PERPETUAL OVERRIDING ROYALTY INTEREST CONVEYANCE
COMMONWEALTH OF PENNSYLVANIA
THIS PERPETUAL OVERRIDING ROYALTY INTEREST CONVEYANCE (this Conveyance) from ENERGY
CORPORATION OF AMERICA, a West Virginia corporation, with offices at 4643 South Ulster Street,
Suite 100, Denver, Colorado 80237-2867 Assignor), to The Bank of New York Mellon Trust
Company, N.A., a national banking association organized under the laws of the State of New York,
with offices at 919 Congress Avenue, Suite 500, Austin, Texas 78701, as trustee (the
Trustee), acting not in its individual capacity but solely as trustee of the ECA
Marcellus Trust I (the Trust) under that certain Amended and Restated Trust Agreement
dated as of July 7, 2010 (the Trust Agreement), is delivered to be effective as of 7:00
a.m., Eastern Time, April 1, 2010 (the Effective Time). All capitalized terms not
otherwise defined herein shall have the meanings ascribed to such terms in Article II below.
Section 1.01 The Grant. For and in consideration of good and valuable consideration paid by
Trustee on behalf of the Trust to Assignor, the receipt and sufficiency of which are hereby
acknowledged, Assignor has, subject to the terms of this Conveyance, BARGAINED, SOLD, GRANTED,
CONVEYED, TRANSFERRED, ASSIGNED, SET OVER, and DELIVERED, and by these presents does hereby
BARGAIN, SELL, GRANT, CONVEY, TRANSFER, ASSIGN, SET OVER, and DELIVER unto Trustee on behalf of the
Trust, as a perpetual net overriding royalty interest (the Royalty Interest), a variable
undivided interest in and to the Subject Interests, to the extent that the Subject Interests
pertain to Gas in, under and that may be produced and saved from the wellbores of the Development
Wells, sufficient to cause the Trust to receive the Trust Gas or proceeds thereof calculated and
paid in money in accordance with the further terms and conditions of this Conveyance.
Section 1.02 Habendum Clause. TO HAVE AND TO HOLD the Royalty Interest, together with all and
singular the rights and appurtenances thereto in anywise belonging, unto Trustee on behalf of the
Trust, its successors and assigns, subject to terms and provisions of this Conveyance.
Section 1.03 Warranty.
(a) The Warranty. Assignor warrants to the Trust, its successors and assigns, that the
Subject Interests are free of all Encumbrances created by, through, or under Assignor, but not
otherwise, except for the Permitted Encumbrances.
(i) Subject to Section 1.03(b)(ii), in the event of a breach of the foregoing warranty
for any Subject Interest, the Trusts sole remedy shall be to receive payment on each
applicable Quarterly Payment Date, out of Assignors Net Share of Gas from other Development
Wells in excess of that subject to the Royalty Interest and the royalty interest created
pursuant to the Term PUD Conveyance (Assignor Retained Gas), without interest
(except such interest payable under this Conveyance on payments made after the applicable
due date as described in Section 5.02 below), of an amount equal to the difference between
(x) Trust Gas (or the proceeds from the sale thereof) that the Trust would have received
with respect to such Development Well in the applicable Computation Period if such warranty
had not been breached and (y) Trust Gas (or the proceeds from the sale thereof) that the
Trust actually received during that Computation Period with respect to that Development
Well, to the extent such difference is attributable to the breach of the warranty, but not
to the extent that such difference is attributable to any other cause, and any such amounts
of Assignor Retained Gas shall be treated as Trust Gas.
(ii) In the event a breach of the foregoing warranty for any Subject Interest is due to
production burdens in excess of twelve and one half percent (12.5%) with respect to a
Development Well, Assignor shall pay to Trustee on each applicable Quarterly Payment Date an
amount equal to that which Trustee would have received with respect to such Development Well
in the applicable Computation Period if such warranty had not been breached out of Assignor
Retained Gas, and such excess production burdens will be fully allocated against Assignors
retained interest in such Development Well.
(c) DISCLAIMER. EXCEPT FOR THE WARRANTIES OF TITLE GIVEN IN SECTION 1.03(a), ASSIGNOR MAKES
THIS CONVEYANCE AND ASSIGNS THE ROYALTY INTEREST WITHOUT RECOURSE, COVENANT OR WARRANTY OF TITLE OF
ANY KIND, EXPRESS, IMPLIED OR STATUTORY. ANY COVENANTS OR WARRANTIES IMPLIED BY STATUTE OR LAW BY
THE USE HEREIN OF THE WORDS GRANT, CONVEY OR OTHER SIMILAR WORDS ARE HEREBY EXPRESSLY
DISCLAIMED, WAIVED AND NEGATED. WITHOUT LIMITING THE GENERALITY OF THE TWO PRECEDING SENTENCES,
TRUSTEE ON BEHALF OF THE TRUST ACKNOWLEDGES THAT ASSIGNOR HAS NOT MADE, AND ASSIGNOR HEREBY
EXPRESSLY DISCLAIMS AND NEGATES, AND THE TRUSTEE ON BEHALF OF THE TRUST HEREBY EXPRESSLY WAIVES,
ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING
TO (i) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES OR THE QUALITY, QUANTITY OR
VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE SUBJECT INTERESTS, (ii) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (iii) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, (iv) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES
OF MATERIALS, AND (v) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER ANY APPLICABLE LEGAL
REQUIREMENT; IT BEING THE EXPRESS INTENTION OF BOTH THE TRUST AND ASSIGNOR THAT THE ROYALTY
INTEREST IS HEREBY ASSIGNED TO THE
TRUSTEE ON BEHALF OF THE TRUST ON AN AS IS AND WHERE IS BASIS WITH ALL FAULTS, AND THAT
THE TRUSTEE ON BEHALF OF THE TRUST HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS THE TRUST
DEEMS APPROPRIATE. ASSIGNOR AND THE TRUSTEE ON BEHALF OF THE TRUST AGREE THAT, TO THE EXTENT
REQUIRED BY APPLICABLE LEGAL REQUIREMENTS TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES
CONTAINED IN THIS SECTION ARE CONSPICUOUS DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LEGAL
(d) Substitution of Warranty. This instrument is made with full substitution and subrogation
of the Trust in and to all covenants of warranty by Third Persons (other than Affiliates of
Assignor) heretofore given or made with respect to the Development Wells, the Subject Interests or
any part thereof or interest therein.
Section 1.04 Release of Excess Acreage. After the Drilling Obligation Completion Date, Trustee on
behalf of the Trust shall, on request, execute, acknowledge, and deliver to Assignor a recordable
instrument (reasonably acceptable to Assignor) that conveys the Royalty Interest to Assignor and
releases such Royalty Interest and this Conveyance with respect to all Subject Lands except such
portion of any Subject Lands that covers and pertains to all Subject Gas in, under and that may be
produced from any wellbore of any Development Well.
This Article II defines certain capitalized words, terms, and phrases used in this Conveyance.
Certain other capitalized words, terms, and phrases used in this Conveyance are defined elsewhere
in this Conveyance.
Additional Lease is defined in Section 12.01.
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
Assignee Conveyances means for purposes of Section 11.02(a), this Conveyance, the
Term PUD Conveyance, the Term PDP Conveyance, the Perpetual PDP Conveyance, and the Investor
Conveyance, considered collectively.
Assignor is defined in the Introduction to this Conveyance and also includes all
permitted successors and assigns of Assignor.
Assignor Retained Gas is defined in Section 1.03(b)(i).
Assignors Net Share of Gas means the share of Subject Gas from each Development
Well that is attributable to Assignors Net Revenue Interest in that Development Well.
Business Day means any day that is not a Saturday, Sunday, a holiday determined by
the New York Stock Exchange, Inc. as affecting ex dates or any other day on which national
banking institutions in New York, New York are closed as authorized or required by law.
Chargeable Costs is defined in Section 3.02(a).
Computation Period means each calendar quarter commencing at the Effective Time,
with each calendar quarter being deemed to have begun at 7:00 a.m. Eastern Time on the first day of
such calendar quarter and to have ended at 7:00 a.m. Eastern Time on the first day of the next
calendar quarter, except for the first Computation Period, which shall be deemed to have begun at
the Effective Time and to have ended at 7:00 a.m. Eastern Time on July 1, 2010.
Conveyance is defined in the Introduction to this Conveyance.
Development Agreement means that certain Development Agreement between Assignor and
the Trustee dated as of even date herewith.
Development Well has the meaning given such term in the Development Agreement.
Drilling Obligation means Assignors obligation set forth in Section 2.01(a) of the
Drilling Obligation Completion Date has the meaning given to such term in the
Effective Time is defined in the Introduction to this Conveyance.
Encumbrance means any mortgage, lien, security interest, pledge, charge,
encumbrance, limitation, preferential right to purchase, consent to assignment, irregularity,
burden, or defect.
Excess Costs means, in any Computation Period, the excess of Chargeable Costs for
that Computation Period over the amount determined by multiplying Assignors Net Share of Gas
produced during the Computation Period by the Sales Price for that Computation Period. Excess
Costs shall bear interest at the Prime Interest Rate from the end of the Computation Period in
which such costs were incurred to the date that Assignor recovers such amounts from Trust Proceeds.
Exchange Acreage has the meaning set forth in Section 12.02.
Excluded Assets means those oil and gas wells and all oil and gas formations, except
for the Target Formation, in the lands subject to or covered by the oil and gas leases described on
Fair Value means, with respect to any portion of the Royalty Interest to be released
pursuant to Section 11.02 or 11.03 in connection with a sale or release of any Development Well or
Subject Interest, an amount of net proceeds which could reasonably be expected to be obtained from
the sale of such portion of the Royalty Interest to a party which is not an Affiliate of either the
Assignor or the Trust on an arms-length negotiated basis, taking into account relevant market
conditions and factors existing at the time of any such proposed sale or release, such net proceeds
to be determined by deducting the Trusts proportionate share of sales costs, commissions and
brokerage fees, if any (based on the ratio of (i) the fair market value of the portion of the
Royalty Interest being released to (ii) the fair market value of the Development Wells and Subject
Interests being transferred (including the value of the Royalty Interest being released).
Farmout Agreements means any farmout agreement, participation agreement, exploration
agreement, development agreement or any similar agreement.
Force Majeure is defined in Section 13.02.
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, gas or mineral lease or other similar
instrument that covers Gas shall be considered a Gas lease hereunder, even if it also covers
Governmental Authority means the United States of America, any state, commonwealth,
territory, or possession thereof, and any political subdivision of any of the foregoing, including
courts, departments, commissions, boards, bureaus, agencies, and other instrumentalities.
Greene County Gathering System means Assignors Greene County, Pennsylvania
Investor Conveyance means that certain Private Investor Overriding Royalty Interest
Conveyance by and between the Private Investors and the Trust dated effective as of the Effective
Legal Requirement means any law, statute, ordinance, decree, requirement, order,
judgment, rule, or regulation of, including the terms of any license or permit issued by, any
MBtu means one thousand British thermal units, and MMBtu means one million
British thermal units.
Mcf means one thousand cubic feet of Gas, and MMcf means one million cubic
feet of Gas, measured and expressed in each case at the same temperature, pressure, and other
conditions of measurement (a) provided in any contract for the purchase of Gas from the Subject
Interest or, (b) if no such contract exists, provided by applicable state law for purposes of
reporting production to Governmental Authorities.
Mortgages means, collectively, (i) the Drilling Support Lien (as such term is
defined in the Development Agreement) and (ii) that certain Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement, granted by Assignor in favor of the Trust dated
as of even date herewith, which agreement grants the Trust a lien and security interest on the
Royalty Interest (as such term is defined in each of the Conveyances).
Net Revenue Interest means the interest, stated as a decimal fraction, in Subject
Gas production from a Development Well that Assignor is entitled to take with respect to Assignors
Subject Interest in that Development Well and the associated Subject Lands, subject only to the
Permitted Production Burdens (treated in each case as a reduction in interest rather than as a
Non-Affiliate means, for any specified Person, any other Person that is not an
Affiliate of the specified Person.
Notice is defined in Section 14.01.
Party, when capitalized, refers to Assignor or Trustee. Parties, when
capitalized, refers to Assignor and Trustee.
Permitted Encumbrances means:
(a) the Permitted Production Burdens;
(b) contractual obligations arising under operating agreements, Farmout Agreements,
production sales contracts, leases, assignments, and other similar agreements that may
affect the properties or their titles;
(c) pooling and unitization agreements, declarations, orders, or Legal Requirements to
secure payment of amounts not yet delinquent;
(d) liens that arise in the normal course of operations, such as liens for unpaid
taxes, statutory liens securing unpaid suppliers and contractors, and contractual liens
under operating agreements, in any case, that are not yet delinquent or, if delinquent, are
being contested in good faith in the normal course of business;
(e) conventional rights of reassignment that obligate Assignor to reassign all or part
of any Subject Interest to a Third Person if Assignor intends to release or abandon such
interest before the expiration of the primary term or other termination of such interest;
(f) easements, rights-of-way, servitudes, permits, surface leases, surface use
restrictions, and other surface uses and impediments on, over, or in respect of the Subject
Interests that are not such as to interfere materially with the operation, value, or use of
the Subject Interests;
(g) rights reserved to or vested in any Governmental Authority to control or regulate
any Subject Interests in any manner, and all applicable Legal Requirements;
(h) the terms of the instruments creating the Subject Interests and Subject Lands;
(i) any Prior Reversionary Interests that affect the Subject Interests; and
(j) the Mortgages,
provided that such aforementioned encumbrances are of the type and nature customary in the oil and
gas industry, as conducted in the Appalachian Basin, and do not, alone or in the aggregate,
materially and adversely affect the operation, value, or use of any Subject Interest, and all to
the extent, and for so long as, such Permitted Encumbrances are otherwise valid and enforceable
against the Subject Interests, without recognizing, expressly or by implication, any rights or
interests in any Third Person or Governmental Authority that such Third Person or Governmental
Authority does not otherwise lawfully possess.
Permitted Production Burdens means (a) all Production Burdens that affected the
Subject Interests when they were acquired by Assignor and (b) all Production Burdens that were
created by Assignor; in each case, provided that the total Permitted Production Burdens for any
Development Well shall not exceed twelve and one half percent (12.5%) (proportionately reduced to
Assignors Working Interest in such Development Well).
Perpetual PDP Conveyance means that certain Perpetual Overriding Royalty Interest
Conveyance (PDP) by and between Assignor and the Trust dated effective as of the Effective Time.
Person means any natural person, corporation, partnership, trust, estate, or other
entity, organization, or association.
Private Investors means the individuals and entities listed on Exhibit D attached
Post Production Cost Charge is defined in Section 3.02(c).
Prime Interest Rate is defined in Section 5.02(b).
Prior Reversionary Interest means any contract, agreement, Farmout Agreement, lease,
deed, conveyance or operating agreement that exists as of the Effective Time, that by the terms
thereof requires a Person to convey a part of the Subject Interest to another Person or to
permanently cease production of any Development Well including, any operating agreements, oil and
gas leases, coal leases, and other similar agreements or instruments affecting the Subject
Production Burdens means, with respect to any Subject Lands, Subject Interests, or
Subject Gas, all royalty interests, overriding royalty interests, production payments, net profits
interests, Prior Reversionary Interests and other similar interests that constitute a burden on,
are measured by, or are payable out of the production of Gas or the proceeds realized from the sale
or other disposition thereof.
Quarterly Payment Amount is defined in Section 5.01(a).
Quarterly Payment Date is defined in Section 5.01(c).
Reasonably Prudent Operator Standard means the standard of conduct of a reasonably
prudent oil and gas operator in the AMI Area 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
Reserved Amounts means those amounts set aside from Trust Proceeds by Assignor in
accordance with the provisions of Section 5.04 below.
Royalty Interest is defined in Section 1.01.
Sales Price means, for any Computation Period, the sale price received by Assignor
per Mcf or per MMBtu for Trust Gas determined in accordance with the following provisions:
(a) sale refers to any sale, exchange, or other disposition of Trust Gas for value,
the value of such Gas that is exchanged or otherwise disposed of for valuable consideration
being the sales price that Assignor receives for any such Gas sold pursuant to Section 4.01
for any such Gas.
(b) amounts of money not paid to Assignor when due by any purchaser of Trust Gas (for
example, Taxes or other amounts withheld or deducted by any such purchaser) shall not be
included within the Sales Price until actually received by, or credited to the account of,
(c) advance payments and prepayments for future deliveries of Trust Gas shall be
included within the Sales Price, without interest, when that volume of Gas subject to the
advance payments or prepayments is actually produced;
(d) loan proceeds received by Assignor shall not be treated as a component of the
applicable Sales Price; and
(e) if a controversy or possible controversy exists, whether by reason of any statute,
order, decree, rule, regulation, contract, or otherwise, between Assignor and any purchaser
of Trust Gas or any other Person, about the correct Sales Price of any Trust Gas, about
deductions from the Sales Price, about Assignors right to receive the proceeds of any sale
of Trust Gas, or about any other matter, then monies withheld by the purchaser or deposited
by it with an escrow agent or if Assignor receives any monies and promptly deposits such
monies with a Third Person escrow agent as a result of such controversy, such monies shall
not be included within the Sales Price until received by or returned to Assignor, as
Subject Gas means Gas in and under, and that may be produced, saved, and sold from a
Development Well, insofar and only insofar as such Gas is produced from the Target Formation,
subject to the following:
(a) Subject Gas excludes Gas that is:
(i) lost in the production, gathering, or marketing of Gas;
(ii) used (A) in conformity with ordinary and prudent operations on the Subject
Lands, including drilling and production operations with respect to such Development
Well or (B) in connection with plant operations (whether on or off the Subject
Lands) for processing or compressing the Subject Gas;
(iii) taken by a Third Person to recover costs, or some multiple of costs, paid
or incurred by that Third Person under any operating agreement, unit agreement, or
other agreement in connection with nonconsent operations conducted (or participated
in) by that Third Person;
(iv) retained by a Third Person for gathering, transportation, processing or
marketing services related to the Subject Gas in lieu of cash payment for such
services, to the extent such agreement is permitted under this Conveyance; and
(v) in excess of the percentage attributable to Assignors Net Share of Gas
taken by Assignor to recover costs, or some multiple of costs, paid or incurred by
Assignor under any operating agreement, unit agreement, or other agreement in
connection with nonconsent operations conducted (or participated in) by Assignor.
(b) Subject Gas includes Gas, not otherwise excluded above, that is sold or exchanged
for other Gas, or otherwise disposed of for valuable consideration.
Subject Interests means Assignors undivided interests in the Subject Lands, whether
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 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 of, and all renewal 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) Assignors rights to
substances other than Gas; (b) Assignors rights to Gas under contracts for the purchase, sale,
transportation, storage, processing, or other handling or disposition of Gas; (c) Assignors
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)
any additional, or enlarged interests in the Development Wells, Subject Lands or Subject Gas,
except those reflected in Exhibit A, subject to Section 12.01, 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. The Subject Interests are
subject to the Permitted Encumbrances.
Subject Lands means the lands subject to or covered by the oil and gas leases
described in Exhibit A, insofar and only insofar as they cover the Target Formation, less and
except the Excluded Assets, and subject to the exceptions, exclusions and reservations set forth on
such Exhibit A, as such Exhibit may be modified pursuant to Section 12.01.
Target Formation means what is generally referred to as the Marcellus Shale
formation and for purposes of this Conveyance is defined as that formation located from the bottom
of the Tully Formation (as seen by the ECA Kemsod #1 Well, API number 37-059-25209), at a depth of
7,881 feet, to the top of the Huntersville Chert Formation (as seen by the ECA Kemsod #1 Well, API
number 37-059-25209), at a depth of 8,204 feet.
Term PDP Conveyance means that certain Term Overriding Royalty Interest Conveyance
(PDP) by and between Assignor and Eastern Marketing Corporation dated effective as of the Effective
Term PUD Conveyance means that certain Term Overriding Royalty Interest Conveyance
(PUD) by and between Assignor and Eastern Marketing Corporation dated effective as of the Effective
Taxes is defined in Section 3.02(b).
Third Person means a Person other than Assignor or Trustee.
Transfer including its syntactical variants, means any assignment, sale, transfer,
conveyance, or disposition of any property; provided, Transfer as used herein does not include the
granting of a security interest in Assignors interest in any property including the Subject
Interests or Subject Lands.
Trust is defined in the Introduction to this Conveyance.
Trust Agreement is defined in the Introduction to this Conveyance.
Trust Gas is defined in Section 3.01.
Trust Proceeds means, for any Computation Period, proceeds received by Assignor for
the account of the Trust, as the Trusts marketing and payment agent and representative, from the
sale of Trust Gas under this Conveyance less Chargeable Costs calculated in accordance with Section
Trustee is defined in the Introduction to this Conveyance and also includes all
successor and substitute trustees under the Trust Agreement.
Working Interest means with respect to any Development Well, the interest, stated as
a decimal fraction, in and to such Development Well that is burdened with the obligation to bear
and pay costs and expenses of maintenance, development and operations on or in connection with such
CALCULATION OF TRUST GAS
Section 3.01 Definition. Trust Gas is that volume of Gas which the Trust is entitled to
receive in any Computation Period under this Conveyance, calculated in accordance with the
With respect to any Development Well:
Twenty-Five Percent (25%) X (Assignors Net Share of Gas produced during that
For purposes of calculating Trust Gas hereunder, if, during any Computation Period, Assignor is
unable to determine the precise volume of Gas produced, sold and attributable to Assignors Net
Share of Gas, then Assignor shall, in good faith and in accordance with the Reasonably Prudent
Operator Standard, estimate the volume of such Gas produced, sold and attributable to Assignors
Net Share of Gas for such Computation Period. Assignor shall adjust Assignors Net Share of Gas
upward or downward, as the case may be, in the next or subsequent Computation Periods to reflect
the difference between the estimated volume and the actual amount of Gas produced, sold and
attributable to Assignors Net Share of Gas in the Computation Period for which such estimate was
Section 3.02 Chargeable Costs.
(a) Definition. Subject to Section 5.04 hereof, for each Computation Period, Chargeable
Costs means the sum of (i) Taxes, (ii) the Post Production Cost Charge and (iii) Excess Costs
from prior Computation Periods that (in each case) are actually paid or are deemed to have been
paid by Assignor during that Computation Period or paid or deemed to have been paid by Assignor
during a prior Computation Period and not included in any prior Computation Periods Chargeable
Costs. All costs associated with or paid or incurred in connection with the initial drilling,
testing, completing, and equipping for production of the Development Wells shall be borne solely by
Assignor and shall not be included as Chargeable Costs.
(b) Taxes. Taxes means general property, ad valorem, production, severance, sales,
gathering, windfall profit, excise, and other taxes, except income taxes, assessed or levied on or
in connection with the Subject Interests, the Royalty Interest, this Conveyance, production of
Subject Gas, Assignors Net Share of Gas, the Trust Gas (or the proceeds from the sale thereof), or
facilities or equipment on the Subject Lands that are used for the production, dehydration,
treatment, processing, gathering, or transportation of Subject Gas, or against Assignor as owner of
the Subject Interests or paid by Assignor on behalf of behalf of the Trust as owner of this Royalty
(c) Post Production Cost Charge. Post Production Cost Charge means those costs
incurred by Assignor (including, internal costs and Third Person costs) to gather, transport,
compress, process, treat, dehydrate and market the Subject Gas, including any costs as may be
required to make merchantable and to deliver such Gas to market; provided, any internal costs of
Assignor and its Affiliates that are part of the Post Production Cost Charge shall not materially
exceed the costs prevailing in the area where the Subject Gas is being produced for
similar services; and provided, further, with respect to marketing costs, only Non-Affiliate
marketing fees and costs shall be included, and marketing costs of Assignor and its Affiliates with
respect to any Subject Gas will be specifically excluded from the Post Production Cost Charge; and
provided, further, until the Drilling Obligation Completion Date, any such internal costs of
Assignor and its Affiliates (excluding costs for any fuel that is used in the compression process,
including equivalent electricity charges in instances where electric compressors are used)
associated with the Greene County Gathering System shall be limited to $0.52 per MMBtu of Trust Gas
gathered. Any costs, fees or expenses that are properly charged or allocated to the Trust Gas
pursuant to another provision of this Conveyance (including, as provided for in the definition of
Subject Gas) shall not be included as part of the Post Production Cost Charge.
(d) Operating and Drilling Costs. All costs associated with or paid or incurred in connection
with the drilling, testing, completing, developing and operating the Development Wells or
associated with the Subject Interests other than Taxes and Post Production Cost Charges shall be
borne solely by Assignor and shall not be included as Chargeable Costs.
Section 3.03 Trust Proceeds. Trust Proceeds means the volume of Trust Gas (on an Mcf
basis or MMBtu basis, as applicable) for the applicable Computation Period multiplied by the
relevant Sales Price less the Chargeable Costs associated with such Trust Gas for the applicable
MARKETING OF TRUST GAS
Section 4.01 Rights and Duties Regarding Sale of Trust Gas. Assignor shall market or shall cause
to be marketed Assignors Net Share of Gas (including the Trust Gas) in good faith and in
accordance with the Reasonably Prudent Operator Standard and Section 4.02(d). Assignor shall use
its reasonable efforts in connection with any sale of Assignors Net Share of Gas (including the
Trust Gas) to obtain, as soon as reasonably practicable, full payment for such Gas; provided,
however, that it shall not be considered a breach of Assignors marketing duty or standard of
conduct for Assignor to market such Gas to an Affiliate of Assignor, so long as Assignor does not
market such Gas at a volume-weighted average price lower than the volume-weighted average price
upon which Assignor pays royalties to the owners of the other royalty interests in the Subject Gas,
save and excepting Chargeable Costs provided for in Article III hereof.
Section 4.02 Trusts Agent and Representative.
(a) Appointment. Trustee on behalf of the Trust appoints Assignor as the Trusts agent and
representative to market and deliver or cause to be marketed and delivered all Trust Gas and to
collect and receive all payments therefrom under any gas purchase agreement or contract without
deduction (except to the extent Chargeable Costs are deducted for any Computation Period). The
appointment of Assignor as the Trusts agent and representative for such purpose is a material item
of consideration to the Parties in connection with the execution and delivery of this Conveyance.
Trustee on behalf of the Trust may not remove Assignor from
office as the Trusts agent and representative, except for cause upon a material breach by
Assignor of its duties to the Trust under this Conveyance.
(b) Duties and Powers. As the Trusts agent and representative, Assignor shall receive all
payments for the sale of the Trust Gas and account to Trustee on behalf of the Trust, receive and
make all communications with the purchaser of such Gas, and otherwise act and speak for the Trust
in connection with the sale of the Trust Gas. Third Persons may rely conclusively on the authority
of Assignor to market the Trust Gas, and with respect to Third Persons, the Trust shall be
conclusively bound by the acts of Assignor in connection with the sale of Trust Gas. It shall not
be necessary for Trustee on behalf of the Trust to join Assignor in the execution of any division
order, transfer order, or other instrument, agreement, or document relating to the sale of the
Trust Gas. Third Persons may pay all Trust Proceeds for the sale of such Gas directly to Assignor,
without the necessity of any joinder by or consent of Trustee on behalf of the Trust or any inquiry
into the use or disposition of such proceeds by Assignor.
(c) Prohibited Acts. Assignor may not act for or bind the Trust on any matter, except the
marketing and delivery of the Trust Gas under this Article IV.
(d) Standard of Conduct. In exercising its powers and performing its duties as the Trusts
agent and representative, Assignor shall act in good faith and in accordance with the Reasonably
Prudent Operator Standard. It shall not be a violation of such standard of conduct for Assignor
(i) to sell Assignors Net Share of Gas or the Trust Gas to an Affiliate pursuant to any gas
purchase agreement or contract, or (ii) to delegate some or all of Assignors duties as the Trusts
agent and representative to its Affiliates (so long as such Affiliates perform in good faith and in
accordance with the Reasonably Prudent Operator Standard), with Assignor remaining liable to the
Trust for the performance of such Affiliates.
(e) Termination of Authority. Assignor may not resign as the Trusts agent and representative
without the prior written consent of the Trustee on behalf of the Trust, except that Assignor may
resign as the Trusts agent and representative without such consent with respect to any Subject
Interests assigned, sold, transferred, or conveyed by Assignor in accordance with the terms of this
Conveyance. If such sale is made subject to the Royalty Interest, Assignor must cause the
purchaser to assume the duties of the Trusts agent and representative with respect to the Subject
Interests acquired by that purchaser and to be bound by the provisions of this Article IV.
Section 4.03 Delivery of Subject Gas. Assignor (whether or not it is serving as the Trusts agent
and representative) shall deliver or cause to be delivered Assignors Net Share of Gas (including
Trust Gas) to the purchasers thereof into the pipelines to which the Development Wells producing
such Gas are connected.
Section 4.04 Processing. Assignor may process Assignors Net Share of Gas (including Trust Gas) to
remove liquid and liquefiable hydrocarbons and may commit any of the Subject Interests (including
the Royalty Interest attributable thereto) to an agreement for processing minerals (pursuant to
which, for example, the plant owner or operator receives a portion of the Subject Gas or plant
products therefrom or proceeds of the sale thereof as a fee for processing), so long as Assignor
enters into such processing arrangements in good faith and in
accordance with the Reasonably Prudent Operator Standard. The Trust shall be bound by such
arrangements, shall permit Assignors Net Share of Gas (including the Trust Gas) to be processed by
Assignor or its contractor, and shall have no right to any liquid or liquefiable hydrocarbons
obtained by such processor or to the proceeds from the sale thereof. Trustee shall not, however,
be personally liable for any costs or risks associated with such processing operations, but the
Trust shall indirectly suffer the Btu reduction and volume reductions associated with processing
through corresponding reductions in the Btu content and volumes of the Trust Gas.
Section 5.01 Obligation to Pay.
(a) Quarterly Payment Amount. On each Quarterly Payment Date, Assignor shall prepare, in good
faith, an estimate of the cash to be paid to the Trust from (A) all of the proceeds (including any
interest earned thereon and payable to the Trust pursuant to Section 5.01(b) or Section 5.01(e)) to
be paid to the Trust from the sale of Trust Gas produced during such Computation Period; plus (B)
all of the proceeds (including any interest earned thereon and payable to the Trust pursuant to
Section 5.01(b) or Section 5.01(e)) to be paid to the Trust from the sale of Trust Gas, if any,
produced during any prior Computation Periods, to the extent not previously taken into account for
purposes of determining a Quarterly Payment Amount for any prior Computation Periods, as such sum
may be (x) increased or decreased as a result of any adjustments to the estimates that were
previously made pursuant to this Section 5.01(a) for any prior Computation Periods that are
necessary to accurately report the proceeds from the sale of Trust Gas for such prior Computation
Periods(y) increased by the amount of any damages payable to the Trustee under Section 1.03(b)
during the most recently completed Computation Period prior to such Quarterly Payment Date and (z)
decreased by any Reserved Amounts as provided in Section 5.04 below (Quarterly Payment
(b) The Obligation. After each Computation Period and on or before the Quarterly Payment Date
for that Computation Period, Assignor shall tender to Trustee the Quarterly Payment Amount with
respect to the applicable Computation Period. With respect to the final Computation Period,
Assignor shall tender to the Trustee all unexpended Reserved Amounts (together with any interest
(c) Quarterly Payment Date. Quarterly Payment Date for each Computation Period
means the thirtieth (30th) day after the end of such Computation Period. If such day is
not a Business Day, the Quarterly Payment Date shall be the next Business Day.
(d) No Segregated Account. All amounts received by Assignor from the sale of Assignors Net
Share of Gas and the Trust Gas, as applicable, for any Computation Period shall be held by Assignor
in one of its general bank accounts and Assignor will not be required to maintain a segregated
account for such funds.
(e) Disputed Proceeds. If Assignor receives any amounts of money from the sale of Trust Gas
that is subject to controversy or, in the reasonable opinion of Assignor, possible
controversy, Assignor shall promptly deposit the money with a Third Person escrow agent in a
segregated interest-bearing account. Such amount shall not be treated as a portion of Trust
Proceeds so long as it remains with such escrow agent, but shall be treated as a portion of the
Trust Proceeds, along with the accrued interest, when received from such escrow agent and paid over
Section 5.02 Interest on Past Due Payments.
(a) Obligation to Pay. Any Trust Proceeds or other amounts of money not paid by Assignor to
Trustee when due shall bear, and Assignor will pay, interest at the Prime Interest Rate on the
overdue amount commencing on the sixth (6th) day after such due date until such amount
(b) Definition. Prime Interest Rate means the lesser of (i) the rate of interest
per annum publicly announced from time to time by The Bank of New York Mellon Trust Company, N.A.
as its prime rate in effect at its principal office in New York City (each change in the Prime
Rate to be effective on the date such change is publicly announced), with the understanding that
such banks prime rate may be one of several base rates, may serve as a basis upon which
effective rates are from time to time calculated for loans making reference thereto, and may not be
the lowest of such banks base rates or (ii) the maximum rate of interest permitted under
applicable Legal Requirement.
Section 5.03 Overpayments and Refunds.
(a) Overpayments. If Assignor ever pays Trustee more than the amount of money then due and
payable to the Trust under this Conveyance, Trustee shall not be obligated to return the
overpayment, but Assignor may at any time thereafter deduct from Trust Proceeds and retain for its
own account an amount equal to the overpayment.
(b) Refunds. If Assignor is ever legally obligated to pay any Third Person, including any gas
purchaser or Governmental Authority, any refund, interest, penalty, or other amount of money,
because any payment of Trust Proceeds received by Assignor for the account of Trustee exceeded, or
allegedly exceeded, the amount due or lawful under any applicable contract, Legal Requirement, or
other obligation, Assignor may thereafter deduct from Trust Proceeds and retain for its own account
an amount equal to such payment.
Section 5.04 Reserved Amounts. At any time and from time to time under this Conveyance and in
accordance with the Reasonably Prudent Operator Standard, Assignor may set aside from Trust
Proceeds amounts determined in good faith to economically accrue to a Computation Period with
respect to known or anticipated costs or liabilities (the Reserved Amounts) which may be
incurred in future Computation Periods with respect to Taxes assessed or levied with respect to a
time period in excess of a calendar quarter. As Reserved Amounts are expended by Assignor to cover
applicable Taxes in a Computation Period, Chargeable Costs shall be reduced in such Computation
Period by an amount equal to the Reserved Amounts so expended. In the event that Assignor
overestimates the cost of any Taxes for which it has set aside Reserved Amounts, the excess amount
shall be applied against any other Chargeable Costs (which shall be reduced by an amount equal to
such excess Reserved Amounts so expended), or
paid as Trust Proceeds on the Quarterly Payment Date following the Computation Period in which it
is determined that Assignor has set aside excess Reserved Amounts.
RECORDS AND REPORTS
Section 6.01 Books, Records, and Accounts.
(a) Obligation to Maintain. Assignor shall maintain true and correct books, records, and
accounts of (i) all transactions required or permitted by this Conveyance and (ii) the financial
information necessary to effect such transactions, including the financial information needed to
calculate each installment of Trust Proceeds.
(b) Right of Inspection. Trustee or its representative, at the Trusts expense, may inspect
and copy such books, records, and accounts in the offices of Assignor during normal business hours
and upon reasonable notice.
Section 6.02 Statements.
(a) Quarterly Statements. On each Quarterly Payment Date, Assignor shall deliver to Trustee a
statement showing the computation of Trust Gas and Trust Proceeds for the preceding Computation
(b) Annual Statements. On the first Quarterly Payment Date after the end of each calendar
year, such statement shall also show the computation of Trust Proceeds for the preceding calendar
(c) Contents of Statements. Without limiting the generality of the foregoing provisions in
this Section 6.02, each statement delivered by Assignor to Trustee pursuant to this Section 6.02
shall state, for the relevant period, (i) the total volumes of Subject Gas produced from the
Subject Lands, (ii) the total volumes of the Assignors Net Share of Gas, (iii) the total volumes
of Trust Gas, (iv) the applicable Sales Price, (v) the amount of Trust Proceeds due and payable for
the relevant period and (vi) the amounts of money, if any, due and payable by any purchaser of the
Subject Gas or the Trust Gas, the nonpayment of which resulted in the payment to Trustee of less
than Trust Proceeds for the relevant period. Notwithstanding the preceding, Assignor shall only be
required to provide the preceding information on an aggregate basis.
Section 6.03 The Trustees Exceptions to Quarterly Statements. If Trustee on behalf of the Trust
takes exception to any item or items included in any quarterly statement required by Section 6.02,
Trustee must notify Assignor in writing within sixty (60) days after Trustees receipt of such
quarterly statement. Such Notice must set forth in reasonable detail the specific charges
complained of and to which exception is taken or the specific credits which should have been made
and allowed. Adjustments shall be made for all complaints and exceptions that are justified.
Notwithstanding anything to the contrary herein, all matters reflected in Assignors statements for
the preceding calendar year (or portion thereof) that are not objected to by Trustee in the manner
provided by this Section 6.03 shall be deemed correct as rendered by Assignor to Trustee.
Section 6.04 Other Information.
(a) Disclosure. At Trustees request, subject to applicable restrictions on disclosure and
transfer of information, Assignor shall give Trustee and its designated representatives (on behalf
of the Trust) reasonable access in Assignors office during normal business hours to all
geological, Development Well, and production data in Assignors possession or Assignors
Affiliates possession, relating to operations on the Subject Interests.
(b) Disclaimer of Warranties and Liability. Assignor makes no representations or warranties
about the accuracy or completeness of any such data, reports, or studies and shall have no
liability to Trustee, the Trust or any other Person resulting from such data, studies, or reports.
(c) No Attribution. Trustee shall not attribute to Assignor or to the consulting engineers
any reports or studies or the contents thereof in any securities filings or reports to owners or
holders of interests in the Trust.
(d) Confidentiality. All information furnished to the Trustee and its designated
representatives pursuant to this Section 6.04 is confidential and for the sole benefit of Trustee
on behalf of the Trust and shall not be disclosed by Trustee or its designated representatives to
any other Person, except to the extent that such information (i) is required in any report,
statement or testimony submitted to any Governmental Authority having or claiming to have
jurisdiction over Trustee or the Trust or submitted to bank examiners or similar organizations or
their successors, (ii) is required in response to any summons or subpoena or in connection with any
litigation, (iii) is believed to be required in order to comply with any applicable Legal
Requirement to the Trustee or the Trust, (iv) was publicly available or otherwise known to the
recipient at the time of disclosure or (v) subsequently becomes publicly available other than
through any act or omission of the recipient; provided, however, with respect to the disclosures
with respect to items (i), (ii) and (iii) above, Trustee will notify Assignor prior to any such
disclosure in order to provide Assignor an opportunity to seek to limit any such required
NO LIABILITY OF THE TRUSTEE OR THE TRUST
Neither the Trustee nor the Trust shall be personally liable or responsible under this
Conveyance for any cost, risk, liability, or obligation associated in any way with the ownership or
operation of the Subject Lands, the Subject Interests, the Development Wells, or the Subject Gas.
The foregoing sentence does not restrict the right of Assignor to deduct Chargeable Costs or
Reserved Amounts in calculating the volumes of the Trust Gas or Trust Proceeds.
Section 8.01 Standards of Conduct. Except as otherwise specifically provided in this Conveyance,
Assignor shall (a) operate and maintain the Subject Interests and (b) make elections under each
applicable lease, operating agreement, unit agreement, contract for development, and other similar
instrument or agreement (including elections concerning
abandonment of any Development Well or release of any Subject Interest) in good faith and in
accordance with the Reasonably Prudent Operator Standard.
Section 8.02 Abandonment of Properties. Nothing in this Conveyance shall obligate Assignor to
continue to operate any Development Well or to operate or maintain in force or attempt to maintain
in force any Subject Interest when such Development Well or Subject Interest ceases to produce, or
Assignor determines, in accordance with Section 8.01 above, that such Development Well or Subject
Interest is not capable of producing Gas in paying quantities. The expiration of a Subject
Interest in accordance with the terms and conditions applicable thereto shall not be considered to
be a voluntary surrender or abandonment thereof.
Section 8.03 Insurance. Assignor may, but is not required by this Conveyance to, carry insurance
on any Subject Interest or Development Well, or covering any risk with respect thereto. Assignor
shall never be liable to the Trustee or the Trust on account of any injury or loss to the Subject
Interests or any Development Well, whether insurable or uninsurable, not covered by insurance. If
Assignor elects to carry insurance, the premiums shall not be included in Chargeable Costs, and
Assignor shall retain all proceeds of such insurance.
POOLING AND UNITIZATION
Section 9.01 Pooling of Subject Interests. Certain Subject Interests have been, or may have been,
heretofore pooled and unitized for the production of Gas. Such Subject Interests are and shall be
subject to the terms and provisions of the applicable pooling and unitization agreements, and the
Royalty Interest in each pooled or unitized Subject Interest shall apply to and affect only the Gas
produced from such units that accrues to such Subject Interest under and by virtue of the
applicable pooling and unitization agreements.
Section 9.02 Pooling and Unitization.
(a) Right to Pool. Assignor has the exclusive executive right and power (as between Assignor
and the Trustee) to pool or unitize any Subject Interest and to alter, change, amend, or terminate
any pooling or unitization agreements heretofore or hereafter entered into, as to all or any part
of the Subject Lands, as to any one or more of the formations or horizons, and as to any Gas, upon
such terms and provisions as Assignor shall in its sole discretion deem appropriate.
(b) Effect of Pooling. If and whenever through the exercise of such right and power, or
pursuant to any Legal Requirement now existing or hereafter enacted or promulgated, any Subject
Interest is pooled or unitized in any manner, the Royalty Interest, insofar as it affects such
Subject Interest, shall also be pooled and unitized, and such Royalty Interest in such Subject
Interest shall apply to and affect only the Gas production that accrues to such Subject Interest
under and by virtue of the applicable pooling and unitization agreement or order. It shall not be
necessary for the Trustee to agree to, consent to, ratify, confirm or adopt any exercise of pooling
or unitization of any Subject Interest by Assignor.
Section 10.01 Legal Requirements. All obligations of Assignor under this Conveyance are, and shall
be, subject to all applicable Legal Requirements and the instruments, documents, and agreements
creating the Subject Interests.
Section 10.02 Filings. Assignor shall use its reasonable discretion in making filings for itself
and on behalf of the Trust with any Governmental Authority having jurisdiction with respect to
matters affecting the Subject Interests, the Subject Lands, or the Subject Gas.
ASSIGNMENT AND SALE OF SUBJECT INTERESTS
Section 11.01 Assignment by Assignor Subject to Royalty Interest.
(a) Right to Sell. Subject to Section 11.05, Assignor may from time to time Transfer,
mortgage, or pledge its interest in the Development Wells, the Subject Interests, or any part
thereof or undivided interest therein, subject to the Royalty Interest and this Conveyance.
Assignor shall cause the assignee, purchaser, transferee, grantee, mortgagee, or pledgee of any
such transaction to take the affected Subject Interests subject to the Royalty Interest and this
Conveyance and, from and after the actual date of any such Transfer, to assume Assignors
obligations under this Conveyance with respect to such Subject Interests.
(b) Effect of Sale. From and after the actual date of any such Transfer by Assignor, Assignor
shall be relieved of all obligations, requirements, and responsibilities arising under this
Conveyance with respect to the Subject Interests Transferred, except for those that accrued prior
to such date.
(c) Allocation of Consideration. Trustee is not entitled to receive any share of the sales
proceeds received by Assignor in any transaction permitted by this Section 11.01.
(d) Separate Interest. Effective on the effective date of any Transfer of any Subject
Interest subject to this Section 11.01, Trust Gas and Trust Proceeds shall thereafter be computed
separately with respect to such Subject Interests, and the assignee, buyer, transferee, or grantee
of such Subject Interests shall thereafter serve as the Trusts agent and representative under
Article IV with respect to such interests and shall pay all corresponding Trust Proceeds directly
Section 11.02 Sale and Release of Properties.
(a) Transfer. Subject to Section 11.05, Assignor may from time to time, Transfer the
Development Wells, the Subject Interests, or any part thereof or undivided interest therein, free
of the Royalty Interest and this Conveyance provided that the aggregate Fair Value of all Royalty
Interests released with respect to the Assignee Conveyances during any twelve (12) month period
shall not exceed $5,000,000 or as provided for in Section 12.02.
(b) Payments. In connection with any Transfer pursuant to this Section 11.02, Assignor shall
remit to the Trust an amount equal to the Fair Value of the Royalty Interest being released.
Assignor shall make such payment to the Trust on the Quarterly Payment Date for the Computation
Period in which Assignor receives the payment with respect to any such Transfer of the Subject
(c) Release. In connection with any Transfer provided for in Section 11.02(a), Trustee on
behalf of the Trust shall, on request, execute, acknowledge, and deliver to Assignor a recordable
instrument (reasonably acceptable to Assignor) that releases the Royalty Interest with respect to
the Development Well and the related Subject Interests and Subject Lands being Transferred.
(d) Effect of Sale. From and after the actual date of any such Transfer by Assignor, Assignor
and any assignee, purchaser, transferee or grantee of such Subject Interest shall be relieved of
all obligations, requirements, and responsibilities arising under the Royalty Interest or this
Conveyance with respect to the Development Well or Subject Interests Transferred, except for those
that accrued prior to such date.
Section 11.03 Release of Other Properties.
(a) Prior Reversionary Interests. In the event that any Person notifies Assignor that,
pursuant to a Prior Reversionary Interest, Assignor is required to convey any of the Subject
Interests to such Person or cease production from any Development Well, Assignor may provide such
conveyance with respect to such Subject Interest or permanently cease Production from any such
(b) Payments. In the event that Assignor receives compensation pursuant to any Prior
Reversionary Interest in connection with any conveyance or permanent cessation of production from
any Development Well, Assignor shall remit to the Trust an amount equal to the product of (x) such
amount actually received by Assignor with respect to such reconveyance or permanent cessation of
production and (y) a fraction the numerator of which is (A) the Fair Value of the Royalty Interest
released and the denominator of which is (B) the Fair Value of the Subject Interest that is being
released. Assignor shall make such payment to the Trust on the Quarterly Payment Date for the
Computation Period in which Assignor receives such payment.
(c) Release for Prior Reversionary Interests. In connection with any conveyance or permanent
cessation of production provided for in Section 11.03(a) above, Trustee on behalf of the Trust
shall, on request, execute, acknowledge, and deliver to Assignor a recordable instrument
(reasonably acceptable to Assignor) that releases the Royalty Interest and this Conveyance with
respect to any such Development Well or Subject Interests.
(d) Effect of Prior Reversionary Interests. From and after the actual date of any conveyance
or permanent cessation of production provided for in Section 11.03(a), Assignor and any assignee,
purchaser, transferee or grantee of such Subject Interest shall be relieved of all obligations,
requirements, and responsibilities arising under the Royalty Interest or this Conveyance with
respect to the Subject Interests Transferred, except for those that accrued prior to such date.
Section 11.04 Farmouts.
(a) Farmout. Assignor may from time to time enter into Farmout Agreements with Third Persons
with respect to the Subject Interests. In the event that Assignor enters into any Farmout
Agreement with a Third Person, the Royalty Interest and this Conveyance shall only burden
Assignors retained interest in the Subject Interest after giving effect to any interest in the
Subject Interest that a counterparty to the Farmout Agreement may earn under such Farmout
Agreement. Only the Assignors retained interest in the Subject Interest will count towards the
Assignors obligation to drill Development Wells under the Development Agreement.
(b) Release. In connection with Assignor entering into any Farmout Agreement, Trustee on
behalf of the Trust shall, upon request of Assignor, execute, acknowledge, and deliver to Assignor
a recordable instrument (reasonably acceptable to Assignor) that releases the Royalty Interest and
this Conveyance with respect to the Subject Interests being transferred pursuant to such Farmout
Agreement; provided, the Royalty Interest shall still burden the Subject Interest retained by
Section 11.05 Transfer of Subject Lands. Except as provided for in Section 12.02, Assignor will
not Transfer any Development Well or any of the Subject Interests comprising a part of the Subject
Lands pursuant to Sections 11.01 and 11.02 prior to the Drilling Obligation Completion Date.
Section 11.06 Change in Ownership.
(a) Obligation to Give Notice. No change of ownership or of the right to receive payment of
the Royalty Interest, or of any part thereof, however accomplished, shall bind Assignor until
notice thereof is furnished to Assignor by the Person claiming the benefit thereof, and then only
with respect to payments made after such Notice is furnished.
(b) Notice of Sale. Notice of sale, transfer, conveyance, or assignment shall consist of a
certified copy of the recorded instrument accomplishing the same.
(c) Notice of Other Changes of Ownership. Notice of change of ownership or of the right to
receive payment accomplished in any other manner (e.g., by dissolution of the Trust) shall consist
of certified copies of recorded documents and complete proceedings legally binding and conclusive
of the rights of all Persons.
(d) Effect of Lack of Notice. Until such Notice accompanied by such documentation is
furnished to Assignor in the manner provided above, Assignor may, at Assignors election, either
(i) continue to pay or tender all sums payable on the Royalty Interest in the same manner provided
in this Conveyance, precisely as if no such change in interest or ownership or right to receive
payment had occurred or (ii) suspend payment of Trust Proceeds without interest until such
documentation is furnished.
(e) Effect of Nonconforming Notices. The kinds of Notice provided by this Section 11.03(d)
shall be exclusive, and no other kind, whether actual or constructive, shall bind Assignor.
Section 11.07 One Payee. Assignor shall never be obligated to pay Trust Proceeds to more than one
Person. If more than one Person is ever entitled to receive payment of any part of the Trust
Proceeds, Assignor may suspend payments of all Trust Proceeds until the concurrent owners or
claimants of the Royalty Interest or the right to receive payment of Trust Proceeds appoint one
Person in writing to receive all payments of Trust Proceeds on their behalf. Assignor may
thereafter conclusively rely upon the authority of that Person to receive payments of Trust
Proceeds and shall be under no further duty to inquire into the authority or performance of such
Section 11.08 Rights of Mortgagee. If Trustee executes a mortgage or deed of trust covering all or
part of the Royalty Interest, the mortgagees or trustees therein named or the holders of any
obligation secured thereby shall be entitled, to the extent that such mortgage or deed of trust so
provides, to exercise the rights, remedies, powers, and privileges conferred upon Trustee by this
Conveyance and to give or withhold all consents required to be obtained from Trustee. This Section
11.08 shall not be deemed or construed to impose upon Assignor any obligation or liability
undertaken by the Trustee under such mortgage or deed of trust or under the obligation secured
Section 12.01 Additional Leases. In the event that Assignor acquires any additional leases
(Additional Lease) other than the Subject Interests in the AMI Area prior the Drilling
Obligation Completion Date, (i) Assignor shall be subject to all of the limitations hereunder and
under the Development Agreement with respect to such Additional Leases(s), and (ii), subject to
Section 12.03, at Assignors option, Assignor and Trustee shall execute, acknowledge, and deliver
an instrument that amends this Conveyance so that such Additional Lease will be subject to the
Royalty Interest and be part of the Subject Interests and Subject Lands hereunder; provided that in
no event shall Assignor extend any well into such Additional Lease(s) unless and until this
Conveyance is amended to include such Additional Leases(s) as part of the Subject Interests.
Section 12.02 Exchange of Subject Lands. Subject to Section 12.03, Assignor may, at its option at
any time prior to the Drilling Obligation Completion Date, cause Trustee to execute, acknowledge,
and deliver to Assignor a recordable instrument (reasonably acceptable to Assignor) that releases
from the Royalty Interest and this Conveyance portions of the Subject Interests in connection with
Assignors exchange of such Subject Interests for other properties within the AMI, which such other
properties will be made subject to the Royalty Interests in this Conveyance (such other properties
being hereafter referred to as Exchange Acreage).
Section 12.03 Limitations. In no event, however, may any Additional Lease be made subject to the
Royalty Interest and this Conveyance pursuant to Section 12.01, or any exchange be effected
pursuant to Section 12.02 unless Assignor certifies to the Trust that (a) no Development Well will
be spud on the Additional Lease or the Exchange Acreage, (b) the aggregate acreage attributable to
all Additional Leases and all Exchange Acreage will not exceed 5% of the Subject Lands as such
exist as of the date of this Conveyance, (c) if the Additional Lease and Exchange Acreage were
treated as Subject Lands, the portion of the Subject Lands
that covers and pertains to Subject Gas in, under and that may be produced from all horizontal
wells to be drilled by Assignor pursuant to the Drilling Obligation that extend into Additional
Leases and Exchange Acreage and that may be retained by the Trust pursuant to Section 1.04 hereof
following the Drilling Obligation Completion Date will not constitute more than 5% of the Subject
Lands that cover and pertain to Subject Gas in, under and that may be produced from all Development
Wells (including horizontal wells that extend into Additional Leases and Exchange Acreage) and that
may be retained by the Trust pursuant to Section 1.04 hereof following the Drilling Obligation
Completion Date, (d) in the case of an Additional Lease, the reserve profile of such Additional
Lease is consistent with reserve profiles of other portions of the Subject Interests that would,
but for the acquisition of the Additional Lease, be tapped from a Development Well having the
entire length of all of its perforated laterals located within the Subject Interests and (e) in the
case of an exchange pursuant to Section 12.02, the reasonably projected quantity of proved
undeveloped reserves attributable to the Exchange Acreage does not significantly differ from the
reasonably projected quantity of proved undeveloped reserves attributable to the portion of the
Subject Interests to be given in exchange therefor.
Section 12.04 No Drainage. Subsequent to the Drilling Obligation Completion Date, neither Assignor
nor any of its Affiliates shall drill any Gas well that will have a perforated segment that will be
within five hundred feet (500) of any perforated interval of any Development Well which produces
oil or gas from the Target Formation.
Section 13.01 Nonperformance. Assignor shall not be responsible to Trustee for any loss or damage
to Trustee resulting from any delay in performing or failure to perform any obligation under this
Conveyance (other than Assignors obligation to make payments of Trust Proceeds to Trustee) to the
extent such failure or delay is caused by Force Majeure.
Section 13.02 Force Majeure. Force Majeure means any of the following, to the extent
they are not caused solely by the breach by Assignor of its duty to perform certain obligations
under this Conveyance in accordance with the Reasonably Prudent Operator Standard:
(a) act of God, fire, lightning, landslide, earthquake, storm, hurricane, hurricane warning,
flood, high water, washout, tidal wave, or explosion;
(b) strike, lockout, or other similar industrial disturbance, act of the public enemy, war,
military operation, blockade, insurrection, riot, epidemic, arrest or restraint of Governmental
Authority or people, or national emergency;
(c) the inability of the Assignor to acquire, or the delay on the part of any Third Person
(other than an Affiliate of the Assignor) in acquiring, materials, supplies, machinery, equipment,
servitudes, right-of-way grants, easements, permits, or licenses, or approvals or authorizations by
regulatory bodies needed to enable such Party to perform hereunder;
(d) any breakage of or accident to machinery, equipment, or lines of pipe, the repair,
maintenance, improvement, replacement, alteration to a plant or line of pipe or related facility,
the testing of machinery, equipment or line of pipe, or the freezing of a line of pipe;
(e) any Legal Requirement or the affected Partys compliance therewith; or
(f) any other cause, whether similar or dissimilar to the causes enumerated in (a) through (e)
above, not reasonably within the control of Assignor.
Section 13.03 Force Majeure Notice. Assignor will give Trustee a Notice of each Force Majeure as
soon as reasonably practicable after the occurrence of the Force Majeure.
Section 13.04 Remedy. Assignor will use its reasonable efforts to remedy each Force Majeure and
resume full performance under this Conveyance as soon as reasonably practicable, except that the
settlement of strikes, lockouts, or other labor disputes shall be entirely within the discretion of
Section 14.01 Definition. Notice means any notice, advice, invoice, demand, or other
communication required or permitted by this Conveyance.
Section 14.02 Written Notice. Except as otherwise provided by this Conveyance, each Notice shall
be in writing.
Section 14.03 Methods of Giving Notice. Notice may be given by any reasonable means, including
telecopier, hand delivery, overnight courier, and United States mail.
Section 14.04 Charges. All Notices shall be properly addressed to the recipient, with all postage
and other charges being paid by the Party giving Notice.
Section 14.05 Effective Date. Notice shall be effective when actually received by the Party being
Section 14.06 Addresses. The addresses of the Parties for purposes of Notice are the addresses in
the Introduction to this Conveyance.
Section 14.07 Change of Address. Either Party may change its address to another address within the
continental United States by giving ten (10) days Notice to the other Party.
Section 15.01 Successors and Assigns. Subject to the limitation and restrictions on the assignment
or delegation by the Parties of their rights and interests under this Conveyance, this Conveyance
binds and inures to the benefit of Assignor, Trustee, the Trust and their respective successors,
assigns, and legal representatives.
Section 15.02 Governing Law. WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PRINCIPLES
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION, THIS CONVEYANCE SHALL BE
CONSTRUED UNDER AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA (EXCLUDING CHOICE OF
LAW AND CONFLICT OF LAW RULES).
Section 15.03 Construction of Conveyance. In construing this Conveyance, the following principles
shall be followed:
(a) no consideration shall be given to the captions of the articles, sections, subsections, or
clauses, which are inserted for convenience in locating the provisions of this Conveyance and not
as an aid in its construction;
(b) no consideration shall be given to the fact or presumption that one Party had a greater or
lesser hand in drafting this Conveyance;
(c) the word includes and its syntactical variants mean includes, but is not limited to
and corresponding syntactical variant expressions;
(d) a defined term has its defined meaning throughout this Conveyance, regardless of whether
it appears before or after the place in this Conveyance where it is defined;
(e) the plural shall be deemed to include the singular, and vice versa, unless the content
otherwise requires; and
(f) each exhibit, attachment, and schedule to this Conveyance is a part of this Conveyance,
but if there is any conflict or inconsistency between the main body of this Conveyance and any
exhibit, attachment, or schedule, the provisions of the main body of this Conveyance shall prevail.
Section 15.04 No Waiver. Failure of either Party to require performance of any provision of this
Conveyance shall not affect either Partys right to require full performance thereof at any time
thereafter, and the waiver by either Party of a breach of any provision hereof shall not constitute
a waiver of a similar breach in the future or of any other breach or nullify the effectiveness of
Section 15.05 Relationship of Parties. This Conveyance does not create a partnership, mining
partnership, joint venture, or relationship of trust or agency (except with respect to Assignors
agency relationship with respect to those matters set forth in Articles IV and V above) between the
Section 15.06 Proportionate Reduction. In the event of failure or deficiency in title to any
Development Well or Subject Interest (other than burdens in excess of twelve and one half percent
(12.5%)), the portion of the Subject Gas production attributable thereto shall be reduced in the
same proportion that such Development Well or Subject Interest is reduced by such failure or
deficiency. Such proportionate reduction of the Royalty Interest shall not limit Trustees rights
with respect to such reduction under Section 1.03(a).
Section 15.07 Further Assurances. Each Party shall execute, acknowledge, and deliver to the other
Party all additional instruments and other documents reasonably required to describe more
specifically any interests subject hereto, to vest more fully in Trustee the Royalty Interest
conveyed (or intended to be conveyed) by this Conveyance, or to evidence or effect any transaction
contemplated by this Conveyance. Assignor shall also execute and deliver all additional
instruments and other documents reasonably required to transfer interests in state, federal, or
Indian lease interests in compliance with applicable Legal Requirements or agreements.
Section 15.08 The 7:00 A.M. Convention. Except as otherwise provided in this Conveyance, each
calendar day, month, quarter, and year shall be deemed to begin at 7:00 a.m. Eastern Time on the
stated day or on the first day of the stated month, quarter, or year, and to end at 7:00 a.m.
Eastern Time on the next day or on first day of the next month, quarter, or year, respectively.
Section 15.09 Counterpart Execution. This Conveyance may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but
all of such counterparts shall constitute for all purposes one Conveyance. As between the Parties,
any signature hereto delivered by a Party by facsimile transmission or email pdf. shall be deemed
an original hereto.
Section 15.10 Present and Absolute Conveyance. It is the express intention of Assignor and Trustee
that the Royalty Interest is, and shall be construed for all purposes as, a present, fully-vested
and absolute conveyance.
Section 15.11 Limitation of Liability. It is expressly understood and agreed by the parties hereto
that (a) this Agreement is executed and delivered by the Trustee not individually or personally,
but solely as Trustee in the exercise of the powers and authority conferred and vested in it and
(b) under no circumstances shall the Trustee be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under this Agreement.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, each Party has caused this Conveyance to be executed in its name and
behalf and delivered on the date or dates stated in the acknowledgment certificates appended to
this Conveyance, to be effective as of the Effective Time.
||ENERGY CORPORATION OF
||/s/ Donald C. Supcoe
||Name: Donald C. Supcoe
||Title: Senior Vice President
Signature Page to Perpetual Royalty Interest Conveyance
||ECA MARCELLUS TRUST I
||By: The Bank of New York Mellon Trust
||/s/ Michael J. Ulrich
||Name: Michael J. Ulrich
||Title: Authorized Signatory
Vinson & Elkins LLP
1001 Fannin Street
Houston, TX 77002-6760
Attention: Thomas Herbert
Signature Page to Perpetual Royalty Interest Conveyance
STATE OF COLORADO
On this, the
7th day of July, 2010, before me Julie Ann Kitano, a
personally appeared Donald C. Supcoe, who acknowledged himself to be the Senior Vice President of
Energy Corporation of America, a West Virginia corporation, and that he as such Senior Vice
President, being authorized to do so, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as Senior Vice President.
In witness whereof, I hereunto set my hand and official seal.
||/s/ Julie Ann Kitano
Commission Expires: 4-26-2014
STATE OF COLORADO
On this, the
7th day of July, 2010, before me Julie Ann Kitano, a
personally appeared Michael J. Ulrich, who acknowledged himself to be the authorized signatory of
The Bank of New York Mellon Trust Company, N.A., a national banking association and Trustee of ECA
Marcellus Trust I and that he as such authorized signatory, being authorized to do so, executed the
foregoing instrument for the purposes therein contained by signing the name of the national banking
association by himself as authorized signatory.
In witness whereof, I hereunto set my hand and official seal.
||/s/ Julie Ann Kitano
Commission Expires: 4-26-2014
CERTIFICATE OF RESIDENCE
The Bank of New York Mellon Trust Company, N.A., as grantee and Trustee hereunder, hereby
certifies that its precise address is:
919 Congress Avenue
Austin, Texas 78701
ECA MARCELLUS TRUST I
By: The Bank of New York Mellon Trust Company, N.A.
||/s/ Michael J. Ulrich
|Name: Michael J. Ulrich
|Title: Authorized Signatory
W. GASTON CAPERTON, III
CLARK CLEMENT and PAULETTE CLEMENT
MICHAEL J. COCHRAN, JR.
PETER H. COORS
RODNEY D. COX and JENNIFER M. COX
CURTIS FAMILY REVOCABLE TRUST
DORGAN LIVING TRUST
RANDALL C. FARKOSH and SHERRY J. FARKOSH
JOHN S. FISCHER and FAYE E. FISCHER
MICHAEL S. FLETCHER and BOBBETTE FLETCHER
J. MICHAEL FORBES
MARK A. FRY and TAMMY L. FRY
THOMAS R. GOODWIN
DANIEL EARL GRAHAM LIVING TRUST and SALLY QUEREAU GRAHAM LIVING TRUST
CLINT L. HIPKE
DAVID E. JORDAN and CAROL JORDAN
FRANCIS H. McCULLOUGH, III and KATHY L. McCULLOUGH
KATHERINE F. McCULLOUGH TRUST
KRISTIN McCULLOUGH TRUST
LESLEY K. McCULLOUGH TRUST
MEREDITH B. McCULLOUGH TRUST
DENNIS L. McGOWAN and N. GAYLE McGOWAN
ALISON MORK TRUST
JOHN MORK and JULIE MORK
KYLE MORK TRUST
ARTHUR C. NIELSEN, JR. TRUST DATED JULY 14, 2003
JAY S. PIFER
NIKI D. RANDOLPH
PETER L. REBSTOCK
R. KENT SCHAMP
PETER A. SULLIVAN and WENDY H. SULLIVAN
DONALD C. SUPCOE and PATTY L. SUPCOE
RODNEY A. WINTERS and TAMMY M. WINTERS