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EXHIBIT 10.19
DEVELOPMENT AGREEMENT
INTRODUCTION
THIS DEVELOPMENT AGREEMENT (this "Development Agreement") from
ENERGY
CORPORATION OF AMERICA, a West Virginia corporation, with
offices at 4643 South
Ulster Street, Suite 100, Denver, Colorado 80237-2867
("Assignor"), to
________________________, a trust corporation organized under
the laws of the
State of _________, with offices
___________________________________________,
Attention: ________________, as trustee (the "Trustee"), acting
not in its
individual capacity but solely as trustee of the Appalachian Gas
Royalty Trust
(the "Trust") under that certain Amended and Restated Trust
Agreement dated as
of ______________ (the "Trust Agreement") is delivered to be
effective as of
7:00 a.m., Eastern Time, ___________, 2005 (the "Effective
Time"). All
capitalized terms not otherwise defined herein shall have the
meanings ascribed
to such terms in Article I below.
Assignor and the Trustee contemporaneously herewith, have
entered into
each of the following conveyances (i) Term Royalty Conveyance
(West Virginia)
dated effective as of the Effective Time ("West Virginia
Conveyance"), (ii) Term
Royalty Conveyance (Pennsylvania) dated effective as of the
Effective Time
("Pennsylvania Conveyance") and (iii) Term Royalty Conveyance
(Kentucky) dated
effective as of the Effective Time ("Kentucky Conveyance" and
together with the
West Virginia Conveyance and the Pennsylvania Conveyance
collectively the
"Conveyances").
In connection with the Conveyances Assignor has agreed to
undertake
certain obligations during the term of the Conveyances with
respect to the
Subject Interests and the Development Wells.
ARTICLE I
DEFINITIONS
This Article I defines certain capitalized words, terms, and
phrases used
in this Development Agreement. Certain other capitalized words,
terms, and
phrases used in this Development Agreement are defined elsewhere
in this
Development Agreement.
"Adjusted Development Well Value" With respect to each
Development Well,
the value obtained by multiplying for each Development Well
drilled or caused to
be drilled by Assignor during any Annual Period one (1) times
the Working
Interest (stated as a decimal fraction or 1.00, where Assignor
holds a 100%
Working Interest), that Assignor is required to bear in such
Development Well.
For example, if Assignor holds an eighty-five percent (85%)
Working Interest in
a Development Well, the computation would be:
1 x .85 = .85
therefore, such Development Well would have a .85 Adjusted
Development Well
Value.
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"Additional Lease" is defined in Section 2.07.
"Affiliate" means, for any specified Person, another Person that
controls,
is controlled by, or is under common control with, the specified
Person.
"Control," in the preceding sentence, refers to the possession
by one Person,
directly or indirectly, of the right or power to direct or cause
the direction
of the management and policies of another Person, whether
through the ownership
of voting securities, by contract, or otherwise.
"AMI Area" means that area depicted on the map set forth on
Exhibit B as
the AMI Area.
"Annual Drilling Target" that number of Development Wells where
(i) the
cumulative total of all the Adjusted Development Well Values for
all Development
Wells drilled by or caused to be drilled by Assignor during the
first Annual
Period equals not less than 45, (ii) the cumulative total of all
the Adjusted
Development Well Values for all Development Wells drilled during
the first two
Annual Periods equals not less than 90, (iii) the cumulative
total of all the
Adjusted Development Well Values for all Development Wells
drilled during the
first three Annual periods equals not less than 135 and (iv) the
cumulative
total of all the Adjusted Development Well Values for all
Development Wells
drilled during the first four Annual Periods equals not less
than the Total
Drilling Target.
"Annual Period" means the annual period commencing on April 1
each year
and ending on March 31 of the succeeding year.
"Assignor" is defined in the Introduction to this Development
Agreement
and also includes all permitted successors and assigns of
Assignor.
"Deed of Trust" is defined in Section 2.10.
"Development Agreement" is defined in the introductory paragraph
of this
Agreement.
"Development Well" means any Gas well drilled, within the
meaning of
Section 2.01(b), after the date of this Development Agreement
that is located on
the Subject Development Lands.
"Drilling Obligation Completion Date" means _______________,
2009.
"Gas" means natural gas and all other gaseous hydrocarbons,
excluding
condensate, butane, and other liquid and liquefiable components
that are
actually removed from the Gas stream by separation, processing,
or other means.
Any oil and gas lease or other similar instrument that covers
Gas shall be
considered a "Gas lease" hereunder, even if it also covers other
substances.
"Party," when capitalized, refers to Assignor or Trustee.
"Parties," when
capitalized, refers to Assignor and Trustee.
"Person" means any natural person, corporation, partnership,
trust,
estate, or other entity, organization, or association.
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"Reasonably Prudent Operator Standard" means the standard of
conduct of a
reasonably prudent oil and gas operator in the Appalachian Basin
under the same
or similar circumstances, acting with respect to its own
property and
disregarding the existence of the Royalty Interest as a burden
on such property.
"Royalty Interest" means collectively, the Royalty Interest
created under
each of the Conveyances.
"Subject Development Lands" means the lands subject to or
covered by the
oil and gas leases described in Exhibit A and included in the
AMI Area, subject
to the exceptions, exclusions and reservations set forth on
Exhibit A, as such
exhibit may be modified pursuant to Section 2.07.
"Subject Gas" means Gas in and under, and that may be produced,
saved, and
sold from, the Development Wells during the Term.
"Subject Interests" means Assignor's undivided interests in the
Subject
Development Lands, as lessee under Gas leases, as an owner of
the Subject Gas
(or the right to extract such Gas), or otherwise, by virtue of
which undivided
interests Assignor has the right to conduct exploration,
drilling, development,
and Gas production operations on the Subject Development Lands,
or to cause such
operations to be conducted, or to participate in such operations
by paying and
bearing all or any part of the costs, risks, and liabilities of
such operations,
to drill, test, complete, equip, operate, and produce
Development Wells to
exploit the Gas. "Subject Interests" includes all extensions and
renewals of,
and all new Gas leases covering, the Subject Lands (or any
portion thereof)
obtained by Assignor, or any Affiliate thereof, within six (6)
months after the
expiration or termination of any such Gas lease. "Subject
Interests" do not
include (a) Assignor's rights to substances other than Gas; (b)
Assignor's
rights to Gas under contracts for the purchase, sale,
transportation, storage,
processing, or other handling or disposition of Gas; (c)
Assignor's interests
in, or rights to Gas with respect to, pipelines, gathering
systems, storage
facilities, processing facilities, or other equipment or
facilities, other than
the Development Wells; or (d) subject to Section 1.04(c) of each
of the
Conveyances, any after-acquired, additional, or enlarged
interests in the
Development Wells, Subject Development Lands or Subject Gas,
except those
reflected in Exhibit A or any Additional Lease, extensions and
renewals covered
by the preceding sentence. "Subject Interests" may be owned or
claimed by
Assignor by virtue of grants or reservations in deeds, Gas
leases, or other
instruments, or by virtue of operating agreements, pooling or
unitization
agreements or orders, or other kinds of instruments, agreements,
or documents,
legal or equitable, recorded or unrecorded.
"Term" means that period from the Effective Time through the
date that
each of the Conveyances has terminated or been released in
accordance with its
terms.
"Total Drilling Target" that number of Development Wells where
the
cumulative total of all such Adjusted Development Well Values
for all
Development Wells drilled by or caused to be drilled by Assignor
equals 180.
"Transfer", including its syntactical variants, means any
assignment,
sale, transfer, conveyance, or disposition of any property;
provided, Transfer
as used herein does not include
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the granting of a security interest in Assignor's interest in
any property
including, the Subject Interests or the Subject Development
Lands.
"Trust" is defined in the Introduction to this Agreement.
"Trustee" is defined in the Introduction to this Agreement and
also
includes all successor and substitute trustees under the Trust
Agreement.
"Working Interest" means with respect to any Development Well,
the
interest in and to such Development Well that is burdened with
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