Exhibit 10.3

 

Execution Version

 

 

 

Gas Natural Inc.

 

$50,000,000

 

$50,000,000 4.23% Senior Notes due October 19, 2028

 

______________

 

Note Purchase Agreement

 

______________

 

Dated October 19, 2016

 

 

 

 

 

  

 

Table of Contents

        Section Heading Page       Section 1. Authorization of Notes 1      
Section 2. Sale and Purchase of Notes 1       Section 2.1. Sale and Purchase of
Notes 1 Section 2.2. Representations and Warranties 1       Section 3. Closing 2
      Section 4. Conditions to Closing 2       Section 4.1. Representations and
Warranties 2 Section 4.2. Performance; No Default 3 Section 4.3. Compliance
Certificates 3 Section 4.4. Opinions of Counsel 3 Section 4.5. Purchase
Permitted By Applicable Law, Etc 4 Section 4.6. Payment of Special Counsel Fees
4 Section 4.7. Private Placement Number 4 Section 4.8. Changes in Corporate
Structure 4 Section 4.9. Funding Instructions 4 Section 4.10. Subsidiary
Guaranty 4 Section 4.11. Regulatory Approval 4 Section 4.12. Proceedings and
Documents 4 Section 4.13. Existing Indebtedness 5       Section 5.
Representations and Warranties of the Company 5       Section 5.1. Organization;
Power and Authority 5 Section 5.2. Authorization, Etc 5 Section 5.3. Disclosure
5 Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates
6 Section 5.5. Financial Statements; Material Liabilities 6 Section 5.6.
Compliance with Laws, Other Instruments, Etc 6 Section 5.7. Governmental
Authorizations, Etc 7 Section 5.8. Litigation; Observance of Agreements,
Statutes and Orders 7 Section 5.9. Taxes 7 Section 5.10. Title to Property;
Leases 8 Section 5.11. Licenses, Permits, Etc 8 Section 5.12. Compliance with
ERISA 8 Section 5.13. Private Offering by the Company 9 Section 5.14. Use of
Proceeds; Margin Regulations 9 Section 5.15. Existing Indebtedness; Future Liens
9 Section 5.16. Foreign Assets Control Regulations, Etc 10

 

 -i- 

 

 

Section 5.17. Status under Certain Statutes 11 Section 5.18. Environmental
Matters 11 Section 5.19. Notes Rank Pari Passu 12       Section 6.
Representations of the Purchaser 12       Section 6.1. Purchase for Investment
12 Section 6.2. Source of Funds 12       Section 7. Information as to Company 14
      Section 7.1. Financial and Business Information 14 Section 7.2. Officer’s
Certificate 17 Section 7.3. Visitation 17 Section 7.4. Electronic Delivery 18  
    Section 8. Payment and Prepayment of the Notes 18       Section 8.1.
Maturity 18 Section 8.2. Optional Prepayments with Make-Whole Amount 18 Section
8.3. Allocation of Partial Prepayments 19 Section 8.4. Maturity; Surrender, Etc.
19 Section 8.5. Purchase of Notes 19 Section 8.6. Make-Whole Amount 20 Section
8.7. Change of Control 21 Section 8.8. Payments Due on Non-Business Days 23    
  Section 9. Affirmative Covenants. 23       Section 9.1. Compliance with Law 23
Section 9.2. Insurance 23 Section 9.3. Maintenance of Properties 23 Section 9.4.
Payment of Taxes and Claims 24 Section 9.5. Corporate Existence, Etc 24 Section
9.6. Books and Records 24 Section 9.7 Subsidiary Guarantors 24 Section 9.8.
Notes to Rank Pari Passu 25       Section 10. Negative Covenants. 25      
Section 10.1. Transactions with Affiliates 26 Section 10.2. Merger,
Consolidation, Etc 26 Section 10.3. Sale of Assets 27 Section 10.4. Line of
Business 28 Section 10.5. Economic Sanctions, Etc 28 Section 10.6. Liens 28
Section 10.7. Total Debt to Capital Ratio 30 Section 10.8. Interest Coverage
Ratio 30 Section 10.9. Priority Debt 30

 

 -ii- 

 

 

Section 10.10. Consolidated Net Worth 30       Section 11. Events of Default 31
      Section 12. Remedies on Default, Etc 33       Section 12.1. Acceleration
33 Section 12.2. Other Remedies 34 Section 12.3. Rescission 34 Section 12.4. No
Waivers or Election of Remedies, Expenses, Etc 34       Section 13.
Registration; Exchange; Substitution of Notes 34       Section 13.1.
Registration of Notes 34 Section 13.2. Transfer and Exchange of Notes 35
Section 13.3. Replacement of Notes 35       Section 14. Payments on Notes 36    
  Section 14.1. Place of Payment 36 Section 14.2. Home Office Payment 36      
Section 15. Expenses, Etc 36       Section 15.1. Transaction Expenses 36 Section
15.2. Survival 37       Section 16. Survival of Representations and Warranties;
Entire Agreement 37       Section 17. Amendment and Waiver 37      
Section 17.1. Requirements 37 Section 17.2. Solicitation of Holders of Notes 38
Section 17.3. Binding Effect, Etc 38 Section 17.4. Notes Held by Company, Etc 38
      Section 18. Notices 39       Section 19. Reproduction of Documents 39    
  Section 20. Confidential Information 40       Section 21. Substitution of
Purchaser 41       Section 22. Miscellaneous 41       Section 22.1. Successors
and Assigns 41 Section 22.2. Accounting Terms 41

 

 -iii- 

 

 

Section 22.3. Severability 42 Section 22.4. Construction, Etc 42 Section 22.5.
Counterparts 42 Section 22.6. Governing Law 42 Section 22.7. Jurisdiction and
Process; Waiver of Jury Trial 42

 

 -iv- 

 

 

Schedule A — Defined Terms       Schedule 1 — Form of 4.23% Senior Note due
October 19, 2028       Schedule 4.4(a) — Form of Opinion of Special Counsel for
the Company       Schedule 4.4(b) — Form of Opinion of Special Counsel for the
Purchaser       Schedule 5.3 — Disclosure Materials       Schedule 5.4 —
Subsidiaries of the Company and Ownership of Subsidiary Stock       Schedule 5.5
— Financial Statements       Schedule 5.7 — Approvals and Consents      
Schedule 5.15 — Existing Indebtedness       Schedule 10.6 — Existing Liens      
Schedule B — Information Relating to Purchaser       Exhibit 2.2 — Form of
Subsidiary Guaranty

 

 -v- 

 

 

Gas Natural Inc.

1375 East 9th St, Suite 3100

Cleveland, Ohio 44114

 

$50,000,000 4.23% Senior Notes due October 19, 2028

 

Dated October 19, 2016

 

To the Purchaser Listed in

Schedule B Hereto:

 

Ladies and Gentlemen:

 

Gas Natural Inc., an Ohio corporation (together with any successor thereto that
becomes a party hereto pursuant to Section 10.2, the “Company”), agrees with the
Purchaser as follows:

 

Section 1.         Authorization of Notes.

 

The Company will authorize the issue and sale of $50,000,000 aggregate principal
amount of its 4.23% Senior Notes due October 19, 2028 (as amended, restated or
otherwise modified from time to time pursuant to Section 17 and including any
such notes issued in substitution therefor pursuant to Section 13, the “Notes”.
The Notes shall be substantially in the form set out in Schedule 1. Certain
capitalized and other terms used in this Agreement are defined in Schedule A.
References to a “Schedule” or “Exhibit” are references to a Schedule or Exhibit
attached to this Agreement unless otherwise specified. References to a “Section”
are references to a Section of this Agreement unless otherwise specified.

 

Section 2.         Sale and Purchase of Notes.

 

Section 2.1.         Sale and Purchase of Notes. Subject to the terms and
conditions of this Agreement, the Company will issue and sell to the Purchaser
and the Purchaser will purchase from the Company, at the Closing provided for in
Section 3, the Notes in the principal amount specified opposite the Purchaser’s
name in Schedule B at the purchase price of 100% of the principal amount
thereof.

 

Section 2.2.         Subsidiary Guaranty. (a) The payment by the Company of all
amounts due with respect to the Notes and the performance by the Company of its
obligations under this Agreement shall be absolutely and unconditionally
guaranteed by the Initial Subsidiary Guarantors pursuant to the Subsidiary
Guaranty Agreement dated as of even date herewith, which shall be substantially
in the form of Exhibit 2.2 attached hereto (the “Initial Subsidiary Guaranty”),
and otherwise in accordance with the provisions of Section 9.7 hereof.

 

 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

(b)         The holders of the Notes agree to discharge and release any
Subsidiary Guarantor from any Subsidiary Guaranty upon the written request of
the Company, provided that (i) such Subsidiary Guarantor has been released and
discharged (or will be released and discharged concurrently with the release of
such Subsidiary Guarantor under such Subsidiary Guaranty), whether as a
borrower, obligor and/or guarantor, from all obligations under all Material
Credit Facilities and the Company so certifies to the holders of the Notes in a
certificate of a Responsible Officer, (ii) at the time of such release and
discharge, the Company shall deliver a certificate of a Responsible Officer to
the holders of the Notes stating that no Default or Event of Default exists, and
(iii) if any fee or other form of consideration is given to any holder of
Indebtedness of the Company for the purpose of such release, holders of the
Notes shall receive equivalent consideration.

 

Section 3.         Closing.

 

The sale and purchase of the Notes to be purchased by the Purchaser shall occur
at the offices of Chapman and Cutler LLP, 111 West Monroe Street, Chicago,
Illinois 60603, at 9:00 a.m., Chicago time, at a closing (the “Closing”) on
October 19, 2016 or on such other Business Day thereafter on or prior to October
27, 2016 as may be agreed upon by the Company and the Purchaser. At the Closing
the Company will deliver to the Purchaser the Notes to be purchased by the
Purchaser in the form of a single Note to be purchased by the Purchaser (or such
greater number of Notes in denominations of at least $100,000 as the Purchaser
may request) dated the date of the Closing and registered in the Purchaser’s
name (or in the name of its nominee), against delivery by the Purchaser to the
Company or its order of immediately available funds in the amount of the
purchase price therefor by wire transfer of immediately available funds for the
account of the Company to account number 8670312225, account name: Gas Natural
Inc, ABA No. 071000039 at Bank of America N.A., Chicago, IL. If at the Closing
the Company shall fail to tender such Notes to the Purchaser as provided above
in this Section 3, or any of the conditions specified in Section 4 shall not
have been fulfilled to the Purchaser’s satisfaction, the Purchaser shall, at its
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights the Purchaser may have by reason of any of the
conditions specified in Section 4 not having been fulfilled to the Purchaser’s
satisfaction or such failure by the Company to tender such Notes.

 

Section 4.         Conditions to Closing.

 

The Purchaser’s obligation to purchase and pay for the Notes to be sold to the
Purchaser at the Closing is subject to the fulfillment to the Purchaser’s
satisfaction, prior to or at the Closing, of the following conditions:

 

Section 4.1.         Representations and Warranties. (a) The representations and
warranties of the Company in this Agreement shall be correct when made and at
the Closing.

 

(b)         The representations and warranties of the Initial Subsidiary
Guarantors in the Initial Subsidiary Guaranty shall be correct when made and at
such Closing.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 4.2.         Performance; No Default. The Company and each Initial
Subsidiary Guarantor shall have performed and complied with all agreements and
conditions contained in this Agreement or the Subsidiary Guaranty, as
applicable, required to be performed or complied with by it prior to or at the
Closing. Before and after giving effect to the issue and sale of the Notes (and
the application of the proceeds thereof as contemplated by Section 5.14), no
Default or Event of Default shall have occurred and be continuing. Neither the
Company nor any Subsidiary shall have entered into any transaction since the
date of the investor presentation described in Schedule 5.3 that would have been
prohibited by Section 10 had such Section applied since such date.

 

Section 4.3.         Compliance Certificates.

 

(a)         Officer’s Certificate of the Company. The Company shall have
delivered to the Purchaser an Officer’s Certificate, dated the date of the
Closing, certifying that the conditions specified in Sections 4.1(a), 4.2 and
4.8 have been fulfilled.

 

(b)         Secretary’s Certificate of the Company. The Company shall have
delivered to the Purchaser a certificate of its Secretary or Assistant
Secretary, dated the date of the Closing, certifying as to (i) the resolutions
attached thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Notes and this Agreement and (ii) the Company’s
organizational documents as then in effect.

 

(c)         Officer’s Certificate of the Subsidiary Guarantors. Each Initial
Subsidiary Guarantor shall have delivered to the Purchaser an Officer’s
Certificate, dated the date of the Closing, certifying that the conditions
specified in Sections 4.1(b), 4.2 and 4.8 have been fulfilled.

 

(d)         Secretary’s Certificate of the Subsidiary Guarantors. Each Initial
Subsidiary Guarantor shall have delivered to the Purchaser a certificate, dated
the date of the Closing, certifying as to (i) the resolutions attached thereto
and other corporate proceedings relating to the authorization, execution and
delivery of the Initial Subsidiary Guaranty by such Subsidiary Guarantor, and
(ii) such Subsidiary Guarantor’s organizational documents as then in effect.

 

Section 4.4.         Opinions of Counsel. The Purchaser shall have received
opinions in form and substance satisfactory to the Purchaser, dated the date of
the Closing (a) from Kohrman Jackson & Krantz LLP, counsel for the Company,
covering the matters set forth in Schedule 4.4(a) and covering such other
matters incident to the transactions contemplated hereby as the Purchaser or its
counsel may reasonably request (and the Company hereby instructs its counsel to
deliver such opinion to the Purchaser), (b) from Chapman and Cutler LLP, the
Purchaser’s special counsel in connection with such transactions, substantially
in the form set forth in Schedule 4.4(b) and covering such other matters
incident to such transactions as the Purchaser may reasonably request, and
(c) from counsel for the Initial Subsidiary Guarantors, covering such matters
incident to the transactions contemplated by the Initial Subsidiary Guaranty as
the Purchaser or its counsel may reasonably request.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 4.5.         Purchase Permitted By Applicable Law, Etc. On the date of
the Closing the Purchaser’s purchase of Notes shall (a) be permitted by the laws
and regulations of each jurisdiction to which the Purchaser is subject, without
recourse to provisions (such as section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation T, U or X of the
Board of Governors of the Federal Reserve System) and (c) not subject the
Purchaser to any tax, penalty or liability under or pursuant to any applicable
law or regulation, which law or regulation was not in effect on the date hereof.
If requested by the Purchaser, the Purchaser shall have received an Officer’s
Certificate certifying as to such matters of fact as the Purchaser may
reasonably specify to enable the Purchaser to determine whether such purchase is
so permitted.

 

Section 4.6.         Payment of Special Counsel Fees. Without limiting
Section 15.1, the Company shall have paid on or before the Closing the fees,
charges and disbursements of the Purchaser’s special counsel referred to in
Section 4.4 to the extent reflected in a statement of such counsel rendered to
the Company at least one Business Day prior to the Closing.

 

Section 4.7.         Private Placement Number. A Private Placement Number issued
by Standard & Poor’s CUSIP Service Bureau (in cooperation with the SVO) shall
have been obtained for the Notes.

 

Section 4.8.         Changes in Corporate Structure. The Company and each
Initial Subsidiary Guarantor shall not have changed its respective jurisdiction
of incorporation or organization, as applicable, or been a party to any merger
or consolidation or succeeded to all or any substantial part of the liabilities
of any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.

 

Section 4.9.         Funding Instructions. At least three Business Days prior to
the date of the Closing, the Purchaser shall have received written instructions
signed by a Responsible Officer on letterhead of the Company confirming the
information specified in Section 3 including (i) the name and address of the
transferee bank, (ii) such transferee bank’s ABA number and (iii) the account
name and number into which the purchase price for the Notes is to be deposited.

 

Section 4.10.         Subsidiary Guaranty. Contemporaneously with the Closing,
each Initial Subsidiary Guarantor shall have executed and delivered the Initial
Subsidiary Guaranty.

 

Section 4.11.         Regulatory Approval. All regulatory and other approvals
required to be in effect in connection with the issuance and sale of the Notes
hereunder shall have been obtained and be in full force and effect, all
applicable waiting periods shall have expired without any materially adverse
action being taken by any applicable authority, and copies of the documentation
thereof shall have been delivered to the Purchaser.

 

Section 4.12.         Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
satisfactory to the Purchaser and its special counsel, and the Purchaser and its
special counsel shall have received all such counterpart originals or certified
or other copies of such documents as the Purchaser or such special counsel may
reasonably request.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 4.13.         Existing Indebtedness. The Purchaser shall have received
evidence satisfactory to it demonstrating that, promptly after receipt of the
proceeds of the Notes, the Existing Debt, and all commitments and outstanding
loans thereunder, have been terminated and paid in full and all related Liens in
respect of the Sun Life Debt have been released by the secured parties
thereunder.

 

Section 5.         Representations and Warranties of the Company.

 

The Company represents and warrants to the Purchaser that:

 

Section 5.1.         Organization; Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and the Notes
and to perform the provisions hereof and thereof.

 

Section 5.2.         Authorization, Etc. This Agreement and the Notes have been
duly authorized by all necessary corporate action on the part of the Company,
and this Agreement constitutes, and upon execution and delivery thereof each
Note will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

 

Section 5.3.         Disclosure. This Agreement, the financial statements listed
in Schedule 5.5 and the documents, certificates or other writings delivered to
the Purchaser by or on behalf of the Company prior to June 27, 2016 in
connection with the transactions contemplated hereby and identified in Schedule
5.3 (this Agreement and such documents, certificates or other writings and such
financial statements delivered to the Purchaser being referred to, collectively,
as the “Disclosure Documents”), taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. Except as disclosed in the Disclosure Documents, since
December 31, 2015, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any Subsidiary
except changes that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. There is no fact known to the
Company that could reasonably be expected to have a Material Adverse Effect that
has not been set forth herein or in the Disclosure Documents.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 5.4.         Organization and Ownership of Shares of Subsidiaries;
Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and
correct lists of (i) the Company’s Subsidiaries, showing, as to each Subsidiary,
the name thereof, the jurisdiction of its organization, and the percentage of
shares of each class of its capital stock or similar equity interests
outstanding owned by the Company and each other Subsidiary, (ii) the Company’s
Affiliates, other than Subsidiaries, and (iii) the Company’s directors and
senior officers.

 

(b)         All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and non-assessable
and are owned by the Company or another Subsidiary free and clear of any Lien
that is prohibited by this Agreement.

 

(c)         Each Subsidiary is a corporation or other legal entity duly
organized, validly existing and, where applicable, in good standing under the
laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and, where applicable, is in good standing in
each jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Each such Subsidiary has the corporate or other
power and authority to own or hold under lease the properties it purports to own
or hold under lease and to transact the business it transacts and proposes to
transact.

 

(d)         No Subsidiary is subject to any legal, regulatory, contractual or
other restriction (other than the agreements and regulatory restrictions listed
on Schedule 5.4 and customary limitations imposed by corporate law or similar
statutes) restricting the ability of such Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the Company or any
of its Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Subsidiary.

 

Section 5.5.         Financial Statements; Material Liabilities. The Company has
delivered to the Purchaser copies of the financial statements of the Company and
its Subsidiaries listed on Schedule 5.5. All of such financial statements
(including in each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the Company and its
Subsidiaries as of the respective dates specified in such Schedule and the
consolidated results of their operations and cash flows for the respective
periods so specified and have been prepared in accordance with GAAP consistently
applied throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments). The Company and its Subsidiaries do not have any Material
liabilities that are not disclosed in the Disclosure Documents.

 

Section 5.6.         Compliance with Laws, Other Instruments, Etc. The
execution, delivery and performance by the Company of this Agreement and the
Notes will not (i) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of the
Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws, shareholders
agreement or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, (ii) conflict with or result in
a breach of any of the terms, conditions or provisions of any order, judgment,
decree or ruling of any court, arbitrator or Governmental Authority applicable
to the Company or any Subsidiary, including, without limitation, the Approvals
and Consents, or (iii) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or any
Subsidiary.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 5.7.         Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes, except for any filing that has
already been made or any approval that has already been obtained, including
without limitation the Approvals and Consents. The period of time for filing an
appeal with respect to each Approval and Consent has expired, and each Approval
and Consent is in full force and effect.

 

Section 5.8.         Litigation; Observance of Agreements, Statutes and Orders.
(a) There are no actions, suits, investigations or proceedings pending or, to
the best knowledge of the Company, threatened against or affecting the Company
or any Subsidiary or any property of the Company or any Subsidiary in any court
or before any arbitrator of any kind or before or by any Governmental Authority
that could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 

(b)         Neither the Company nor any Subsidiary is (i) in default under any
agreement or instrument to which it is a party or by which it is bound, (ii) in
violation of any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or (iii) in violation of any applicable law, ordinance,
rule or regulation of any Governmental Authority (including, without limitation,
Environmental Laws, the USA PATRIOT Act or any of the other laws and regulations
that are referred to in Section 5.16), which default or violation could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

Section 5.9.         Taxes. The Company and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the amount
of which, individually or in the aggregate, is not Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Company knows of no basis for any other tax or assessment that could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The charges, accruals and reserves on the books of the Company
and its Subsidiaries in respect of U.S. federal, state or other taxes for all
fiscal periods are adequate. The U.S. federal income tax liabilities of the
Company and its Subsidiaries have been finally determined (whether by reason of
completed audits or the statute of limitations having run) for all fiscal years
up to and including the fiscal year ended December 31, 2015.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 5.10.         Title to Property; Leases. The Company and its
Subsidiaries have good and sufficient title to their respective properties that
individually or in the aggregate are Material, including all such properties
reflected in the most recent audited balance sheet referred to in Section 5.5 or
purported to have been acquired by the Company or any Subsidiary after such date
(except as sold or otherwise disposed of in the ordinary course of business), in
each case free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.

 

Section 5.11.         Licenses, Permits, Etc. (a) The Company and its
Subsidiaries own or possess all licenses, permits, franchises, authorizations,
patents, copyrights, proprietary software, service marks, trademarks and trade
names, or rights thereto, that individually or in the aggregate are Material,
without known conflict with the rights of others.

 

(b)         To the knowledge of the Company, no product or service of the
Company or any of its Subsidiaries infringes in any material respect any
license, permit, franchise, authorization, patent, copyright, proprietary
software, service mark, trademark, trade name or other right owned by any other
Person.

 

(c)         To the knowledge of the Company, there is no Material violation by
any Person of any right of the Company or any of its Subsidiaries with respect
to any license, permit, franchise, authorization, patent, copyright, proprietary
software, service mark, trademark, trade name or other right owned or used by
the Company or any of its Subsidiaries.

 

Section 5.12.         Compliance with ERISA. (a) The Company and each ERISA
Affiliate have operated and administered each Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and could not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.  Neither the Company nor any ERISA
Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee benefit plans
(as defined in section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could, individually or in the aggregate, reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to section 430(k) of the Code or to any
such penalty or excise tax provisions under the Code or federal law or section
4068 of ERISA or by the granting of a security interest in connection with the
amendment of a Plan, other than such liabilities or Liens as would not be
individually or in the aggregate Material.

 

(b)         The present value of the aggregate benefit liabilities under each of
the Plans (other than Multiemployer Plans), determined as of the end of such
Plan’s most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan’s most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term “benefit liabilities” has the
meaning specified in section 4001 of ERISA and the terms “current value” and
“present value” have the meaning specified in section 3 of ERISA.

 

 -8- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

(c)         The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.

 

(d)         The expected postretirement benefit obligation (determined as of the
last day of the Company’s most recently ended fiscal year in accordance with
Financial Accounting Standards Board Accounting Standards Codification Topic
715-60, without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Company and its Subsidiaries is
not Material.

 

(e)         The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax could
be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company to the Purchaser in the first sentence of this Section 5.12(e) is
made in reliance upon and subject to the accuracy of the Purchaser’s
representation in Section 6.2 as to the sources of the funds to be used to pay
the purchase price of the Notes to be purchased by the Purchaser.

 

Section 5.13.         Private Offering by the Company. Neither the Company nor
anyone acting on its behalf has offered the Notes or any similar Securities for
sale to, or solicited any offer to buy the Notes or any similar Securities from,
or otherwise approached or negotiated in respect thereof with, any Person other
than the Purchaser, which has been offered the Notes at a private sale for
investment. Neither the Company nor anyone acting on its behalf has taken, or
will take, any action that would subject the issuance or sale of the Notes to
the registration requirements of section 5 of the Securities Act or to the
registration requirements of any Securities or blue sky laws of any applicable
jurisdiction.

 

Section 5.14.         Use of Proceeds; Margin Regulations. The Company will
apply the proceeds of the sale of the Notes hereunder to refinance existing
Indebtedness and for general corporate purposes. No part of the proceeds from
the sale of the Notes hereunder will be used, directly or indirectly, for the
purpose of buying or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System (12 CFR
221), or for the purpose of buying or carrying or trading in any Securities
under such circumstances as to involve the Company in a violation of Regulation
X of said Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of said Board (12 CFR 220). Margin stock does not constitute
more than 5% of the value of the consolidated assets of the Company and its
Subsidiaries and the Company does not have any present intention that margin
stock will constitute more than 5% of the value of such assets. As used in this
Section, the terms “margin stock” and “purpose of buying or carrying” shall have
the meanings assigned to them in said Regulation U.

 

 -9- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

Section 5.15.         Existing Indebtedness; Future Liens. (a) Except as
described therein, Schedule 5.15 sets forth a complete and correct list of all
outstanding Indebtedness of the Company and its Subsidiaries as of October 19,
2016 (including descriptions of the obligors and obligees, principal amounts
outstanding, any collateral therefor and any Guaranties thereof), since which
date there has been no Material change in the amounts, interest rates, sinking
funds, installment payments or maturities of the Indebtedness of the Company or
its Subsidiaries. Neither the Company nor any Subsidiary is in default and no
waiver of default is currently in effect, in the payment of any principal or
interest on any Indebtedness of the Company or such Subsidiary and no event or
condition exists with respect to any Indebtedness of the Company or any
Subsidiary that would permit (or that with notice or the lapse of time, or both,
would permit) one or more Persons to cause such Indebtedness to become due and
payable before its stated maturity or before its regularly scheduled dates of
payment.

 

(b)         Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit any of its property,
whether now owned or hereafter acquired, to be subject to a Lien that secures
Indebtedness or to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien that secures Indebtedness.

 

(c)         Neither the Company nor any Subsidiary is a party to, or otherwise
subject to any provision contained in, any instrument evidencing Indebtedness of
the Company or such Subsidiary, any agreement relating thereto or any other
agreement (including, but not limited to, its charter or any other
organizational document) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Indebtedness of the Company, except as
disclosed in Schedule 5.15.

 

Section 5.16.         Foreign Assets Control Regulations, Etc. (a) Neither the
Company nor any Controlled Entity (i) is a Blocked Person, (ii) has been
notified that its name appears or may in the future appear on a State Sanctions
List or (iii) is a target of sanctions that have been imposed by the United
Nations or the European Union.

 

(b)         Neither the Company nor any Controlled Entity (i) has violated, been
found in violation of, or been charged or convicted under, any applicable U.S.
Economic Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws or
(ii) to the Company’s knowledge, is under investigation by any Governmental
Authority for possible violation of any U.S. Economic Sanctions Laws, Anti-Money
Laundering Laws or Anti-Corruption Laws.

 

(c)         No part of the proceeds from the sale of the Notes hereunder:

 

(i)         constitutes or will constitute funds obtained on behalf of any
Blocked Person or will otherwise be used by the Company or any Controlled
Entity, directly or indirectly, (A) in connection with any investment in, or any
transactions or dealings with, any Blocked Person, (B) for any purpose that
would cause any Purchaser to be in violation of any U.S. Economic Sanctions Laws
or (C) otherwise in violation of any U.S. Economic Sanctions Laws;

 

(ii)         will be used, directly or indirectly, in violation of, or cause any
Purchaser to be in violation of, any applicable Anti-Money Laundering Laws; or

 

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Gas Natural Inc.   Note Purchase Agreement

 

(iii)         will be used, directly or indirectly, for the purpose of making
any improper payments, including bribes, to any Governmental Official or
commercial counterparty in order to obtain, retain or direct business or obtain
any improper advantage, in each case which would be in violation of, or cause
any Purchaser to be in violation of, any applicable Anti-Corruption Laws.

 

(d)         The Company has established procedures and controls which it
reasonably believes are adequate (and otherwise comply with applicable law) to
ensure that the Company and each Controlled Entity is and will continue to be in
compliance with all applicable U.S. Economic Sanctions Laws, Anti-Money
Laundering Laws and Anti-Corruption Laws.

 

Section 5.17.         Status under Certain Statutes. Neither the Company nor any
Subsidiary is subject to regulation under the Investment Company Act of 1940, as
amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act,
as amended.

 

The Company is subject to regulation under the Public Utility Holding Company
Act of 2005, as amended (“PUHCA”), however, has an exmption from both reporting
and record keeping requirements and has complied with and is in compliance with
PUHCA. The Company is not subject to regulation under the Natural Gas Act, the
Natural Gas Policy Act or the rules, regulations and orders of the Federal
Energy Regulatory Commission or any other federal public utility or gas utility
laws or regulations.

 

Section 5.18.         Environmental Matters. (a) Neither the Company nor any
Subsidiary has knowledge of any claim or has received any notice of any claim
and no proceeding has been instituted asserting any claim against the Company or
any of its Subsidiaries or any of their respective real properties or other
assets now or formerly owned, leased or operated by any of them, alleging any
damage to the environment or violation of any Environmental Laws, except, in
each case, such as could not reasonably be expected to result in a Material
Adverse Effect.

 

(b)         Neither the Company nor any Subsidiary has knowledge of any facts
which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring on or
in any way related to real properties now or formerly owned, leased or operated
by any of them or to other assets or their use, except, in each case, such as
could not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.

 

(c)         Neither the Company nor any Subsidiary has stored any Hazardous
Materials on real properties now or formerly owned, leased or operated by any of
them in a manner which is contrary to any Environmental Law that could,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

 

(d)         Neither the Company nor any Subsidiary has disposed of any Hazardous
Materials in a manner which is contrary to any Environmental Law that could,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

 

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Gas Natural Inc.   Note Purchase Agreement

 

(e)         All buildings on all real properties now owned, leased or operated
by the Company or any Subsidiary are in compliance with applicable Environmental
Laws, except where failure to comply could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.

 

Section 5.19.         Notes Rank Pari Passu. The obligations of the Company
under this Agreement and the Notes rank pari passu in right of payment with all
other senior unsecured Indebtedness (actual or contingent) of the Company,
including, without limitation, all Material Credit Facilities.

 

Section 6.         Representations of the Purchaser.

 

Section 6.1.         Purchase for Investment. The Purchaser represents that it
is purchasing the Notes for its own account or for one or more separate accounts
maintained by the Purchaser or for the account of one or more pension or trust
funds and not with a view to the distribution thereof, provided that the
disposition of the Purchaser’s or their property shall at all times be within
the Purchaser’s or their control. The Purchaser understands that the Notes have
not been registered under the Securities Act and may be resold only if
registered pursuant to the provisions of the Securities Act or if an exemption
from registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.

 

The Purchaser represents that it is an “accredited investor” (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act acting for
its own account (and not for the account of others) or as a fiduciary or agent
for others (which others are also “accredited investors”). The Purchaser further
represents that the Purchaser has had the opportunity to ask questions of the
Company and received answers concerning the terms and conditions of the sale of
the Notes.

 

Section 6.2.         Source of Funds. The Purchaser represents that at least one
of the following statements is an accurate representation as to each source of
funds (a “Source”) to be used by the Purchaser to pay the purchase price of the
Notes to be purchased by the Purchaser hereunder:

 

(a)         the Source is an “insurance company general account” (as the term is
defined in the United States Department of Labor’s Prohibited Transaction
Exemption (“PTE”) 95-60) in respect of which the reserves and liabilities (as
defined by the annual statement for life insurance companies approved by the
NAIC (the “NAIC Annual Statement”)) for the general account contract(s) held by
or on behalf of any employee benefit plan together with the amount of the
reserves and liabilities for the general account contract(s) held by or on
behalf of any other employee benefit plans maintained by the same employer (or
affiliate thereof as defined in PTE 95-60) or by the same employee organization
in the general account do not exceed 10% of the total reserves and liabilities
of the general account (exclusive of separate account liabilities) plus surplus
as set forth in the NAIC Annual Statement filed with the Purchaser’s state of
domicile; or

 

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Gas Natural Inc.   Note Purchase Agreement

 

(b)         the Source is a separate account that is maintained solely in
connection with the Purchaser’s fixed contractual obligations under which the
amounts payable, or credited, to any employee benefit plan (or its related
trust) that has any interest in such separate account (or to any participant or
beneficiary of such plan (including any annuitant)) are not affected in any
manner by the investment performance of the separate account; or

 

(c)         the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 or (ii) a bank collective investment
fund, within the meaning of the PTE 91-38 and, except as disclosed by the
Purchaser to the Company in writing pursuant to this clause (c), no employee
benefit plan or group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets allocated to such
pooled separate account or collective investment fund; or

 

(d)         the Source constitutes assets of an “investment fund” (within the
meaning of Part VI of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified
professional asset manager” or “QPAM” (within the meaning of Part VI of the QPAM
Exemption), no employee benefit plan’s assets that are managed by the QPAM in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an affiliate
(within the meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or
by the same employee organization and managed by such QPAM, represent more than
20% of the total client assets managed by such QPAM, the conditions of Part I(c)
and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person
controlling or controlled by the QPAM maintains an ownership interest in the
Company that would cause the QPAM and the Company to be “related” within the
meaning of Part VI(h) of the QPAM Exemption and (i) the identity of such QPAM
and (ii) the names of any employee benefit plans whose assets in the investment
fund, when combined with the assets of all other employee benefit plans
established or maintained by the same employer or by an affiliate (within the
meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or by the same
employee organization, represent 10% or more of the assets of such investment
fund, have been disclosed to the Company in writing pursuant to this clause
(d);or

 

(e)         the Source constitutes assets of a “plan(s)” (within the meaning of
Part IV(h) of PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset
manager” or “INHAM” (within the meaning of Part IV(a) of the INHAM Exemption),
the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied,
neither the INHAM nor a person controlling or controlled by the INHAM (applying
the definition of “control” in Part IV(d)(3) of the INHAM Exemption) owns a 10%
or more interest in the Company and (i) the identity of such INHAM and (ii) the
name(s) of the employee benefit plan(s) whose assets constitute the Source have
been disclosed to the Company in writing pursuant to this clause (e); or

 

(f)         the Source is a governmental plan; or

 

(g)         the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each of
which has been identified to the Company in writing pursuant to this clause (g);
or

 

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Gas Natural Inc.   Note Purchase Agreement

 

(h)         the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.

 

As used in this Section 6.2, the terms “employee benefit plan,” “governmental
plan,” and “separate account” shall have the respective meanings assigned to
such terms in section 3 of ERISA.

 

Section 7.         Information as to Company.

 

Section 7.1.         Financial and Business Information. The Company shall
deliver to each holder of a Note that is an Institutional Investor:

 

(a)         Quarterly Statements — within 45 days (or such shorter period as is
the earlier of (x) 15 days greater than the period applicable to the filing of
the Company’s Quarterly Report on Form 10-Q (the “Form 10-Q”) with the SEC
regardless of whether the Company is subject to the filing requirements thereof
and (y) the date by which such financial statements are required to be delivered
under any Material Credit Facility or the date on which such corresponding
financial statements are delivered under any Material Credit Facility if such
delivery occurs earlier than such required delivery date) after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), duplicate copies of,

 

(i)         a consolidated balance sheet of the Company and its Subsidiaries as
at the end of such quarter, and

 

(ii)         consolidated statements of income, changes in shareholders’ equity
and cash flows of the Company and its Subsidiaries, for such quarter and (in the
case of the second and third quarters) for the portion of the fiscal year ending
with such quarter,

 

setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above of
copies of the Company’s Form 10-Q prepared in compliance with the requirements
therefor and filed with the SEC shall be deemed to satisfy the requirements of
this Section 7.1(a);

 

(b)         Annual Statements — within 105 days (or such shorter period as is
the earlier of (x) 15 days greater than the period applicable to the filing of
the Company’s Annual Report on Form 10-K (the “Form 10-K”) with the SEC
regardless of whether the Company is subject to the filing requirements thereof
and (y) the date by which such financial statements are required to be delivered
under any Material Credit Facility or the date on which such corresponding
financial statements are delivered under any Material Credit Facility if such
delivery occurs earlier than such required delivery date) after the end of each
fiscal year of the Company, duplicate copies of

 

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Gas Natural Inc.   Note Purchase Agreement

 

(i)         a consolidated balance sheet of the Company and its Subsidiaries as
at the end of such year, and

 

(ii)         consolidated statements of income, changes in shareholders’ equity
and cash flows of the Company and its Subsidiaries for such year,

 

setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied by an opinion thereon (without a “going concern” or similar
qualification or exception and without any qualification or exception as to the
scope of the audit on which such opinion is based) of independent public
accountants of recognized national standing, which opinion shall state that such
financial statements present fairly, in all material respects, the financial
position of the companies being reported upon and their results of operations
and cash flows and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the circumstances,
provided that the delivery within the time period specified above of the
Company’s Form 10-K for such fiscal year (together with the Company’s annual
report to shareholders, if any, prepared pursuant to Rule 14a-3 under the
Securities Exchange Act of 1934) prepared in accordance with the requirements
therefor and filed with the SEC, together with the opinion of independent public
accountants described above, shall be deemed to satisfy the requirements of this
Section 7.1(b);

 

(c)         SEC and Other Reports — promptly upon their becoming available, one
copy of (i) each financial statement, report, notice or proxy statement sent by
the Company or any Subsidiary to its principal lending banks as a whole
(excluding information sent to such banks in the ordinary course of
administration of a bank facility, such as information relating to pricing and
borrowing availability) or to its public Securities holders generally, and
(ii) each regular or periodic report, each registration statement (without
exhibits except as expressly requested by the Purchaser or holder), and each
prospectus and all amendments thereto filed by the Company or any Subsidiary
with the SEC and of all press releases and other statements made available
generally by the Company or any Subsidiary to the public concerning developments
that are Material;

 

(d)         Notice of Default or Event of Default — promptly, and in any event
within five Business Days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given any
notice or taken any action with respect to a claimed default hereunder or that
any Person has given any notice or taken any action with respect to a claimed
default of the type referred to in Section 11(f), a written notice specifying
the nature and period of existence thereof and what action the Company is taking
or proposes to take with respect thereto;

 

 -15- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

(e)         ERISA Matters — promptly, and in any event within five Business Days
after a Responsible Officer becoming aware of any of the following, a written
notice setting forth the nature thereof and the action, if any, that the Company
or an ERISA Affiliate proposes to take with respect thereto:

 

(i)         with respect to any Plan, any reportable event, as defined in
section 4043(c) of ERISA and the regulations thereunder, for which notice
thereof has not been waived pursuant to such regulations as in effect on the
date hereof; or

 

(ii)         the taking by the PBGC of steps to institute, or the threatening by
the PBGC of the institution of, proceedings under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to such
Multiemployer Plan; or

 

(iii)         any event, transaction or condition that could result in the
incurrence of any liability by the Company or any ERISA Affiliate pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, or in the imposition of any Lien on any of
the rights, properties or assets of the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or such penalty or excise tax provisions, if such
liability or Lien, taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material Adverse Effect;

 

(f)         Notices from Governmental Authority — promptly, and in any event
within 30 days of receipt thereof, copies of any notice to the Company or any
Subsidiary from any federal or state Governmental Authority relating to any
order, ruling, statute or other law or regulation that could reasonably be
expected to have a Material Adverse Effect;

 

(g)         Resignation or Replacement of Auditors — within ten days following
the date on which the Company’s auditors resign or the Company elects to change
auditors, as the case may be, notification thereof, together with such
supporting information as the Required Holders may request; and

 

(h)         Requested Information — with reasonable promptness, such other data
and information relating to the business, operations, affairs, financial
condition, assets or properties of the Company or any of its Subsidiaries
(including, but without limitation, actual copies of the Company’s Form 10-Q and
Form 10-K) or relating to the ability of the Company to perform its obligations
hereunder and under the Notes as from time to time may be reasonably requested
by any such holder of a Note.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 7.2.         Officer’s Certificate. Each set of financial statements
delivered to a holder of a Note pursuant to Section 7.1(a) or Section 7.1(b)
shall be accompanied by a certificate of a Senior Financial Officer:

 

(a)         Covenant Compliance — setting forth the information from such
financial statements that is required in order to establish whether the Company
was in compliance with the requirements of Section 10 during the quarterly or
annual period covered by the statements then being furnished, (including with
respect to each such provision that involves mathematical calculations, the
information from such financial statements that is required to perform such
calculations) and detailed calculations of the maximum or minimum amount, ratio
or percentage, as the case may be, permissible under the terms of such Section,
and the calculation of the amount, ratio or percentage then in existence. In the
event that the Company or any Subsidiary has made an election to measure any
financial liability using fair value (which election is being disregarded for
purposes of determining compliance with this Agreement pursuant to Section 22.2)
as to the period covered by any such financial statement, such Senior Financial
Officer’s certificate as to such period shall include a reconciliation from GAAP
with respect to such election; and

 

(b)         Event of Default — certifying that such Senior Financial Officer has
reviewed the relevant terms hereof and has made, or caused to be made, under his
or her supervision, a review of the transactions and conditions of the Company
and its Subsidiaries from the beginning of the quarterly or annual period
covered by the statements then being furnished to the date of the certificate
and that such review shall not have disclosed the existence during such period
of any condition or event that constitutes a Default or an Event of Default or,
if any such condition or event existed or exists (including, without limitation,
any such event or condition resulting from the failure of the Company or any
Subsidiary to comply with any Environmental Law), specifying the nature and
period of existence thereof and what action the Company shall have taken or
proposes to take with respect thereto.

 

Section 7.3.         Visitation. The Company shall permit the representatives of
each holder of a Note that is an Institutional Investor:

 

(a)         No Default — if no Default or Event of Default then exists, at the
expense of such holder and upon reasonable prior notice to the Company, to visit
the principal executive office of the Company, to discuss the affairs, finances
and accounts of the Company and its Subsidiaries with the Company’s officers,
and (with the consent of the Company, which consent will not be unreasonably
withheld) its independent public accountants, and (with the consent of the
Company, which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in writing; and

 

(b)         Default — if a Default or Event of Default then exists, at the
expense of the Company to visit and inspect any of the offices or properties of
the Company or any Subsidiary, to examine all their respective books of account,
records, reports and other papers, to make copies and extracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
officers and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts of the
Company and its Subsidiaries), all at such times and as often as may be
requested.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 7.4.         Electronic Delivery. Financial statements, opinions of
independent certified public accountants, other information and Officer’s
Certificates that are required to be delivered by the Company pursuant to
Sections 7.1(a), (b) or (c) and Section 7.2 shall be deemed to have been
delivered if the Company satisfies any of the following requirements with
respect thereto:

 

(i)         such financial statements satisfying the requirements of Section
7.1(a) or (b) and related Officer’s Certificate satisfying the requirements of
Section 7.2 are delivered to each holder of a Note by e-mail;

 

(ii)         the Company shall have timely filed such Form 10–Q or Form 10–K,
satisfying the requirements of Section 7.1(a) or Section 7.1(b), as the case may
be, with the SEC on EDGAR and shall have made such form and the related
Officer’s Certificate satisfying the requirements of Section 7.2 available on
its home page on the internet, which is located at http://www.egas.net/ as of
the date of this Agreement;

 

(iii)         such financial statements satisfying the requirements of Section
7.1(a) or Section 7.1(b) and related Officer’s Certificate(s) satisfying the
requirements of Section 7.2 are timely posted by or on behalf of the Company on
IntraLinks or on any other similar website to which each holder of Notes has
free access; or

 

(iv)         the Company shall have filed any of the items referred to in
Section 7.1(c) with the SEC on EDGAR and shall have made such items available on
its home page on the internet or on IntraLinks or on any other similar website
to which each holder of Notes has free access;

 

provided however, that in the case of any of clauses (ii), (iii) or (iv), the
Company shall have given each holder of a Note prior written notice, which may
be by e-mail or in accordance with Section 18, of such posting or filing in
connection with each delivery, provided further, that upon request of any holder
to receive paper copies of such forms, financial statements and Officer’s
Certificates or to receive them by e-mail, the Company will promptly e-mail them
or deliver such paper copies, as the case may be, to such holder.

 

Section 8.         Payment and Prepayment of the Notes.

 

Section 8.1.         Maturity. As provided therein, the entire unpaid principal
balance of each Note shall be due and payable on the Maturity Date thereof.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 8.2.         Optional Prepayments with Make-Whole Amount. The Company
may, at its option, upon notice as provided below, prepay at any time all, or
from time to time any part of, the Notes, in an amount not less than 10% of the
aggregate principal amount of the Notes then outstanding in the case of a
partial prepayment, at 100% of the principal amount so prepaid, and the
Make-Whole Amount determined for the prepayment date with respect to such
principal amount. The Company will give each holder of Notes written notice of
each optional prepayment under this Section 8.2 not less than ten days and not
more than 60 days prior to the date fixed for such prepayment unless the Company
and the Required Holders agree to another time period pursuant to Section 17.
Each such notice shall specify such date (which shall be a Business Day), the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.3), and the interest to be paid on the prepayment date
with respect to such principal amount being prepaid, and shall be accompanied by
a certificate of a Senior Financial Officer as to the estimated Make-Whole
Amount due in connection with such prepayment (calculated as if the date of such
notice were the date of the prepayment), setting forth the details of such
computation. Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes a certificate of a Senior Financial Officer
specifying the calculation of such Make-Whole Amount as of the specified
prepayment date.

 

Section 8.3.         Allocation of Partial Prepayments. In the case of each
partial prepayment of the Notes pursuant to Section 8.2, the principal amount of
the Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.

 

Section 8.4.         Maturity; Surrender, Etc.          In the case of each
optional prepayment of Notes pursuant to this Section 8, the principal amount of
each Note to be prepaid shall mature and become due and payable on the date
fixed for such prepayment, together with interest on such principal amount
accrued to such date and the applicable Make-Whole Amount, if any. From and
after such date, unless the Company shall fail to pay such principal amount when
so due and payable, together with the interest and Make-Whole Amount, if any, as
aforesaid, interest on such principal amount shall cease to accrue. Any Note
paid or prepaid in full shall be surrendered to the Company and cancelled and
shall not be reissued, and no Note shall be issued in lieu of any prepaid
principal amount of any Note.

 

Section 8.5.         Purchase of Notes. The Company will not and will not permit
any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except (a) upon the payment or
prepayment of the Notes in accordance with this Agreement and the Notes or
(b) pursuant to an offer to purchase made by the Company or an Affiliate pro
rata to the holders of all Notes at the time outstanding upon the same terms and
conditions. Any such offer shall provide each holder with sufficient information
to enable it to make an informed decision with respect to such offer, and shall
remain open for at least ten (10) Business Days. If the holders of more than 35%
of the principal amount of the Notes then outstanding accept such offer, the
Company shall promptly notify the remaining holders of such fact and the
expiration date for the acceptance by holders of Notes of such offer shall be
extended by the number of days necessary to give each such remaining holder at
least seven (7) Business Days from its receipt of such notice to accept such
offer. The Company will promptly cancel all Notes acquired by it or any
Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 8.6.         Make-Whole Amount.

 

“Make-Whole Amount” means, with respect to any Note, an amount equal to the
excess, if any, of the Discounted Value of the Remaining Scheduled Payments with
respect to the Called Principal of such Note over the amount of such Called
Principal, provided that the Make-Whole Amount may in no event be less than
zero. For the purposes of determining the Make-Whole Amount, the following terms
have the following meanings:

 

“Called Principal” means, with respect to any Note, the principal of such Note
that is to be prepaid pursuant to Section 8.2 or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context requires.

 

“Discounted Value” means, with respect to the Called Principal of any Note, the
amount obtained by discounting all Remaining Scheduled Payments with respect to
such Called Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.

 

“Reinvestment Yield” means, with respect to the Called Principal of any Note,
0.50% over the yield to maturity implied by the yield(s) reported as of 10:00
a.m. (New York City time) on the second Business Day preceding the Settlement
Date with respect to such Called Principal, on the display designated as “Page
PX1” (or such other display as may replace Page PX1) on Bloomberg Financial
Markets for the most recently issued actively traded on-the-run U.S. Treasury
securities (“Reported”) having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date. If there are no such U.S.
Treasury securities Reported having a maturity equal to such Remaining Average
Life, then such implied yield to maturity will be determined by (a) converting
U.S. Treasury bill quotations to bond equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between the yields
Reported for the applicable most recently issued actively traded on-the-run U.S.
Treasury securities with the maturities (1) closest to and greater than such
Remaining Average Life and (2) closest to and less than such Remaining Average
Life. The Reinvestment Yield shall be rounded to the number of decimal places as
appears in the interest rate of the applicable Note.

 

If such yields are not Reported or the yields Reported as of such time are not
ascertainable (including by way of interpolation), then “Reinvestment Yield”
means, with respect to the Called Principal of any Note, 0.50% over the yield to
maturity implied by the U.S. Treasury constant maturity yields reported, for the
latest day for which such yields have been so reported as of the second Business
Day preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (or any comparable successor
publication) for the U.S. Treasury constant maturity having a term equal to the
Remaining Average Life of such Called Principal as of such Settlement Date. If
there is no such U.S. Treasury constant maturity having a term equal to such
Remaining Average Life, such implied yield to maturity will be determined by
interpolating linearly between (1) the U.S. Treasury constant maturity so
reported with the term closest to and greater than such Remaining Average Life
and (2) the U.S. Treasury constant maturity so reported with the term closest to
and less than such Remaining Average Life. The Reinvestment Yield shall be
rounded to the number of decimal places as appears in the interest rate of the
applicable Note.

 

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Gas Natural Inc.   Note Purchase Agreement

 

“Remaining Average Life” means, with respect to any Called Principal, the number
of years obtained by dividing (i) such Called Principal into (ii) the sum of the
products obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number of
years, computed on the basis of a 360-day year composed of twelve 30-day months
and calculated to two decimal places, that will elapse between the Settlement
Date with respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.

 

“Remaining Scheduled Payments” means, with respect to the Called Principal of
any Note, all payments of such Called Principal and interest thereon that would
be due after the Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its scheduled due date,
provided that if such Settlement Date is not a date on which interest payments
are due to be made under the Notes, then the amount of the next succeeding
scheduled interest payment will be reduced by the amount of interest accrued to
such Settlement Date and required to be paid on such Settlement Date pursuant to
Section 8.4 or Section 12.1.

 

“Settlement Date” means, with respect to the Called Principal of any Note, the
date on which such Called Principal is to be prepaid pursuant to Section 8.2 or
has become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.

 

Section 8.7.         Change of Control. (a) Notice of Change of Control. The
Company will, within 15 Business Days after any Responsible Officer has
knowledge of the occurrence of any Change of Control, give written notice of
such Change of Control to each holder of Notes. Such notice shall contain and
constitute an offer to prepay Notes as described in subparagraph (b) of this
Section 8.7 and shall be accompanied by the certificate described in
subparagraph (e) of this Section 8.7.

 

(b)         Offer to Prepay Notes. The offer to prepay Notes contemplated by
subparagraph (a) of this Section 8.7 shall be an offer to prepay, in accordance
with and subject to this Section 8.7, all, but not less than all, the Notes held
by each holder (in this case only, “holder” in respect of any Note registered in
the name of a nominee for a disclosed beneficial owner shall mean such
beneficial owner) on a date specified in such offer (the “Proposed Prepayment
Date”). The Proposed Prepayment Date shall be not less than 20 days and not more
than 60 days after the date of such offer (if the Proposed Prepayment Date shall
not be specified in such offer, the Proposed Prepayment Date shall be the 45th
day after the date of such offer).

 

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Gas Natural Inc.   Note Purchase Agreement

 

(c)         Acceptance; Rejection. A holder of Notes may accept or reject the
offer to prepay made pursuant to this Section 8.7 by causing a notice of such
acceptance or rejection to be delivered to the Company at least 5 Business Days
prior to the Proposed Prepayment Date. A failure by a holder of Notes to respond
to an offer to prepay made pursuant to this Section 8.7, or to accept an offer
as to all of the Notes held by such holder, in each case on or before the 5th
Business Day preceding the Proposed Prepayment Date, shall be deemed to
constitute a rejection of such offer by such holder.

 

(d)         Prepayment. Prepayment of the Notes to be prepaid pursuant to this
Section 8.7 shall be at 100% of the principal amount of such Notes, together
with interest on such Notes accrued to the date of prepayment and without any
Make-Whole Amount. The prepayment shall be made on the Proposed Prepayment Date.

 

(e)         Officer’s Certificate. Each offer to prepay the Notes pursuant to
this Section 8.7 shall be accompanied by a certificate, executed by a Senior
Financial Officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this
Section 8.7; (iii) the principal amount of each Note offered to be prepaid;
(iv) the interest that would be due on each Note offered to be prepaid, accrued
to the Proposed Prepayment Date; and (v) in reasonable detail, the nature and
date of the Change of Control.

 

(f)         Definition of Change of Control. “Change of Control” means an event
or series of events by which:

 

(A)         any “person” or “group” (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, but excluding any employee
benefit plan of such person or its subsidiaries, and any person or entity acting
in its capacity as trustee, agent or other fiduciary or administrator of any
such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5
under the Securities Exchange Act of 1934, except that a person or group shall
be deemed to have “beneficial ownership” of all securities that such person or
group has the right to acquire, whether such right is exercisable immediately or
only after the passage of time (such right, an “option right”)), directly or
indirectly, of 35% or more of the equity securities of the Company entitled to
vote for members of the board of directors or equivalent governing body of the
Company on a fully-diluted basis (and taking into account all such securities
that such person or group has the right to acquire pursuant to any option
right); or

 

(B)         during any period of 12 consecutive months, a majority of the
members of the board of directors or other equivalent governing body of the
Company cease to be composed of individuals (i) who were members of that board
or equivalent governing body on the first day of such period, (ii) whose
election or nomination to that board or equivalent governing body was approved
by individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and (ii)
above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body (excluding, in the case of
both clause (ii) and clause (iii), any individual whose initial nomination for,
or assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors);

 

 -22- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

provided however, that the Bison Infrastructure Transaction shall not constitute
a Change of Control for purposes of this Agreement.

 

Section 8.8.         Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, (x) subject to clause
(y), any payment of interest on any Note that is due on a date that is not a
Business Day shall be made on the next succeeding Business Day without including
the additional days elapsed in the computation of the interest payable on such
next succeeding Business Day; and (y) any payment of principal of or Make-Whole
Amount on any Note (including principal due on the Maturity Date of such Note)
that is due on a date that is not a Business Day shall be made on the next
succeeding Business Day and shall include the additional days elapsed in the
computation of interest payable on such next succeeding Business Day.

 

Section 9.         Affirmative Covenants.

 

The Company covenants that so long as any of the Notes are outstanding:

 

Section 9.1.         Compliance with Laws. Without limiting Section 10.5, the
Company will, and will cause each of its Subsidiaries to, comply with all laws,
ordinances or governmental rules or regulations to which each of them is
subject, including, without limitation, ERISA, Environmental Laws, the USA
PATRIOT Act and the other laws and regulations that are referred to in Section
5.16, and will obtain and maintain in effect all licenses, certificates,
permits, franchises and other governmental authorizations necessary to the
ownership of their respective properties or to the conduct of their respective
businesses, in each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits, franchises
and other governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 9.2.         Insurance. The Company will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.

 

Section 9.3.         Maintenance of Properties. The Company will, and will cause
each of its Subsidiaries to, maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business carried on in
connection therewith may be properly conducted at all times, provided that this
Section shall not prevent the Company or any Subsidiary from discontinuing the
operation and the maintenance of any of its properties if such discontinuance is
desirable in the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

 -23- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

Section 9.4.         Payment of Taxes and Claims. The Company will, and will
cause each of its Subsidiaries to, file all tax returns required to be filed in
any jurisdiction and to pay and discharge all taxes shown to be due and payable
on such returns and all other taxes, assessments, governmental charges, or
levies imposed on them or any of their properties, assets, income or franchises,
to the extent the same have become due and payable and before they have become
delinquent and all claims for which sums have become due and payable that have
or might become a Lien on properties or assets of the Company or any Subsidiary,
provided that neither the Company nor any Subsidiary need pay any such tax,
assessment, charge, levy or claim if (i) the amount, applicability or validity
thereof is contested by the Company or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Company or such Subsidiary or (ii) the nonpayment of all such taxes,
assessments, charges, levies and claims could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 9.5.         Corporate Existence, Etc. Subject to Section 10.2, the
Company will at all times preserve and keep its corporate existence in full
force and effect. Subject to Sections 10.2 and 10.3, the Company will at all
times preserve and keep in full force and effect the corporate existence of each
of its Subsidiaries (unless merged into the Company or a Wholly-Owned
Subsidiary) and all rights and franchises of the Company and its Subsidiaries
unless, in the good faith judgment of the Company, the termination of or failure
to preserve and keep in full force and effect such corporate existence, right or
franchise could not, individually or in the aggregate, have a Material Adverse
Effect.

 

Section 9.6.         Books and Records. The Company will, and will cause each of
its Subsidiaries to, maintain proper books of record and account in conformity
with GAAP and all applicable requirements of any Governmental Authority having
legal or regulatory jurisdiction over the Company or such Subsidiary, as the
case may be. The Company will, and will cause each of its Subsidiaries to, keep
books, records and accounts which, in reasonable detail, accurately reflect all
transactions and dispositions of assets. The Company and its Subsidiaries have
devised a system of internal accounting controls sufficient to provide
reasonable assurances that their respective books, records, and accounts
accurately reflect all transactions and dispositions of assets and the Company
will, and will cause each of its Subsidiaries to, continue to maintain such
system.

 

Section 9.7         Subsidiary Guarantors. The Company will cause each of its
Subsidiaries that guarantees or otherwise becomes liable at any time, whether as
a borrower or an additional or co-borrower or otherwise, for or in respect of
any Indebtedness under any Material Credit Facility to concurrently therewith:

 

 -24- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

(a)         execute and deliver a joinder to an existing Subsidiary Guaranty
(each, a “Joinder Agreement”) or execute and deliver a Subsidiary Guaranty in
substantially the form of the attached Exhibit 2.2 (each, an “Additional
Subsidiary Guaranty”), providing for the guaranty by such Subsidiary, on a joint
and several basis with all other such Subsidiaries, of (i) the prompt payment in
full when due of all amounts payable by the Company pursuant to the Notes
(whether for principal, interest, Make-Whole Amount or otherwise) and this
Agreement, including, without limitation, all indemnities, fees and expenses
payable by the Company thereunder and (ii) the prompt, full and faithful
performance, observance and discharge by the Company of each and every covenant,
agreement, undertaking and provision required pursuant to the Notes or this
Agreement to be performed, observed or discharged by it; and

 

(b)         deliver the following to each holder of a Note:

 

(i)         an executed counterpart of such Joinder Agreement or such Additional
Subsidiary Guaranty;

 

(ii)         a certificate signed by an authorized officer of such Subsidiary
containing representations and warranties on behalf of such Subsidiary to the
same effect, mutatis mutandis, as those contained in Sections 5.1, 5.2, 5.6 and
5.7 of this Agreement (but with respect to such Subsidiary and such Joinder
Agreement or Additional Subsidiary Guaranty rather than the Company);

 

(iii)         all documents as may be reasonably requested by the Required
Holders to evidence the due organization, continuing existence and good standing
of such Subsidiary and the due authorization by all requisite action on the part
of such Subsidiary of the execution and delivery of such Joinder Agreement or
Additional Subsidiary Guaranty and the performance by such Subsidiary of its
obligations thereunder; and

 

(iv)         an opinion of counsel reasonably satisfactory to the Required
Holders covering such matters relating to such Subsidiary and such Joinder
Agreement or Additional Subsidiary Guaranty as the Required Holders may
reasonably request.

 

Section 9.8.         Notes to Rank Pari Passu. The Notes and all obligations
under this Agreement are and at all times shall remain direct obligations of the
Company ranking pari passu with all other notes from time to time issued and
outstanding hereunder without any preference among themselves and pari passu
with all Indebtedness outstanding under any Material Credit Facility and all
other present and future unsecured Indebtedness (actual or contingent) of the
Company which is not expressed to be subordinate or junior in rank to any other
unsecured Indebtedness of the Company.

 

Section 10.         Negative Covenants.

 

The Company covenants that so long as any of the Notes are outstanding:

 

 -25- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

Section 10.1.         Transactions with Affiliates. The Company will not and
will not permit any Subsidiary to enter into directly or indirectly any
transaction or group of related transactions (including without limitation the
purchase, lease, sale or exchange of properties of any kind or the rendering of
any service) with any Affiliate (other than the Company or another Subsidiary),
except in the ordinary course and pursuant to the reasonable requirements of the
Company’s or such Subsidiary’s business and upon fair and reasonable terms no
less favorable to the Company or such Subsidiary than would be obtainable in a
comparable arm’s-length transaction with a Person not an Affiliate.

 

Section 10.2.         Merger, Consolidation, Etc. The Company will not and will
not permit any Subsidiary to consolidate with or merge with any other Person or
convey, transfer or lease all or substantially all of its assets in a single
transaction or series of transactions to any Person unless:

 

(a)         with respect to any such transaction involving the Company, the
successor formed by such consolidation or the survivor of such merger or the
Person that acquires by conveyance, transfer or lease all or substantially all
of the assets of the Company as an entirety, as the case may be, shall be a
solvent corporation or limited liability company organized and existing under
the laws of the United States or any state thereof (including the District of
Columbia), and, if the Company is not such corporation or limited liability
company, (i) such corporation or limited liability company shall have executed
and delivered to each holder of any Notes its assumption of the due and punctual
performance and observance of each covenant and condition of this Agreement and
the Notes and (ii) such corporation or limited liability company shall have
caused to be delivered to each holder of any Notes an opinion of nationally
recognized independent counsel, or other independent counsel reasonably
satisfactory to the Required Holders, to the effect that all agreements or
instruments effecting such assumption are enforceable in accordance with their
terms and comply with the terms hereof;

 

(b)         any Subsidiary of the Company may (i) consolidate with or merge
with, or convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to, (x) the Company or another Subsidiary
so long as in any merger or consolidation involving the Company, the Company
shall be the surviving or continuing corporation, or (y) subject to the
provisions of Section 10.3, any other Person so long as the survivor is a
Subsidiary, or (ii) convey, transfer or lease all of its assets in compliance
with the provisions of Section 10.3;

 

(c)         each Subsidiary Guarantor under any Subsidiary Guaranty that is
outstanding at the time such transaction or each transaction in such a series of
transactions occurs reaffirms its obligations under such Subsidiary Guaranty in
writing at such time pursuant to documentation that is reasonably acceptable to
the Required Holders; and

 

(d)         immediately before and immediately after giving effect to such
transaction or each transaction in any such series of transactions, no Default
or Event of Default shall have occurred and be continuing.

 

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Gas Natural Inc.   Note Purchase Agreement

 

No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation or limited liability company that shall theretofore have become such
in the manner prescribed in this Section 10.2 from its liability under this
Agreement or the Notes.

 

Section 10.3.         Sale of Assets. The Company will not and will not permit
any Subsidiary to, sell, lease or otherwise dispose of any Substantial Part (as
defined below) of the assets of the Company and its Subsidiaries; provided,
however, that the Company or any Subsidiary may sell, lease or otherwise dispose
of assets constituting a Substantial Part of the assets of the Company and its
Subsidiaries if such assets are sold in an arm’s length transaction and, at such
time and after giving effect thereto, no Default or Event of Default shall have
occurred and be continuing and an amount equal to the net proceeds received from
such sale, lease or other disposition of that portion of such assets that
exceeds the definition of Substantial Part (but not less than that portion of
such assets that exceeds the definition of Substantial Part) shall be used
within 365 days of such sale, lease or disposition, in any combination:

 

(1)         to acquire productive assets used or useful in carrying on the
business of the Company and its Subsidiaries and having a value at least equal
to the value of such assets sold, leased or otherwise disposed of; and/or

 

(2)         to prepay or retire Senior Debt of the Company and its Subsidiaries,
provided that (i) the Company shall offer to prepay each outstanding Note in a
principal amount which equals the Ratable Portion for such Note, and (ii) any
such prepayment of the Notes shall be made at 100% of the principal amount
thereof, together with accrued interest thereon to the date of such prepayment,
but without the payment of the Make-Whole Amount. Any offer of prepayment of the
Notes pursuant to this Section 10.3 shall be given to each holder of the Notes
by written notice that shall be delivered not less than thirty (30) days and not
more than sixty (60) days prior to the proposed prepayment date. Each such
notice shall state that it is given pursuant to this Section 10.3 and that the
offer set forth in such notice must be accepted by such holder in writing and
shall also set forth (i) the prepayment date, (ii) a description of the
circumstances which give rise to the proposed prepayment and (iii) a calculation
of the Ratable Portion for such holder’s Notes. Each holder of the Notes which
desires to have its Notes prepaid shall notify the Company in writing delivered
not less than five (5) Business Days prior to the proposed prepayment date of
its acceptance of such offer of prepayment. A failure by a holder of Notes to
respond to an offer to prepay made pursuant to this Section 10.3, or to accept
an offer as to all of the Notes held by such holder, in each case on or before
the 5th Business Day preceding the proposed prepayment date, shall be deemed to
constitute a rejection of such offer by such holder. Prepayment of Notes
pursuant to this Section 10.3 shall be made in accordance with Section 8.2 (but
without payment of the Make-Whole Amount).

 

As used in this Section 10.3, a sale, lease or other disposition of assets shall
be deemed to be a “Substantial Part” of the assets of the Company and its
Subsidiaries if the book value of such assets, when added to the book value of
all other assets sold, leased or otherwise disposed of by the Company and its
Subsidiaries during the period of 12 consecutive months ending on the date of
such sale, lease or other disposition, exceeds 10% of the book value of
Consolidated Total Assets, determined as of the end of the fiscal year
immediately preceding such sale, lease or other disposition; provided that there
shall be excluded from any determination of a “Substantial Part” (i) any sale or
disposition of assets in the ordinary course of business of the Company and its
Subsidiaries, (ii) any transfer of assets from the Company to any Subsidiary or
from any Subsidiary to the Company or a Subsidiary, and (iii) any sale or
transfer of property acquired by the Company or any Subsidiary after the date of
this Agreement to any Person within 365 days following the acquisition or
construction of such property by the Company or any Subsidiary if the Company or
a Subsidiary shall concurrently with such sale or transfer, lease such property,
as lessee.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 10.4.         Line of Business. The Company will not and will not permit
any Subsidiary to engage in any business if, as a result, the general nature of
the business in which the Company and its Subsidiaries, taken as a whole, would
then be engaged would be substantially changed from the general nature of the
business in which the Company and its Subsidiaries, taken as a whole, are
engaged on the date of this Agreement as described in the investor presentation
referred to in Schedule 5.3.

 

Section 10.5.         Economic Sanctions, Etc. The Company will not, and will
not permit any Controlled Entity to (a) become (including by virtue of being
owned or controlled by a Blocked Person), own or control a Blocked Person or
(b) directly or indirectly have any investment in or engage in any dealing or
transaction (including any investment, dealing or transaction involving the
proceeds of the Notes) with any Person if such investment, dealing or
transaction (i) would cause any holder or any affiliate of such holder to be in
violation of, or subject to sanctions under, any law or regulation applicable to
such holder, or (ii) is prohibited by or subject to sanctions under any U.S.
Economic Sanctions Laws.

 

Section 10.6.         Liens. The Company will not and will not permit any of its
Subsidiaries to directly or indirectly create, incur, assume or permit to exist
(upon the happening of a contingency or otherwise) any Lien on or with respect
to any property or asset (including, without limitation, any document or
instrument in respect of goods or accounts receivable) of the Company or any
such Subsidiary, whether now owned or held or hereafter acquired, or any income
or profits therefrom, or assign or otherwise convey any right to receive income
or profits, except:

 

(a)         any Lien for any tax, assessment or governmental charge or levy
which is not yet due and payable or which is being contested in good faith and
as to which the Company or such Subsidiary shall have made appropriate reserve;

 

(b)         Liens incidental to the conduct of business or the ownership of
properties and assets (including landlords’, carriers’, warehousemen’s,
mechanics’, materialmen’s and other similar Liens for sums not yet due and
payable) and Liens to secure the performance of bids, tenders, leases, or trade
contracts, or to secure statutory obligations (including obligations under
workers compensation, unemployment insurance and other social security
legislation), surety or appeal bonds or other Liens incurred in the ordinary
course of business and not in connection with the borrowing of money;

 

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(c)         leases or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case incidental
to the ownership of property or assets or the ordinary conduct of the business
of the Company or any of its Subsidiaries, or Liens incidental to minor survey
exceptions and the like, provided that such Liens do not, in the aggregate,
materially detract from the value of such property;

 

(d)         any attachment or judgment Lien, unless the judgment it secures
shall not, within 60 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay;

 

(e)         Liens securing Indebtedness of a Subsidiary to the Company or to
another Subsidiary;

 

(f)         Liens existing as of the date of Closing and reflected in
Schedule 10.6;

 

(g)         Liens incurred after the date of Closing given to secure the payment
of the purchase price incurred in connection with the acquisition, construction
or improvement of property (other than accounts receivable or inventory) useful
and intended to be used in carrying on the business of the Company or a
Subsidiary, including Liens existing on such property at the time of acquisition
or construction thereof or Liens incurred within 365 days of such acquisition or
completion of such construction or improvement, provided that (i) the Lien shall
attach solely to the property acquired, purchased, constructed or improved;
(ii) at the time of acquisition, construction or improvement of such property
(or, in the case of any Lien incurred within three hundred sixty-five (365) days
of such acquisition or completion of such construction or improvement, at the
time of the incurrence of the Indebtedness secured by such Lien), the aggregate
amount remaining unpaid on all Indebtedness secured by Liens on such property,
whether or not assumed by the Company or a Subsidiary, shall not exceed the
lesser of (y) the cost of such acquisition, construction or improvement or
(z) the fair market value of such property (as determined in good faith by one
or more officers of the Company to whom authority to enter into the transaction
has been delegated by the board of directors of the Company); and (iii) at the
time of such incurrence and after giving effect thereto, no Default or Event of
Default would exist;

 

(h)         any Lien existing on property of a Person immediately prior to its
being consolidated with or merged into the Company or a Subsidiary or its
becoming a Subsidiary, or any Lien existing on any property acquired by the
Company or any Subsidiary at the time such property is so acquired (whether or
not the Indebtedness secured thereby shall have been assumed), provided that
(i) no such Lien shall have been created or assumed in contemplation of such
consolidation or merger or such Person’s becoming a Subsidiary or such
acquisition of property, (ii) each such Lien shall extend solely to the item or
items of property so acquired and, if required by the terms of the instrument
originally creating such Lien, other property which is an improvement to or is
acquired for specific use in connection with such acquired property, and
(iii) at the time of such incurrence and after giving effect thereto, no Default
or Event of Default would exist;

 

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(i)         any extensions, renewals or replacements of any Lien permitted by
the preceding subparagraphs (e), (f), (g) and (h) of this Section 10.6, provided
that (i) no additional property shall be encumbered by such Liens, (ii) the
unpaid principal amount of the Indebtedness or other obligations secured thereby
shall not be increased on or after the date of any extension, renewal or
replacement, and (iii) at such time and immediately after giving effect thereto,
no Default or Event of Default shall have occurred and be continuing; and

 

(j)         other Liens securing Indebtedness of the Company or any Subsidiary
not otherwise permitted by clauses (a) through (i), provided that Priority Debt
shall not at any time exceed 10% of Consolidated Net Worth (determined as of the
end of the then most recently ended fiscal quarter), provided, further, that
notwithstanding the foregoing, the Company shall not, and shall not permit any
of its Subsidiaries to, secure pursuant to this Section 10.6(j) any Indebtedness
outstanding under or pursuant to any Material Credit Facility unless and until
the Notes (and any guaranty delivered in connection therewith) shall
concurrently be secured equally and ratably with such Indebtedness pursuant to
documentation reasonably acceptable to the Required Holders in substance and in
form, including, without limitation, an intercreditor agreement and opinions of
counsel to the Company and/or any such Subsidiary, as the case may be, from
counsel that is reasonably acceptable to the Required Holders.

 

Section 10.7.         Total Debt to Capital Ratio. The Company shall not permit
the Total Debt to Capital Ratio to exceed 0.50 to 1.00 at any time; provided
that, upon notice by the Company to the holders of Notes, as of the last day of
each of the four consecutive fiscal quarters immediately following a Qualified
Acquisition, such Total Debt to Capital Ratio may be greater than 0.50 to 1.00,
but in no event greater than 0.55 to 1.00.

 

Section 10.8.         Interest Coverage Ratio. The Company shall not permit the
Interest Coverage Ratio as of the end of any fiscal quarter to be less than 2.00
to 1.00.

 

Section 10.9.         Priority Debt. The Company shall not at any time permit
the aggregate amount of all Priority Debt to exceed 10% of Consolidated Net
Worth (Consolidated Net Worth to be determined as of the end of the then most
recently ended fiscal quarter of the Company).

 

Section 10.10.         Consolidated Net Worth. The Company shall not at any time
permit its Consolidated Net Worth to be less than the sum of (a) 75% of the
total shareholders’ equity as reported in the Company’s Form 10-Q for fiscal
quarter ending September 30, 2016, plus (b) twenty percent (20%) of the sum of
Consolidated Net Income (if positive) earned in each fiscal quarter, commencing
with the fiscal quarter beginning January 1, 2017.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 11.         Events of Default.

 

An “Event of Default” shall exist if any of the following conditions or events
shall occur and be continuing:

 

(a)         the Company defaults in the payment of any principal or Make-Whole
Amount, if any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or

 

(b)         the Company defaults in the payment of any interest on any Note for
more than five Business Days after the same becomes due and payable; or

 

(c)         the Company defaults in the performance of or compliance with any
term contained in Section 7.1(d) or Sections 10.2, 10.3, 10.6, 10.7, 10.8, 10.9
and 10.10; or

 

(d)         the Company or any Subsidiary Guarantor defaults in the performance
of or compliance with any term contained herein (other than those referred to in
Sections 11(a), (b) and (c)) or in any Subsidiary Guaranty and such default is
not remedied within 30 days after the earlier of (i) a Responsible Officer
obtaining actual knowledge of such default and (ii) the Company receiving
written notice of such default from any holder of a Note (any such written
notice to be identified as a “notice of default” and to refer specifically to
this Section 11(d)); or

 

(e)         (i) any representation or warranty made in writing by or on behalf
of the Company or by any officer of the Company in this Agreement or any writing
furnished in connection with the transactions contemplated hereby proves to have
been false or incorrect in any material respect on the date as of which made, or
(ii) any representation or warranty made in writing by or on behalf of any
Subsidiary Guarantor or by any officer of such Subsidiary Guarantor in any
Subsidiary Guaranty or any writing furnished in connection with such Subsidiary
Guaranty proves to have been false or incorrect in any material respect on the
date as of which made; or

 

(f)         (i) the Company or any Subsidiary is in default (as principal or as
guarantor or other surety) in the payment of any principal of or premium or
make-whole amount or interest on any Indebtedness that is outstanding in an
aggregate principal amount of at least $10,000,000 beyond any period of grace
provided with respect thereto, or (ii) the Company or any Subsidiary is in
default in the performance of or compliance with any term of any evidence of any
Indebtedness in an aggregate outstanding principal amount of at least
$10,000,000 or of any mortgage, indenture or other agreement relating thereto or
any other condition exists, and as a consequence of such default or condition
such Indebtedness has become, or has been declared (or one or more Persons are
entitled to declare such Indebtedness to be), due and payable before its stated
maturity or before its regularly scheduled dates of payment, or (iii) as a
consequence of the occurrence or continuation of any event or condition (other
than the passage of time or the right of the holder of Indebtedness to convert
such Indebtedness into equity interests), (x) the Company or any Subsidiary has
become obligated to purchase or repay Indebtedness before its regular maturity
or before its regularly scheduled dates of payment in an aggregate outstanding
principal amount of at least $10,000,000, or (y) one or more Persons have the
right to require the Company or any Subsidiary so to purchase or repay such
Indebtedness; or

 

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(g)         the Company or any Subsidiary (i) is generally not paying, or admits
in writing its inability to pay, its debts as they become due, (ii) files, or
consents by answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an assignment
for the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or

 

(h)         a court or other Governmental Authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of its
Subsidiaries, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Company or any of its
Subsidiaries, or any such petition shall be filed against the Company or any of
its Subsidiaries and such petition shall not be dismissed within 60 days; or

 

(i)         one or more final judgments or orders for the payment of money
aggregating in excess of $10,000,000, including, without limitation, any such
final order enforcing a binding arbitration decision, are rendered against one
or more of the Company and its Subsidiaries and which judgments are not, within
60 days after entry thereof, bonded, discharged or stayed pending appeal, or are
not discharged within 60 days after the expiration of such stay; or

 

(j)         if (i) any Plan shall fail to satisfy the minimum funding standards
of ERISA or the Code for any plan year or part thereof or a waiver of such
standards or extension of any amortization period is sought or granted under
section 412 of the Code, (ii) a notice of intent to terminate any Plan shall
have been or is reasonably expected to be filed with the PBGC or the PBGC shall
have instituted proceedings under ERISA section 4042 to terminate or appoint a
trustee to administer any Plan or the PBGC shall have notified the Company or
any ERISA Affiliate that a Plan may become a subject of any such proceedings,
(iii) the aggregate “amount of unfunded benefit liabilities” (within the meaning
of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed an amount that could reasonably be expected to
have a Material Adverse Effect, (iv) the Company or any ERISA Affiliate shall
have incurred or is reasonably expected to incur any liability pursuant to Title
I or IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from
any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or
amends any employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the Company or any
Subsidiary thereunder; and any such event or events described in clauses (i)
through (vi) above, either individually or together with any other such event or
events, could reasonably be expected to have a Material Adverse Effect. As used
in this Section 11(j), the terms “employee benefit plan” and “employee welfare
benefit plan” shall have the respective meanings assigned to such terms in
section 3 of ERISA; or

 

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(k)         except as permitted by Section 9.7, any Subsidiary Guaranty shall
cease to be in full force and effect, any Subsidiary Guarantor or any Person
acting on behalf of any Subsidiary Guarantor shall contest in any manner the
validity, binding nature or enforceability of any Subsidiary Guaranty, or the
obligations of any Subsidiary Guarantor under any Subsidiary Guaranty are not or
cease to be legal, valid, binding and enforceable in accordance with the terms
of such Subsidiary Guaranty.

 

Section 12.         Remedies on Default, Etc.

 

Section 12.1.         Acceleration. (a) If an Event of Default with respect to
the Company described in Section 11(g) or (h) (other than an Event of Default
described in clause (i) of Section 11(g) or described in clause (vi) of
Section 11(g) by virtue of the fact that such clause encompasses clause (i) of
Section 11(g)) has occurred, all the Notes then outstanding shall automatically
become immediately due and payable.

 

(b)         If any other Event of Default has occurred and is continuing, any
holder or holders of more than 50% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.

 

(c)         If any Event of Default described in Section 11(a) or (b) has
occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held by it or
them to be immediately due and payable.

 

Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
thereon (including, but not limited to, interest accrued thereon at the Default
Rate) and (y) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 12.2.         Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 12.1, the holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note or Subsidiary Guaranty, or for an injunction against a
violation of any of the terms hereof or thereof, or in aid of the exercise of
any power granted hereby or thereby or by law or otherwise.

 

Section 12.3.         Rescission. At any time after any Notes have been declared
due and payable pursuant to Section 12.1(b) or (c), the Required Holders, by
written notice to the Company, may rescind and annul any such declaration and
its consequences if (a) the Company has paid all overdue interest on the Notes,
all principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) neither the Company nor any other Person shall
have paid any amounts which have become due solely by reason of such
declaration, (c) all Events of Default and Defaults, other than non-payment of
amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to Section 17, and (d) no judgment or decree
has been entered for the payment of any monies due pursuant hereto or to the
Notes. No rescission and annulment under this Section 12.3 will extend to or
affect any subsequent Event of Default or Default or impair any right consequent
thereon.

 

Section 12.4.         No Waivers or Election of Remedies, Expenses, Etc. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder’s rights, powers or remedies. No right, power or
remedy conferred by this Agreement, any Subsidiary Guaranty or any Note upon any
holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 12, including, without
limitation, reasonable attorneys’ fees, expenses and disbursements.

 

Section 13.         Registration; Exchange; Substitution of Notes.

 

Section 13.1.         Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. If any holder of one or more Notes
is a nominee, then (a) the name and address of the beneficial owner of such Note
or Notes shall also be registered in such register as an owner and holder
thereof and (b) at any such beneficial owner’s option, either such beneficial
owner or its nominee may execute any amendment, waiver or consent pursuant to
this Agreement. Prior to due presentment for registration of transfer, the
Person(s) in whose name any Note(s) shall be registered shall be deemed and
treated as the owner and holder thereof for all purposes hereof, and the Company
shall not be affected by any notice or knowledge to the contrary. The Company
shall give to any holder of a Note that is an Institutional Investor promptly
upon request therefor, a complete and correct copy of the names and addresses of
all registered holders of Notes.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 13.2.         Transfer and Exchange of Notes. Upon surrender of any Note
to the Company at the address and to the attention of the designated officer
(all as specified in Section 18(iii)), for registration of transfer or exchange
(and in the case of a surrender for registration of transfer accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or such holder’s attorney duly authorized in writing and accompanied by the
relevant name, address and other information for notices of each transferee of
such Note or part thereof), within ten Business Days thereafter, the Company
shall execute and deliver, at the Company’s expense (except as provided below),
one or more new Notes (as requested by the holder thereof) in exchange therefor,
in an aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Schedule 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $100,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $100,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representation set forth in Section 6.2.

 

Section 13.3.         Replacement of Notes. Upon receipt by the Company at the
address and to the attention of the designated officer (all as specified in
Section 18(iii)) of evidence reasonably satisfactory to it of the ownership of
and the loss, theft, destruction or mutilation of any Note (which evidence shall
be, in the case of an Institutional Investor, notice from such Institutional
Investor of such ownership and such loss, theft, destruction or mutilation), and

 

(a)         in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a nominee
for, the original Purchaser or another holder of a Note with a minimum net worth
of at least $50,000,000 or a Qualified Institutional Buyer, such Person’s own
unsecured agreement of indemnity shall be deemed to be satisfactory), or

 

(b)         in the case of mutilation, upon surrender and cancellation thereof,

 

within ten Business Days thereafter, the Company at its own expense shall
execute and deliver, in lieu thereof, a new Note, dated and bearing interest
from the date to which interest shall have been paid on such lost, stolen,
destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or
mutilated Note if no interest shall have been paid thereon.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 14.         Payments on Notes.

 

Section 14.1.         Place of Payment. Subject to Section 14.2, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in New York, New York at the principal office of Bank of
America, N.A. in such jurisdiction. The Company may at any time, by notice to
each holder of a Note, change the place of payment of the Notes so long as such
place of payment shall be either the principal office of the Company in such
jurisdiction or the principal office of a bank or trust company in such
jurisdiction.

 

Section 14.2.         Home Office Payment. So long as the Purchaser or its
nominee shall be the holder of any Note, and notwithstanding anything contained
in Section 14.1 or in such Note to the contrary, the Company will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if any, interest and
all other amounts becoming due hereunder by the method and at the address
specified for such purpose below the Purchaser’s name in Schedule B, or by such
other method or at such other address as the Purchaser shall have from time to
time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, the
Purchaser shall surrender such Note for cancellation, reasonably promptly after
any such request, to the Company at its principal executive office or at the
place of payment most recently designated by the Company pursuant to Section
14.1. Prior to any sale or other disposition of any Note held by the Purchaser
or its nominee, the Purchaser will, at its election, either endorse thereon the
amount of principal paid thereon and the last date to which interest has been
paid thereon or surrender such Note to the Company in exchange for a new Note or
Notes pursuant to Section 13.2. The Company will afford the benefits of this
Section 14.2 to any Institutional Investor that is the direct or indirect
transferee of any Note purchased by the Purchaser under this Agreement and that
has made the same agreement relating to such Note as the Purchaser has made in
this Section 14.2.

 

Section 15.         Expenses, Etc.

 

Section 15.1.         Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all costs and expenses
(including reasonable attorneys’ fees of a special counsel and, if reasonably
required by the Required Holders, local or other counsel) incurred by the
Purchaser and each other holder of a Note in connection with such transactions
and in connection with any amendments, waivers or consents under or in respect
of this Agreement, any Subsidiary Guaranty or the Notes (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this Agreement, any
Subsidiary Guaranty or the Notes or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Agreement, any Subsidiary Guaranty or the Notes, or by reason of being a holder
of any Note, (b) the costs and expenses, including financial advisors’ fees,
incurred in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes and any Subsidiary Guaranty
and (c) the costs and expenses incurred in connection with the initial filing of
this Agreement and all related documents and financial information with the SVO
provided, that such costs and expenses under this clause (c) shall not exceed
$5,000. The Company will pay, and will save the Purchaser and each other holder
of a Note harmless from, (i) all claims in respect of any fees, costs or
expenses, if any, of brokers and finders (other than those, if any, retained by
the Purchaser or other holder in connection with its purchase of the Notes) and
(ii) any and all wire transfer fees that any bank deducts from any payment under
such Note to such holder or otherwise charges to a holder of a Note with respect
to a payment under such Note.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 15.2.         Survival. The obligations of the Company under this
Section 15 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement, any Subsidiary Guaranty
or the Notes, and the termination of this Agreement.

 

Section 16.         Survival of Representations and Warranties; Entire
Agreement.

 

All representations and warranties contained herein shall survive the execution
and delivery of this Agreement and the Notes, the purchase or transfer by the
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any subsequent holder of a Note, regardless
of any investigation made at any time by or on behalf of the Purchaser or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement, the Notes and any
Subsidiary Guaranties embody the entire agreement and understanding between the
Purchaser and the Company and supersede all prior agreements and understandings
relating to the subject matter hereof.

 

Section 17.         Amendment and Waiver.

 

Section 17.1.         Requirements. This Agreement and the Notes may be amended,
and the observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), only with the written consent of the Company
and the Required Holders, except that:

 

(a)         no amendment or waiver of any of Sections 1, 2, 3, 4, 5, 6 or 21
hereof, or any defined term (as it is used therein), will be effective as to the
Purchaser or any holder unless consented to by the Purchaser or any holder in
writing; and

 

(b)          no amendment or waiver may, without the written consent of the
Purchaser and the holder of each Note at the time outstanding, (i) subject to
Section 12 relating to acceleration or rescission, change the amount or time of
any prepayment or payment of principal of, or reduce the rate or change the time
of payment or method of computation of (x) interest on the Notes or (y) the
Make-Whole Amount, (ii) change the percentage of the principal amount of the
Notes the holders of which are required to consent to any amendment or waiver,
or (iii) amend any of Sections 8 (except as set forth in the second sentence of
Section 8.2), 11(a), 11(b), 12, 17 or 20.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 17.2.         Solicitation of Holders of Notes.

 

(a)         Solicitation. The Company will provide each holder of a Note with
sufficient information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered decision with
respect to any proposed amendment, waiver or consent in respect of any of the
provisions hereof or of the Notes or any Subsidiary Guaranty. The Company will
deliver executed or true and correct copies of each amendment, waiver or consent
effected pursuant to this Section 17 or any Subsidiary Guaranty to each holder
of a Note promptly following the date on which it is executed and delivered by,
or receives the consent or approval of, the requisite holders of Notes.

 

(b)         Payment. The Company will not directly or indirectly pay or cause to
be paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, or grant any security or provide other credit support, to any
holder of a Note as consideration for or as an inducement to the entering into
by such holder of any waiver or amendment of any of the terms and provisions
hereof or of any Subsidiary Guaranty or any Note unless such remuneration is
concurrently paid, or security is concurrently granted or other credit support
concurrently provided, on the same terms, ratably to each holder of a Note even
if such holder did not consent to such waiver or amendment.

 

(c)         Consent in Contemplation of Transfer. Any consent given pursuant to
this Section 17 or any Subsidiary Guaranty by a holder of a Note that has
transferred or has agreed to transfer its Note to the Company, any Subsidiary or
any Affiliate of the Company in connection with such consent shall be void and
of no force or effect except solely as to such holder, and any amendments
effected or waivers granted or to be effected or granted that would not have
been or would not be so effected or granted but for such consent (and the
consents of all other holders of Notes that were acquired under the same or
similar conditions) shall be void and of no force or effect except solely as to
such holder.

 

Section 17.3.         Binding Effect, Etc. Any amendment or waiver consented to
as provided in this Section 17 or any Subsidiary Guaranty applies equally to all
holders of Notes and is binding upon them and upon each future holder of any
Note and upon the Company without regard to whether such Note has been marked to
indicate such amendment or waiver. No such amendment or waiver will extend to or
affect any obligation, covenant, agreement, Default or Event of Default not
expressly amended or waived or impair any right consequent thereon. No course of
dealing between the Company and any holder of a Note and no delay in exercising
any rights hereunder or under any Note or Subsidiary Guaranty shall operate as a
waiver of any rights of any holder of such Note.

 

Section 17.4.         Notes Held by Company, Etc. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement, any Subsidiary
Guaranty or the Notes, or have directed the taking of any action provided herein
or in any Subsidiary Guaranty or the Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of
its Affiliates shall be deemed not to be outstanding.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 18.         Notices.

 

Except to the extent otherwise provided in Section 7.4, all notices and
communications provided for hereunder shall be in writing and sent (a) by
telecopy if the sender on the same day sends a confirming copy of such notice by
an internationally recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by an internationally recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:

 

(i)         if to the Purchaser or its nominee, to the Purchaser or nominee at
the address specified for such communications in Schedule B, or at such other
address as the Purchaser or nominee shall have specified to the Company in
writing,

 

(ii)         if to any other holder of any Note, to such holder at such address
as such other holder shall have specified to the Company in writing, or

 

(iii)         if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of Gregory J. Osborne, President and CEO and
James Sprague, Chief Financial Officer, or at such other address as the Company
shall have specified to the holder of each Note in writing.

 

Notices under this Section 18 will be deemed given only when actually received.

 

Section 19.         Reproduction of Documents.

 

This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by the Purchaser at the Closing (except the
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to the Purchaser or any holder,
may be reproduced by the Purchaser or such holder by any photographic,
photostatic, electronic, digital, or other similar process and the Purchaser may
destroy any original document so reproduced. The Company agrees and stipulates
that, to the extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by the Purchaser in the regular course of business) and
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.

 

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Gas Natural Inc.   Note Purchase Agreement

 

Section 20.         Confidential Information.

 

For the purposes of this Section 20, “Confidential Information” means
information delivered to the Purchaser or any holder by or on behalf of the
Company or any Subsidiary in connection with the transactions contemplated by or
otherwise pursuant to this Agreement that is proprietary in nature and that was
clearly marked or labeled or otherwise adequately identified when received by
the Purchaser as being confidential information of the Company or such
Subsidiary, provided that such term does not include information that (a) was
publicly known or otherwise known to the Purchaser prior to the time of such
disclosure, (b) subsequently becomes publicly known through no act or omission
by the Purchaser or any Person acting on the Purchaser’s behalf, (c) otherwise
becomes known to the Purchaser other than through disclosure by the Company or
any Subsidiary or (d) constitutes financial statements delivered to the
Purchaser under Section 7.1 that are otherwise publicly available. The Purchaser
and each holder will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by the Purchaser in good faith
to protect confidential information of third parties delivered to the Purchaser,
provided that the Purchaser may deliver or disclose Confidential Information to
(i) its directors, officers, employees, agents, attorneys, trustees and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by its Notes), (ii) its auditors,
financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with this
Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor
to which it sells or offers to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by this Section 20), (v) any Person
from which it offers to purchase any Security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by this Section 20), (vi) any federal or state regulatory authority having
jurisdiction over the Purchaser, (vii) the NAIC or the SVO or, in each case, any
similar organization, or any nationally recognized rating agency that requires
access to information about the Purchaser’s investment portfolio, or (viii) any
other Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, rule, regulation or order
applicable to the Purchaser, (x) in response to any subpoena or other legal
process, (y) in connection with any litigation to which the Purchaser is a party
or (z) if an Event of Default has occurred and is continuing, to the extent the
Purchaser may reasonably determine such delivery and disclosure to be necessary
or appropriate in the enforcement or for the protection of the rights and
remedies under the Purchaser’s Notes, this Agreement or any Subsidiary Guaranty.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20 as
though it were a party to this Agreement. On reasonable request by the Company
in connection with the delivery to any holder of a Note of information required
to be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying this Section 20.

 

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Gas Natural Inc.   Note Purchase Agreement

 

In the event that as a condition to receiving access to information relating to
the Company or its Subsidiaries in connection with the transactions contemplated
by or otherwise pursuant to this Agreement, the Purchaser or holder of a Note is
required to agree to a confidentiality undertaking (whether through IntraLinks,
another secure website, a secure virtual workspace or otherwise) which is
different from this Section 20, this Section 20 shall not be amended thereby
and, as between the Purchaser or such holder and the Company, this Section 20
shall supersede any such other confidentiality undertaking.

 

Section 21.         Substitution of Purchaser.

 

The Purchaser shall have the right to substitute any one of its Affiliates (a
“Substitute Purchaser”) as the purchaser of the Notes that it has agreed to
purchase hereunder, by written notice to the Company, which notice shall be
signed by both the Purchaser and such Substitute Purchaser, shall contain such
Substitute Purchaser’s agreement to be bound by this Agreement and shall contain
a confirmation by such Substitute Purchaser of the accuracy with respect to it
of the representations set forth in Section 6. Upon receipt of such notice, any
reference to the Purchaser in this Agreement (other than in this Section 21),
shall be deemed to refer to such Substitute Purchaser in lieu of the original
Purchaser. In the event that such Substitute Purchaser is so substituted as the
Purchaser hereunder and such Substitute Purchaser thereafter transfers to the
original Purchaser all of the Notes then held by such Substitute Purchaser, upon
receipt by the Company of notice of such transfer, any reference to such
Substitute Purchaser as a “Purchaser” in this Agreement (other than in this
Section 21), shall no longer be deemed to refer to such Substitute Purchaser,
but shall refer to the original Purchaser, and the original Purchaser shall
again have all the rights of an original holder of the Notes under this
Agreement.

 

Section 22.         Miscellaneous.

 

Section 22.1.         Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.

 

Section 22.2.         Accounting Terms. All accounting terms used herein which
are not expressly defined in this Agreement have the meanings respectively given
to them in accordance with GAAP. Except as otherwise specifically provided
herein, (i) all computations made pursuant to this Agreement shall be made in
accordance with GAAP, and (ii) all financial statements shall be prepared in
accordance with GAAP. For purposes of determining compliance with this Agreement
(including, without limitation, Section 9, Section 10 and the definition of
“Indebtedness”), any election by the Company to measure any financial liability
using fair value (as permitted by Financial Accounting Standards Board
Accounting Standards Codification Topic No. 825-10-25 – Fair Value Option,
International Accounting Standard 39 – Financial Instruments: Recognition and
Measurement or any similar accounting standard) shall be disregarded and such
determination shall be made as if such election had not been made.

 

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Gas Natural Inc.   Note Purchase Agreement

 

If at any time any change in GAAP would affect the computation of any financial
ratio or requirement set forth in this Agreement, and either the Company or the
Required Holders shall so request, the Company and the holders shall negotiate
in good faith to amend such ratio or requirement to preserve the original intent
thereof in light of such change in GAAP; provided that, until so amended,
(a) such ratio or requirement shall continue to be computed in accordance with
GAAP prior to such change therein, and (b) the Company shall include relevant
reconciliations in reasonable detail between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP in each
certificate of a Senior Financial Officer delivered pursuant to Section 7.2
during such period, and shall provide such financial statements and other
documents required under this Agreement or as reasonably requested by the
holders. Without limiting the foregoing, leases shall continue to be classified
and accounted for on a basis consistent with the GAAP treatment of leases on the
date of the Closing for all purposes of this Agreement, notwithstanding any
change in GAAP relating thereto, unless the parties hereto shall enter into a
mutually acceptable amendment addressing such changes, as provided for above.

 

All references herein to consolidated financial statements of the Company and
its Subsidiaries or to the determination of any amount for the Company and its
Subsidiaries on a consolidated basis or any similar reference shall, in each
case, be deemed to include each variable interest entity that the Company is
required to consolidated pursuant to GAAP as if such variable interest entity
were a Subsidiary as defined herein.

 

Section 22.3.         Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 22.4.         Construction, Etc. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.

 

Section 22.5.         Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one instrument. Each counterpart may consist of a number of
copies hereof, each signed by less than all, but together signed by all, of the
parties hereto.

 

Section 22.6.         Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of New York excluding choice-of-law principles of the law
of such State that would permit the application of the laws of a jurisdiction
other than such State.

 

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Gas Natural Inc.   Note Purchase Agreement

  

Section 22.7.         Jurisdiction and Process; Waiver of Jury Trial. (a) The
Company irrevocably submits to the non-exclusive jurisdiction of any New York
State or federal court sitting in the Borough of Manhattan, The City of
New York, over any suit, action or proceeding arising out of or relating to this
Agreement or the Notes. To the fullest extent permitted by applicable law, the
Company irrevocably waives and agrees not to assert, by way of motion, as a
defense or otherwise, any claim that it is not subject to the jurisdiction of
any such court, any objection that it may now or hereafter have to the laying of
the venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.

 

(b)         The Company consents to process being served by or on behalf of any
holder of Notes in any suit, action or proceeding of the nature referred to in
Section 22.7(a) by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, return receipt
requested, to it at its address specified in Section 18 or at such other address
of which such holder shall then have been notified pursuant to said Section. The
Company agrees that such service upon receipt (i) shall be deemed in every
respect effective service of process upon it in any such suit, action or
proceeding and (ii) shall, to the fullest extent permitted by applicable law, be
taken and held to be valid personal service upon and personal delivery to it.
Notices hereunder shall be conclusively presumed received as evidenced by a
delivery receipt furnished by the United States Postal Service or any reputable
commercial delivery service.

 

(c)         Nothing in this Section 22.7 shall affect the right of any holder of
a Note to serve process in any manner permitted by law, or limit any right that
the holders of any of the Notes may have to bring proceedings against the
Company in the courts of any appropriate jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.

 

(d)         The parties hereto hereby waive trial by jury in any action brought
on or with respect to this Agreement, the Notes or any other document executed
in connection herewith or therewith.

 

* * * * *

 

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Gas Natural Inc.   Note Purchase Agreement

 

If you are in agreement with the foregoing, please sign the form of agreement on
a counterpart of this Agreement and return it to the Company, whereupon this
Agreement shall become a binding agreement between you and the Company.

 

  Very truly yours,       Gas Natural Inc.       By /s/ Gregory J. Osborne    
Name:   Gregory J. Osborne     Title: President & Chief Executive Officer

 

 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

This Agreement is hereby

accepted and agreed to as

of the date hereof.

 

 

Teachers Insurance and Annuity

Association of America

      By /s/ Joseph R. Cantey, Jr.     Name:   Joseph R. Cantey, Jr.     Title:
Senior Director

 

 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

Defined Terms

 

As used herein, the following terms have the respective meanings set forth below
or set forth in the Section hereof following such term:

 

“Additional Subsidiary Guaranty” is defined in Section 9.7(a).

 

“Affiliate” means, at any time, and with respect to any Person, any other Person
that at such time directly or indirectly through one or more intermediaries
Controls, or is Controlled by, or is under common Control with, such first
Person, and, with respect to the Company, shall include any Person beneficially
owning or holding, directly or indirectly, 10% or more of any class of voting or
equity interests of the Company or any Subsidiary or any Person of which the
Company and its Subsidiaries beneficially own or hold, in the aggregate,
directly or indirectly, 10% or more of any class of voting or equity interests.
As used in this definition, “Control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. Unless the context otherwise clearly requires, any
reference to an “Affiliate” is a reference to an Affiliate of the Company.

 

“Agreement” means this Agreement, including all Schedules and Exhibits attached
to this Agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time.

 

“Anti-Corruption Laws” means any law or regulation in a U.S. or any non-U.S.
jurisdiction regarding bribery or any other corrupt activity, including the U.S.
Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.

 

“Anti-Money Laundering Laws” means any law or regulation in a U.S. or any
non-U.S. jurisdiction regarding money laundering, drug trafficking,
terrorist-related activities or other money laundering predicate crimes,
including the Currency and Foreign Transactions Reporting Act of 1970 (otherwise
known as the Bank Secrecy Act) and the USA PATRIOT Act.

 

“Approvals and Consents” means, collectively, the approvals and consents set
forth on Schedule 5.7.

 

“Attributable Indebtedness” means, on any date, (a) in respect of any capital
lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP,
and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of
the remaining lease payments under the relevant lease that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP if
such lease were accounted for as a capital lease.

 

“Bison Infrastructure Transaction” means that certain transaction in which the
Company will merge with FR Bison Merger Sub, Inc., an Ohio corporation (with the
Company as the surviving entity) and become the wholly-owned Subsidiary of FR
Bison Holdings, Inc. a Delaware corporation as described in the Company’s Form
8-K as filed October 11, 2016.

 

Exhibit 2.2
(to Note Purchase Agreement)

 

 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

“Blocked Person” means (a) a Person whose name appears on the list of Specially
Designated Nationals and Blocked Persons published by OFAC, (b) a Person,
entity, organization, country or regime that is blocked or a target of sanctions
that have been imposed under U.S. Economic Sanctions Laws or (c) a Person that
is an agent, department or instrumentality of, or is otherwise beneficially
owned by, controlled by or acting on behalf of, directly or indirectly, any
Person, entity, organization, country or regime described in clause (a) or (b).

 

“Business Day” means (a) for the purposes of Section 8.6 only, any day other
than a Saturday, a Sunday or a day on which commercial banks in New York City
are required or authorized to be closed, and (b) for the purposes of any other
provision of this Agreement, any day other than a Saturday, a Sunday or a day on
which commercial banks in New York, New York or Cleveland, Ohio are required or
authorized to be closed.

 

“Capital” means, as of any date of determination thereof, without duplication,
the sum of (i) Consolidated Net Worth plus (ii) all Total Debt.

 

“Capital Lease” means, at any time, a lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

 

“Closing” is defined in Section 3.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time.

 

“Company” means Gas Natural Inc., an Ohio corporation or any successor that
becomes such in the manner prescribed in Section 10.2.

 

“Confidential Information” is defined in Section 20.

 

“Consolidated Net Income” means, with respect to the Company and its
Subsidiaries for any period, the net income (or loss) of the Company and its
Subsidiaries for such period, excluding any gains from Dispositions, any
extraordinary gains and any gains from discontinued operations determined on a
consolidated basis in accordance with GAAP.

 

“Consolidated Net Worth” means, as of any time the same is to be determined, the
total shareholders’ equity (including capital stock, additional paid-in-capital
and retained earnings after deducting treasury stock, but excluding (to the
extent otherwise included in calculating shareholders’ equity), minority
interests in Subsidiaries) which would appear on the consolidated balance sheet
of the Company determined on a consolidated basis in accordance with GAAP.

 

“Consolidated Total Assets” means the total assets of the Company and its
Subsidiaries as shown in the most recent consolidated financial statements
published by the Company and its Subsidiaries determined on a consolidated basis
in accordance with GAAP.

 

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Gas Natural Inc.   Note Purchase Agreement

 

“Controlled Entity” means (a) any of the Subsidiaries of the Company and any of
their or the Company’s respective Controlled Affiliates and (b) if the Company
has a parent company, such parent company and its Controlled Affiliates.

 

“Default” means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.

 

“Default Rate” means that rate of interest that is the greater of (i) 2.0% per
annum above the rate of interest stated in clause (a) of the first paragraph of
the Notes or (ii) 2.0% over the rate of interest publicly announced by Bank of
America, N.A. in New York, New York as its “base” or “prime” rate.

 

“Disclosure Documents” is defined in Section 5.3.

 

“Disposition” means the sale, transfer, license, lease or other disposition
(including any sale and leaseback transaction) of any property by any Person,
including any sale, assignment, transfer or other disposal, with or without
recourse, of any notes or accounts receivable or any rights and claims
associated therewith.

 

“EBIT” means, for any period, Consolidated Net Income for such period plus, to
the extent deducted in determining such Consolidated Net Income (without
duplication): (i) Interest Expense for such period, (ii) income tax expense for
such period, and (iii) non-recurring expenses for such period, provided,
however, that the aggregate amount of such non-recurring expenses that may be
added to EBIT in any fiscal year may not exceed the Non-recurring Expense Cap.

 

“EDGAR” means the SEC’s Electronic Data Gathering, Analysis and Retrieval System
or any successor SEC electronic filing system for such purposes.

 

“Environmental Laws” means any and all federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to Hazardous Materials.

 

“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.

 

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Gas Natural Inc.   Note Purchase Agreement

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time in effect.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) that
is treated as a single employer together with the Company under section 414 of
the Code.

 

“Event of Default” is defined in Section 11.

 

“Existing Debt” means:

 

(a) the Sun Life Debt;

 

(b) the senior unsecured notes due June 29, 2017 (outstanding balance as of
10/10/2016—$8,500,000), issued pursuant to a Note Purchase Agreement, dated June
29, 2007, between Energy West, Incorporated and various purchasers
(Allstate/CUNA), as amended from time to time ;

 

(c) the term loan due April 1, 2017 (outstanding balance as of
10/10/2016—$8,000,000) from Bank of America, N.A., as agent, to Energy West,
Incorporated, pursuant to Amended and Restated Credit Agreement dated September
20, 2012, as amended from time to time

 

(d) the line of Credit due April 1, 2017 (outstanding balance as of
10/10/2016—$18,550,000), pursuant to a Credit Facility, as amended from time to
time, from Bank of America, N.A., as agent, to Energy West, Incorporated; and

 

(e) the loan Agreement and Note, in the original principal amount of $4 million,
dated as of April 15, 2016, by and among NIL Funding Corporation and Gas Natural
Inc. (outstanding balance as of 10/10/2016—$4,000,000).

 

“Form 10-K” is defined in Section 7.1(b).

 

“Form 10-Q” is defined in Section 7.1(a).

 

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States of America.

 

“Governmental Authority” means

 

(a)         the government of

 

(i)         the United States of America or any state or other political
subdivision thereof, or

 

 -4- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

(ii)         any other jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts jurisdiction over any
properties of the Company or any Subsidiary, or

 

(b)         any entity exercising executive, legislative, judicial, regulatory
or administrative functions of, or pertaining to, any such government.

 

“Governmental Official” means any governmental official or employee, employee of
any government-owned or government-controlled entity, political party, any
official of a political party, candidate for political office, official of any
public international organization or anyone else acting in an official capacity.

 

“Guaranty” means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:

 

(a)         to purchase such indebtedness or obligation or any property
constituting security therefor;

 

(b)         to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
indebtedness or obligation;

 

(c)         to lease properties or to purchase properties or services primarily
for the purpose of assuring the owner of such indebtedness or obligation of the
ability of any other Person to make payment of the indebtedness or obligation;
or

 

(d)         otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.

 

In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.

 

“Hazardous Materials” means any and all pollutants, toxic or hazardous wastes or
other substances that might pose a hazard to health and safety, the removal of
which may be required or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage or filtration of which is or
shall be restricted, prohibited or penalized by any applicable law including,
but not limited to, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum, petroleum products, lead based paint, radon gas or similar
restricted, prohibited or penalized substances.

 

 -5- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

“holder” means, with respect to any Note, the Person in whose name such Note is
registered in the register maintained by the Company pursuant to Section 13.1,
provided, however, that if such Person is a nominee, then for the purposes of
Sections 7, 12, 17.2 and 18 and any related definitions in this Schedule A,
“holder” shall mean the beneficial owner of such Note whose name and address
appears in such register.

 

“Indebtedness” with respect to any Person means, at any time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

 

(a)         all obligations of such Person for borrowed money and all
obligations of such Persons evidenced by bonds, debentures, notes, loan
agreements or other similar instruments;

 

(b)         all direct or contingent obligations of such Person arising under
letters of credit (including standby and commercial), bankers’ acceptances, bank
guaranties, surety bonds and similar instruments;

 

(c)         net obligations of such Person under any Swap Contract;

 

(d)         all obligations of such Person to pay the deferred purchase price of
property or services (other than trade accounts payable in the ordinary course
of business and, in each case, not past due for more than 90 days after the date
on which such trade account payable was created);

 

(e)         indebtedness (excluding prepaid interest thereon) secured by a Lien
on property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements), whether or
not such indebtedness shall have been assumed by such Person or limited in
recourse;

 

(f)         capital leases and Synthetic Lease Obligations;

 

(g)         all obligations of such Person to purchase, redeem, retire, defease
or otherwise make any payments in respect of any Equity Interest in such Person
or any other Person, valued, in the case of a redeemable preferred interest, at
the greater of its voluntary or involuntary liquidation preference plus accrued
and unpaid dividends; and

 

(h)         all Guaranties of such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partners or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The amounts of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date. The amount of any capital lease or Synthetic Lease
Obligation as of any date shall be deemed to be the amount of Attributable
Indebtedness in respect thereof as of such date.

 

 -6- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

“INHAM Exemption” is defined in Section 6.2(e).

 

“Initial Subsidiary Guarantor” means each Subsidiary that has executed and
delivered an Initial Subsidiary Guaranty.

 

“Initial Subsidiary Guaranty” is defined in Section 2.2(a).

 

“Institutional Investor” means (a) the Purchaser, (b) any holder of a Note
holding (together with one or more of its affiliates) more than 5% of the
aggregate principal amount of the Notes then outstanding, (c) any bank, trust
company, savings and loan association or other financial institution, any
pension plan, any investment company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form, and (d) any Related Fund of any holder of any Note.

 

“Interest Coverage Ratio” means, for any period of four consecutive fiscal
quarters, the ratio of EBIT for such period to Interest Expense for such period.

 

“Interest Expense” means, for any period, all expense of the Company or any of
its Subsidiaries for such period classified as interest expense for such period,
including capitalized interest and interest under “synthetic” leases, in
accordance with GAAP.

 

“Joinder Agreement” is defined in Section 9.7(a).

 

“Lien” means, with respect to any Person, any mortgage, lien, pledge, charge,
security interest or other encumbrance, or any interest or title of any vendor,
lessor, lender or other secured party to or of such Person under any conditional
sale or other title retention agreement or Capital Lease, upon or with respect
to any property or asset of such Person (including in the case of stock,
stockholder agreements, voting trust agreements and all similar arrangements).

 

“Make-Whole Amount” is defined in Section 8.6.

 

“Material” means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Company and its
Subsidiaries taken as a whole.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, affairs, financial condition, assets or properties of the Company
and its Subsidiaries taken as a whole, (b) the ability of the Company to perform
its obligations under this Agreement and the Notes, (c) the ability of any
Subsidiary Guarantor to perform its obligations under its Subsidiary Guaranty,
or (d) the validity or enforceability of this Agreement, the Notes or any
Subsidiary Guaranty.

 

“Material Credit Facility” means, as to the Company and its Subsidiaries,

 

(a)         the Credit Agreement dated as of October 19, 2016 among the Company,
Bank of America, N.A., as Administrative Agent and L/C issuer, and the other
lenders party thereto, including any renewals, extensions, amendments,
supplements, restatements, replacements or refinancing thereof;

 

 -7- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

(b)         any other agreement(s) creating or evidencing indebtedness for
borrowed money entered into on or after the date of Closing by the Company or
any Subsidiary, other than any intercompany note or notes among the Company and
its Subsidiaries. or in respect of which the Company or any Subsidiary is an
obligor or otherwise provides a guarantee or other credit support (“Credit
Facility”), in a principal amount outstanding or available for borrowing equal
to or greater than $5,000,000 (or the equivalent of such amount in the relevant
currency of payment, determined as of the date of the closing of such facility
based on the exchange rate of such other currency); and if no Credit Facility or
Credit Facilities equal or exceed such amounts, then the largest Credit Facility
shall be deemed to be a Material Credit Facility; and

 

(c)         any private placement document pursuant to which the Company or any
Subsidiary has issued senior notes, either now existing or existing in the
future.

 

“Maturity Date” is defined in the first paragraph of each Note.

 

“Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term
is defined in section 4001(a)(3) of ERISA).

 

“NAIC” means the National Association of Insurance Commissioners or any
successor thereto.

 

“Non-recurring Expense Cap” means (i) for the Company’s 2016 fiscal year,
$4,500,000, and (ii) for each other fiscal year, $1,000,000.

 

“Notes” is defined in Section 1.

 

“OFAC” means the Office of Foreign Assets Control of the United States
Department of the Treasury.

 

“OFAC Sanctions Program” means any economic or trade sanction that OFAC is
responsible for administering and enforcing. A list of OFAC Sanctions Programs
may be found at
http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx.

 

“Officer’s Certificate” means a certificate of a Senior Financial Officer or of
any other officer of the Company whose responsibilities extend to the subject
matter of such certificate.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA or any successor thereto.

 

 -8- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

“Person” means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, business entity or
Governmental Authority.

 

“Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA)
subject to Title I of ERISA that is or, within the preceding five years, has
been established or maintained, or to which contributions are or, within the
preceding five years, have been made or required to be made, by the Company or
any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate
may have any liability.

 

“Priority Debt” means (without duplication), as of the date of any determination
thereof, the sum of (i) all unsecured Indebtedness of Subsidiaries (including
all Guaranties of Indebtedness of the Company but excluding (x) unsecured
Indebtedness owing to the Company or any other Subsidiary, (y) unsecured
Indebtedness outstanding at the time such Person became a Subsidiary, provided
that such Indebtedness shall have not been incurred in contemplation of such
person becoming a Subsidiary, and (z)  all unsecured Indebtedness of any
Subsidiary Guarantors), and (ii) all Indebtedness of the Company and its
Subsidiaries secured by Liens other than Indebtedness secured by Liens permitted
by subparagraphs (a) through (i), inclusive, of Section 10.6.

 

“property” or “properties” means, unless otherwise specifically limited, real or
personal property of any kind, tangible or intangible, choate or inchoate.

 

“PTE” is defined in Section 6.2(a).

 

“Purchaser” means the purchaser that has executed and delivered this Agreement
to the Company and the Purchaser’s successors and assigns (so long as any such
assignment complies with Section 13.2), provided, however, that a Purchaser of a
Note that ceases to be the registered holder or a beneficial owner (through a
nominee) of such Note as the result of a transfer thereof pursuant to Section
13.2 shall cease to be included within the meaning of “Purchaser” of such Note
for the purposes of this Agreement upon such transfer.

 

“QPAM Exemption” is defined in Section 6.2(d).

 

“Qualified Acquisition” means any acquisition of either or both the capital
stock or assets of any Person or Persons (or any portion thereof), or the last
to occur of a series of such acquisitions consummated within a period of six
consecutive months, if the aggregate amount of Indebtedness incurred by one or
more of the Company and their Subsidiaries to finance the purchase price of, or
assumed by one or more of them in connection with the acquisition of, such stock
and property is at least $100,000,000.

 

“Qualified Institutional Buyer” means any Person who is a “qualified
institutional buyer” within the meaning of such term as set forth in Rule
144A(a)(1) under the Securities Act.

 

“Ratable Portion” means, with respect to any Note, an amount equal to the
product of (x) the amount equal to the net proceeds being so applied to the
prepayment of Senior Debt in accordance with Section 10.3(2), multiplied by
(y) a fraction the numerator of which is the outstanding principal amount of
such Note and the denominator of which is the aggregate principal amount of
Senior Debt of the Company and its Subsidiaries being prepaid pursuant to
Section 10.3(2).

 

 -9- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

“Related Fund” means, with respect to any holder of any Note, any fund or entity
that (i) invests in Securities or bank loans, and (ii) is advised or managed by
such holder, the same investment advisor as such holder or by an affiliate of
such holder or such investment advisor.

 

“Required Holders” means at any time on or after the Closing, the holders of
more than 50% in principal amount of the Notes at the time outstanding
(exclusive of Notes then owned by the Company or any of its Affiliates).

 

“Responsible Officer” means any Senior Financial Officer and any other officer
of the Company with responsibility for the administration of the relevant
portion of this Agreement.

 

“SEC” means the Securities and Exchange Commission of the United States, or any
successor thereto.

 

“Securities” or “Security” shall have the meaning specified in section 2(a)(1)
of the Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.

 

“Senior Debt” means, as of the date of any determination thereof, the total
amount of all Indebtedness of the Company and its Subsidiaries determined on a
consolidated basis in accordance with GAAP, other than Subordinated Debt.

 

“Senior Financial Officer” means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.

 

“Source” is defined in Section 6.2.

 

“State Sanctions List” means a list that is adopted by any state Governmental
Authority within the United States of America pertaining to Persons that engage
in investment or other commercial activities in Iran or any other country that
is a target of economic sanctions imposed under U.S. Economic Sanctions Laws.

 

“Subsidiary” means, as to any Person, any other Person in which such first
Person or one or more of its Subsidiaries or such first Person and one or more
of its Subsidiaries owns sufficient equity or voting interests to enable it or
them (as a group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of such
second Person, and any partnership or joint venture if more than a 50% interest
in the profits or capital thereof is owned by such first Person or one or more
of its Subsidiaries or such first Person and one or more of its Subsidiaries
(unless such partnership or joint venture can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
“Subsidiary” is a reference to a Subsidiary of the Company.

 

 -10- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

“Subsidiary Guarantor” means each Subsidiary that has executed and delivered a
Subsidiary Guaranty.

 

“Subsidiary Guaranty” means an Initial Subsidiary Guaranty or an Additional
Subsidiary Guaranty.

 

“Substitute Purchaser” is defined in Section 21.

 

“Subordinated Debt” means all unsecured Indebtedness of the Company which shall
contain or have applicable thereto subordination provisions providing for the
subordination thereof to other Indebtedness of the Company.

 

“Sun Life Debt” means that:

 

(a) Fixed rate note due June 1, 2017, pursuant to Note Purchase Agreement dated
May 3, 2011 among the Company and certain of its Ohio Subsidiaries and Sun Life
Assurance Company of Canada, as amended from time to time; and

 

(b) Senior secured guaranteed note due June 1, 2017, pursuant to Note Purchase
Agreement dated May 3, 2011 among the Company and certain of its Ohio
Subsidiaries and Sun Life Assurance Company of Canada, as amended from time to
time.

 

“SVO” means the Securities Valuation Office of the NAIC or any successor to such
Office.

 

“Swap Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a “Master Agreement”), including
any such obligations or liabilities under any Master Agreement.

 

 -11- 

 

 

Gas Natural Inc.   Note Purchase Agreement

 

“Swap Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts.

 

“Synthetic Lease Obligation” means the monetary obligation of a Person under
(a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use possession of property creating obligations that do not
appear on the balance sheet of such Person but which, upon the insolvency or
bankruptcy of such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).

 

“Total Debt” means, without duplication, all Indebtedness of the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.

 

“Total Debt to Capital Ratio” means, as of any date of determination, the ratio
of: (i) Total Debt as of such date to (ii) Capital as of such date.

 

“USA PATRIOT Act” means United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.

 

“U.S. Economic Sanctions Laws” means those laws, executive orders, enabling
legislation or regulations administered and enforced by the United States
pursuant to which economic sanctions have been imposed on any Person, entity,
organization, country or regime, including the Trading with the Enemy Act, the
International Emergency Economic Powers Act, the Iran Sanctions Act, the Sudan
Accountability and Divestment Act and any other OFAC Sanctions Program.

 

“Wholly-Owned Subsidiary” means, at any time, any Subsidiary all of the equity
interests (except directors’ qualifying shares) and voting interests of which
are owned by any one or more of the Company and the Company’s other Wholly-Owned
Subsidiaries at such time.

 

 -12-