Form of Development Agreement

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.


1


"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.


2


"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 ...