particular, the Purchasers may elect to pay up to $150.0 million of the Purchase Price in the form of shares of the Companys common stock (the Stock Consideration). If the
Purchasers exercise their option to pay a portion of the Purchase Price as Stock Consideration, then the number of shares of common stock to be issued at closing as Stock Consideration would be based on a share price of $38.97. In addition, if the
Purchasers exercise their option to pay a portion of the Purchase Price as Stock Consideration, then the Purchasers would be obligated to make two additional contingent payments to the Seller, in each case, in an amount equal to 10% of the value of
the Stock Consideration, to the extent the calendar year average NYMEX gas price for the calendar year 2021 or 2022, as applicable, equals or exceeds $2.75/MMBtu as calculated pursuant to the Purchase Agreement. If the Purchasers elect to pay Stock
Consideration, the parties will enter into a registration rights and standstill agreement upon the closing of the Acquisition in the form attached as an exhibit to the Purchase Agreement. In addition, the Purchasers have made a $27.1 million
deposit that will be credited against the Purchase Price at the closing of the Acquisition. The Acquisition is expected to close in the fourth quarter of the Companys 2020 fiscal year.
The Company believes that the Acquisition satisfies its strategic priorities as it: (i) is a unique acquisition opportunity that builds
on the Companys diversified, integrated business model, with assets that are geographically contiguous and highly synergistic to existing Company operations in Tioga County, Pennsylvania, and (ii) allows the company to acquire proved
developed producing natural gas reserves at less than $0.40 per Mcfe.
The upstream assets being acquired pursuant to the Purchase
Agreement include: (i) hydrocarbon and mineral leasehold interests and royalties (excluding overriding royalty interests) and associated lands; (ii) oil, gas, water and disposal wells and hydrocarbons produced therefrom; (iii) surface
interests and field offices used or held for use in connection with the oil and gas interests; (iv) associated equipment and facilities; and (v) licenses, permits, records, vehicles, field offices and certain other assets, properties,
rights and interests associated with the leases, lands and wells (collectively, the Upstream Assets). The midstream assets being acquired pursuant to the Purchase Agreement include: (i) a gas gathering, treating, compression,
transmission and handling system, and all pipelines, flowlines and transmission lines utilized in relation to the Upstream Assets; (ii) related surface interests; and (iii) related equipment, machinery, fixtures and facilities
(collectively, the Midstream Assets, and together with the Upstream Assets, the Acquired Assets). The Acquired Assets include an estimated (i) approximately 710 billion cubic feet of net P90 proved reserves (100%
developed producing) and net production of 215 to 230 million cubic feet per day estimated at closing, (ii) 142 miles of gathering pipelines, compression, and related facilities, (iii) over 400,000 total net acres across Pennsylvania,
approximately 200,000 of which holds significant, highly economic development potential, contiguous to the Companys existing acreage footprint, and (iv) 300,000 dekatherms per day of attractive firm transportation capacity.
Before the closing of the Acquisition, the Purchasers intend to conduct due diligence to assess the aggregate dollar value of any
environmental defects. If the aggregate value of environmental defects, any casualty losses and any properties excluded from the Acquisition as provided in the Purchase Agreement equals or exceeds 20% of the unadjusted purchase price under the
Purchase Agreement, each of the Purchasers and the Seller has the right to decline to close the Acquisition. In addition to the termination right, if an environmental defect is neither waived by the Purchasers nor cured by the Seller, then the
Purchasers may exercise certain remedies under the Purchase Agreement with respect to such environmental defects. The Purchase Agreement contains various representations, warranties, covenants, and indemnification obligations of the Purchasers and
the Seller that are customary in transactions of this type. The Purchase Agreement also contains additional representations as to the Midstream Assets, including with respect to title and operational matters. The closing of the Acquisition is
subject to satisfaction or waiver of customary specified conditions, including, among other things, the accuracy of the representations and warranties of the Purchasers and the Seller (generally subject to customary materiality qualifiers). The
Agreement contains certain customary termination rights for both the Purchasers and the Seller, including the rights of either party to terminate in the event that the Transaction has not been completed by August 31, 2020.