surviving corporation only as a general creditor (subject to abandoned property, escheat or other similar laws) for payment of the merger consideration, payable upon compliance with the procedures set forth in the merger agreement.

Lost, Stolen and Destroyed Certificates

If a certificate representing shares of Gas Natural common stock is lost, stolen or destroyed, upon the making of an affidavit of that fact by the shareholder requesting payment, the paying agent will issue, in exchange for such lost, stolen or destroyed certificate, the aggregate merger consideration into which the shares of Gas Natural common stock formerly represented by such certificate were converted into the right to receive pursuant to the merger agreement and, if required by Parent, such shareholder may also be required to provide a bond (in a reasonable and customary amount as directed by Parent) prior to receiving any such merger consideration.

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R EPRESENTATIONS AND W ARRANTIES

Gas Natural, on the one hand, and Parent and Merger Sub, on the other hand, have each made representations and warranties to each other in the merger agreement. None of the representations and warranties of any of the parties to the merger agreement will survive the effective time of the merger.

Representations and Warranties of Gas Natural

We have made customary representations and warranties to Parent and Merger Sub in the merger agreement that are subject in some cases, to specified exceptions and qualifications contained in the merger agreement. The topics covered by our representations and warranties include the following:

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Company Material Adverse Effect

Many of our representations and warranties are qualified by the concept of a “company material adverse effect.” Under the terms of the merger agreement, a company material adverse effect means any fact, circumstance, effect, change, event or development (effects) that has, individually or collectively, a material adverse effect on the business, assets, liabilities, properties, financial condition or results of operations of Gas Natural and our subsidiaries, taken as a whole. However, no change, event, state of facts or development resulting from any of the following items will be taken into account in determining whether a company material adverse effect has occurred:

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With respect to bullets one, two, three, four, seven, nine, ten, eleven and twelve above, such effect may be taken into account in determining whether a company material adverse effect has occurred solely to the extent such effect has a materially disproportionate effect on Gas Natural and our subsidiaries, taken as a whole, as compared to other entities (if any) engaged in the natural gas distribution business and related business in the same state or states in which such effect has taken place (in which case, only the incremental disproportionate impact may be taken into account in determining whether there has been, or would be, a company material adverse effect, to the extent such change is not otherwise excluded from being taken into account by the bullets above). In addition, with respect to bullets five and eight above, the cause of such effects may be deemed to constitute, in and of itself, a company material adverse effect and may be taken into consideration when determining whether a company material adverse effect has occurred.

Representations and Warranties of Parent and Merger Sub

Parent and Merger Sub made customary representations and warranties to us in the merger agreement, that are subject in some cases to specified exceptions and qualifications contained in the merger agreement. The topics covered by their representations and warranties include the following:

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C OVENANTS R EGARDING C ONDUCT OF B USINESS BY G AS N ATURAL P RIOR TO THE M ERGER

Under the merger agreement, until the effective time of the merger, except as contemplated by the merger agreement, as required by applicable law or a governmental entity, in the event of certain emergencies or as agreed to in writing by Parent (which agreement will not be unreasonably withheld, conditioned or delayed), we will, and will cause our subsidiaries to:

In addition, until the effective time of the merger, except as contemplated by the merger agreement, as required by applicable law or a governmental entity, in the event of certain emergencies or as consented to in writing by Parent (which consent will not be unreasonably withheld, conditioned or delayed), we will not, and will not permit our subsidiaries to:

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O BLIGATIONS WITH R ESPECT TO R EGULATORY P ROCEEDINGS

The merger agreement provides that Gas Natural and our subsidiaries may:

To the extent reasonably practicable and as permitted by applicable law, Gas Natural is required to consult in advance with Parent in any such proceedings and consider in good faith any suggestions made by Parent in connection therewith other than with respect to any immaterial proceedings that are not rate cases.

Without the prior written consent of Parent (which consent may not be unreasonably withheld, delayed or conditioned), Gas Natural and our subsidiaries may not enter into any settlement or stipulation in respect of any such proceeding if such settlement or stipulation would materially and adversely affect the authorized capital structure or authorized return on equity of any of our subsidiaries or otherwise result in a material and adverse financial impact on Gas Natural or any of our subsidiaries.

O BLIGATIONS WITH R ESPECT TO THE S PECIAL M EETING

Under the terms of the merger agreement, we have agreed to, as promptly as reasonably practicable following confirmation by the SEC that it has no further comments on this proxy statement, call, give notice of, convene and hold the special meeting for the purpose of seeking approval by the Gas Natural shareholders of the merger agreement, the merger and the other transactions contemplated by the merger agreement (company shareholder approval). The merger agreement provides that our board will include in this proxy statement its recommendation that the Gas Natural shareholders vote in favor of the company shareholder approval (company recommendation) except to the extent our board has made an adverse recommendation change (as such term is defined below in the section entitled “— Obligations of Our Board with Respect to Its Recommendation”) in accordance with the provisions described in such section. Under the terms of the merger agreement, we have also agreed, except to the extent there has been an adverse recommendation change or the merger agreement has been terminated in accordance with its terms, to use our reasonable best efforts to solicit the company shareholder approval. Unless our board has made an adverse recommendation change in accordance with the terms of the merger agreement, we are prohibited from submitting to the vote of Gas Natural shareholders any company acquisition proposal.

A “company acquisition proposal” is defined in the merger agreement to mean, other than the transactions contemplated by the merger agreement, any proposal or offer from a third party with respect to any:

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Gas Natural is permitted to postpone or adjourn the special meeting in certain circumstances related to soliciting additional proxies or requirements of applicable law.

G O -S HOP P ERIOD

Under the terms of the merger agreement, for a period of forty-two days beginning on the first business day after the date of the merger agreement and ending at 11:59 p.m. Eastern time on November 22, 2016 (go-shop period), Gas Natural and its subsidiaries, affiliates, directors, officers, employees, financial advisers and other authorized representatives (Gas Natural representatives) have the right, under the direction of our board to:

On November 23, 2016, Gas Natural will provide Parent with a list of each person or group from whom Gas Natural or any Gas Natural representative receives a written company acquisition proposal during the go-shop period and that our board, prior to the expiration of the go-shop period, has determined, in good faith, after consultation with Gas Natural’s financial and legal advisors, constitutes, or is reasonably likely to lead to, a superior proposal (as such term is defined below), and a copy of each such written company acquisition proposal.

R ESTRICTION ON S OLICITATION OF C OMPANY A CQUISITION P ROPOSALS

Under the terms of the merger agreement, from and after the expiration of the go-shop period, we will, and will cause our subsidiaries and our and their respective Gas Natural representatives to, immediately cease any solicitations, discussions, negotiations or communications with any persons that may be ongoing with respect to any company acquisition proposal. In addition, from and after the expiration of the go-shop period until the earlier of the effective time of the merger and the termination of the merger agreement, we will not and will cause our subsidiaries and any of our and our subsidiaries’ representatives to not:

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Notwithstanding anything to the contrary contained in the merger agreement (but subject to Gas Natural’s compliance with the provisions described in this section), if, at any time following the expiration of the go-shop period and prior to obtaining the company shareholder approval, (i) Gas Natural receives a written unsolicited bona fide company acquisition proposal that did not result from a breach of the provisions described in the bullets preceding this paragraph, (ii) our board determines, in good faith, after consultation with Gas Natural’s financial and legal advisors, that such unsolicited company acquisition proposal constitutes, or is reasonably expected to lead to, a superior proposal, and (iii) our board determines, in good faith, after consultation with Gas Natural’s outside legal and any other advisor our board chooses to consult, that the failure to participate in such negotiations or discussions or to furnish such information or data to such third party would reasonably likely be inconsistent with our board’s fiduciary duties under applicable law, then Gas Natural may participate or engage in discussions or negotiations with, or disclose any non-public information or data relating to Gas Natural or any of our subsidiaries or afford access to the business, properties, assets, employees, books or records of Gas Natural or any of our subsidiaries to the person that made the unsolicited company acquisition proposal or to any person in connection with that company acquisition proposal.

As part of its obligations under the merger agreement with respect to such company acquisition proposal, Gas Natural:

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A superior proposal is defined in the merger agreement to mean a bona fide, written company acquisition proposal (substituting 50.1% for 20% in the definition of company acquisition proposal above) that our board determines in good faith, after consultation with its legal and financial advisors, and taking into account the legal, financial (including any financing terms), regulatory, timing and other aspects of such company acquisition proposal and such other factors that are deemed relevant by our board, is more favorable from a financial point of view (taking into account such relevant factors) to our shareholders than the transactions contemplated by the merger agreement (after taking into account any proposed revisions to the terms of the merger agreement that are committed to in writing by Parent in exercising its matching rights under the merger agreement).

O BLIGATION OF THE B OARD OF D IRECTORS WITH R ESPECT TO I TS R ECOMMENDATION

The merger agreement provides that, except as described below, our board will not:

We refer to an action described in any of the first five bullet points above as an “adverse recommendation change.”

Notwithstanding any other provision of the merger agreement, at any time prior to obtaining the company shareholder approval, if Gas Natural is in compliance with the provisions described in the sections entitled “— Go-Shop Period” and “— Restriction on Solicitation of Company Acquisition Proposals” and the provisions described in this section, our board may make an adverse recommendation change and may cause Gas Natural to terminate the merger agreement in accordance with the provisions described in the first bullet point in the section entitled “— Termination of the Merger Agreement — Gas Natural Termination Rights” below if and only if, prior to obtaining the shareholder approval:

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As long as Gas Natural expressly publicly reaffirms the company recommendation in such disclosure (other than a customary “stop-look-and-listen” communication to the shareholders of Gas Natural pursuant to Rule 14d-9(f) under the Exchange Act), the merger agreement does not prohibit our board from:

E FFORTS TO C OMPLETE THE M ERGER

Under the terms of the merger agreement, each of Gas Natural, on the one hand, and each of Parent and Merger Sub, on the other hand, will use its reasonable best efforts to consummate the transactions contemplated by the merger agreement as soon as reasonably practicable and cause the conditions to the merger to be satisfied (as described below in the section entitled “— Conditions Precedent to the Merger”) as promptly as reasonably practicable, including:

In addition, Parent’s reasonable best efforts required with respect to obtaining any required statutory approvals include:

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provided, however, that such reasonable best efforts will not require Parent or any of its affiliates (including the surviving corporation or its subsidiaries after the merger is effected) to, or permit Gas Natural or our subsidiaries to, take any action (including any of the actions listed in the bullets above, or agree to or accept any order, action or regulatory condition of any governmental entity containing terms, conditions, liabilities, obligations, commitments or sanctions, that, individually or in the aggregate, would reasonably be expected to result in a material adverse effect on the business, assets, liabilities, properties, financial condition or results of operations of Parent, Gas Natural and our subsidiaries, taken as a whole after giving effect to the merger such that Parent and its subsidiaries (including the surviving corporation and its subsidiaries) for this purpose will be deemed to be a consolidated group of entities of the size and scale of a hypothetical company that is 100% of the size and scale of Gas Natural and our subsidiaries, taken as a whole (burdensome effect), except that none of the following will constitute or be taken into account in determining whether any such terms, conditions, liabilities, obligations, commitments or sanctions would, individually or in the aggregate, have such a burdensome effect:

In addition, each of Parent and Gas Natural agreed, to the extent reasonably practicable and unless prohibited by applicable law or a governmental entity, to:

Subject to certain qualifications, Gas Natural will (i) promptly notify Parent of any shareholder litigation arising from the merger agreement or the merger that is brought against Gas Natural or members of our board (transaction litigation), (ii) keep Parent reasonably informed with respect to the status of such litigation, (iii) provide Parent the opportunity to participate in, but not control, the defense, settlement or prosecution of any transaction litigation and (iv) consult with Parent with respect to the defense, settlement and prosecution of any transaction litigation and consider in good faith Parent’s advice with respect to such transaction litigation. Gas Natural may not compromise, settle or come to an arrangement regarding, or agree to compromise, settle or come to an arrangement regarding, any transaction litigation without Parent’s prior written consent (which consent may not be unreasonably withheld, conditioned or delayed).

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C ERTAIN I NDEBTEDNESS M ATTERS

The merger agreement requires that, prior to the closing of the merger, Gas Natural will use commercially reasonable efforts to complete a refinancing of our and our subsidiaries’ long-term and revolving debt and a related restructuring of certain of our subsidiaries on terms approved by the state utilities commissions and presented to Parent prior to the date of the merger agreement. This refinancing and restructuring was completed on October 19, 2016.

In addition, the merger agreement requires us to use commercially reasonable efforts to obtain, prior to the closing of the merger, consents or waivers from the lenders with respect to the credit facilities and letter of credit facilities of Gas Natural and our subsidiaries containing change in control provisions so as to permit the consummation of the merger, and exempt the merger under any change of control, event of default, termination or similar provisions of the documentation related to any swaps of Gas Natural or our subsidiaries.

I NDEMNIFICATION AND I NSURANCE

In the merger agreement, Parent agreed that all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the merger now existing in favor of the current or former directors, officers or employees of Gas Natural and our subsidiaries as provided in their respective organizational documents and any indemnification or other similar contracts of Gas Natural or any of our subsidiaries that were listed in a confidential disclosure letter to the merger agreement, in each case, as in effect on the date of the merger agreement, will continue in full force and effect in accordance with their terms to the extent provided in the following paragraph.

From and after the effective time of the merger and for a period of at least six years thereafter, the surviving corporation will (and Parent will cause the surviving corporation to) indemnify and hold harmless each individual who is as of the date of the merger agreement, or who becomes prior to the effective time of the merger, a director, officer or employee of Gas Natural or any of our subsidiaries or who is as of the date of the merger agreement, or who thereafter commences prior to the effective time of the merger, serving at the request of Gas Natural or any of our subsidiaries as a director, officer or employee of another person (indemnified parties), against all claims, losses, liabilities, damages, judgments, inquiries, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, lawsuit or proceeding, whether civil, criminal, administrative or investigative (including with respect to matters existing or occurring at or prior to the effective time of the merger (including the merger agreement and the transactions and actions contemplated by the merger agreement)), arising out of or pertaining to the fact that the indemnified party is or was a director, officer or employee of Gas Natural or any of our subsidiaries or is or was serving at the request of Gas Natural or any of our subsidiaries as a director, officer or employee of another person, whether asserted or claimed prior to, at or after the effective time of the merger, to the fullest extent permitted under applicable law. The merger agreement also provides that the surviving corporation will to the extent permitted by applicable law advance the expenses incurred in the defense of any such claim by an indemnified party.

In addition, for a period of six years from and after the effective time of the merger, unless Gas Natural has purchased a “tail” policy prior to the effective time of the merger (which Gas Natural may purchase, provided the premium for such insurance does not exceed 250% of aggregate annual premium most recently paid by Gas Natural prior to the effective time of the merger) the surviving corporation will either cause to be maintained in effect the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by Gas Natural or any of our subsidiaries or provide substitute policies for Gas Natural and its current and former directors and officers who are currently covered by the directors’ and officers’ and fiduciary liability insurance coverage currently maintained by Gas Natural, in either case, of not less than the existing coverage and having other terms not less favorable to the insured persons than the directors’ and officers’ liability insurance and fiduciary liability insurance coverage currently maintained by Gas Natural with respect to claims arising from facts or events that occurred on or before the effective time of the merger (with insurance carriers having at

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least the same credit rating as Gas Natural’s current carrier with respect to directors’ and officers’ liability insurance and fiduciary liability insurance), except that in no event will the surviving corporation be required to pay with respect to such insurance policies in respect of any one policy year more than 250% of the aggregate annual premium most recently paid by Gas Natural prior to the date of the merger agreement, and if the surviving corporation is unable to obtain such insurance it will obtain as much comparable insurance as possible for the years within such six year period for an annual premium no greater than the maximum cost stated above, in respect of each policy year within such period. The surviving corporation will be required to maintain such policies in full force and effect, and to continue to honor its obligations thereunder, for such six-year period.

The merger agreement provides that the indemnified parties and insured parties are third party beneficiaries of the indemnification and insurance provisions in the merger agreement and are entitled to enforce such provisions.

For more information, please see the discussion in the section entitled “The Merger  — Interests of Directors and Officers in the Merger” beginning on page 43 of this proxy statement.

E MPLOYEE B ENEFITS

Under the terms of the merger agreement, Parent has agreed to provide or cause the surviving corporation to provide, for one year following the effective time of the merger:

In addition, with respect to each such company employee who is covered by a union or collective bargaining agreement, Parent will cause the surviving corporation to continue to honor all such union or collective bargaining agreements in effect as of the effective time of the merger; provided that Parent, or the surviving corporation, as applicable, will retain the ability to amend or terminate any such agreement to the extent permitted by its terms or by law.

In addition, Parent has agreed that it will, or will cause the surviving corporation to, assume and honor in accordance with their terms all of Gas Natural’s and our subsidiaries’ employment, severance, retention, termination and change-in-control plans, policies, programs, agreements and arrangements (including any change-in-control severance agreement or other arrangement between Gas Natural and any Company employee) as in effect immediately prior to the effective time of the merger that were disclosed by Gas Natural to Parent in the merger agreement, including with respect to any payments, benefits or rights arising as a result of the merger or the other transactions contemplated by the merger agreement (either alone or in combination with any other event), subject to the right of Parent or the surviving corporation to amend or terminate any such plans, policies, programs, agreements or arrangements in accordance with their terms.

With respect to all employee benefit plans of the surviving corporation or any of its subsidiaries, each company employee’s service with Gas Natural or any of our subsidiaries (as well as service with any predecessor employer

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of Gas Natural or any of our subsidiaries, to the extent service with the predecessor employer was recognized by Gas Natural or any of our subsidiaries and is accurately reflected within a company employee’s records) will be treated as service with the surviving corporation or any of its subsidiaries for all purposes, including determining eligibility to participate, level of benefits, vesting and benefit accruals, except (i) to the extent that such service was not recognized under the corresponding employee benefit plan, (ii) for purposes of benefit accruals under any defined benefit pension plan or (iii) to the extent that such recognition would result in any duplication of coverage or benefits for the same period of service.

Parent has further agreed to, and will cause the surviving corporation to, use commercially reasonable efforts to waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively at work requirements and waiting periods under any welfare benefit plan maintained by Parent, the surviving corporation or any of their subsidiaries in which company employees (and their eligible dependents) will be eligible to participate from and after the effective time of the merger, except to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods would not have been satisfied or waived under the corresponding employee benefit plan. Parent will, or will cause the surviving corporation to, use commercially reasonable efforts to recognize the dollar amount of all co-payments, deductibles and similar expenses incurred by each company employee (and his or her eligible dependents) during the calendar year in which the merger occurs for purposes of satisfying such year’s deductible and co-payment limitations under the relevant employee benefit plans in which they will be eligible to participate from and after the effective time of the merger to the extent taken into account under the corresponding employee benefit plan.

O THER C OVENANTS AND A GREEMENTS

Gas Natural, on the one hand, and Parent and Merger Sub, on the other hand, have each made certain other covenants to and agreements with each other regarding various other matters including:

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P RE -C LOSING T RANSACTIONS

The merger agreement requires Gas Natural and our subsidiaries to consummate a refinancing of their long-term and revolving debt, up to a maximum aggregate principal amount of $92 million, and a related restructuring of our subsidiaries prior to the closing of the merger on terms not materially less favorable than those disclosed to Parent prior to the date of the merger agreement. These refinancing and restructuring transactions were consummated effective as of October 19, 2016.

C ONDITIONS P RECEDENT TO THE M ERGER

Conditions to Each Party’s Obligations

Each party’s obligations to effect the merger are subject to the satisfaction or waiver (where permitted) of the following conditions:

Conditions to Gas Natural’s Obligations

Gas Natural’s obligations to effect the merger are also subject to the satisfaction or waiver by us of the following additional conditions:

Conditions to Parent’s and Merger Sub’s Obligations

The obligations of Parent and Merger Sub to effect the merger are also subject to the satisfaction or waiver by Parent of the following additional conditions:

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We cannot give any assurance that all of the conditions to the merger will be either satisfied or waived or that the merger will occur.

T ERMINATION OF THE M ERGER A GREEMENT

Mutual Termination Rights

The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after receipt of the company shareholder approval: