Contract

EXHIBIT 10.13 ————- DRILLING AND OPERATING AGREEMENT DATED SEPTEMBER 15, 2004 BY AND BETWEEN ATLAS AMERICA, INC. AND KNOX ENERGY, LLC

TABLE OF CONTENTS —————– PAGE —- 1. Definitions………………………………………………………………………………….12. Minimum Well Drilling Schedule; Initial and Subsequent Drilling; Election to Participate; Gathering……33. Title; Lease Status; Assignment by Non-Operator; AMI Election……………………………………..84. Drilling and Certain Related Procedures; Abandonment…………………………………………….115. Other Operating Responsibilities of the Operator………………………………………………..136. Marketing of Natural Gas and Oil………………………………………………………………147. Superintendence and Maintenance of the Wells; Operator’s Fee and Other Charges……………………..168. Costs and Expenses; Plugging Reserve Account……………………………………………………179. Additional Operations………………………………………………………………………..1910. Non-Operator’s Access; Audit………………………………………………………………….2011. Term and Termination…………………………………………………………………………2012. Contract Not Assignable………………………………………………………………………2213. Relationship; Internal Revenue Code Election……………………………………………………2214. Force Majeure……………………………………………………………………………….2215. Notices…………………………………………………………………………………….2316. Governing Law……………………………………………………………………………….2417. Successors in Interest……………………………………………………………………….2418. Integration; Amendment; Interpretation…………………………………………………………2419. Severability………………………………………………………………………………..2420. Waivers…………………………………………………………………………………….2421. Further Assurances…………………………………………………………………………..2522. Attorneys’ Fees……………………………………………………………………………..2523. Public Statements……………………………………………………………………………2524. Counterpart; Fax…………………………………………………………………………….25

– i – DEFINITIONSTERM DEFINED AT:- —- ———-Additional Potential Lease(s) ss. 3.4AFE ss. 2.5Affiliate ss. 4.3Agreement Page 1AMI Second Whereas clause, page 1Assignment ss. 1.1(a)Casing Point ss. 1.1(b)Completion ss. 1.1(c)COPAS ss. 7.3Drilling Acreage ss. 1.1(d)Drilling Costs ss. 2.5Dry Hole ss. 1.1(e)force majuere ss. 14.1Gas Purchaser ss. 1.1(f)Initial Period ss. 2.8Leases/Lease Second Whereas clause, page 1Net Revenue ss. 1.1(h)Net Well ss. 2.8Non-Operator Page 1Operating Expenses ss. 1.1(i)Operating Reserve Account ss. 8.1Operator Page 1Operator’s Fee ss. 7.3Option Period ss. 2.8Plugging Funds ss. 8.4Plugging Reserve Account ss. 8.4Proportionate Share ss. 1.1(j)Well Acreage ss. 1.1(l)Wells/Well ss. 1.1(k) – ii –

LIST OF EXHIBITS —————- PRINCIPAL REFERENCE: ——————- Exhibit A – AMI Map Second Whereas clause, page 1Exhibit B – Leases and Additional Potential Leases, Minimum Wells and Excluded Acreage First Whereas clause, page 1Exhibit C – AFE’s ss. 2.3Exhibit D – Assignment ss. 1.1(a)Exhibit E – Gas Balancing Agreement ss. 6.4

– iii – DRILLING AND OPERATING AGREEMENT ——————————– This Drilling and Operating Agreement (this “Agreement”) is made andentered into, effective as of the 15th day of September, 2004, by and betweenATLAS AMERICA, INC., a Pennsylvania corporation (and not any other entity havingthe name Atlas America, Inc. or any derivative thereof), whose address is 311Rouser Road, Moon Township, Coraopolis, PA 15108 (hereinafter referred to as”Operator”) and KNOX ENERGY, LLC, a Tennessee limited liability company, whoseaddress is 132 Mitchell Road, Oak Ridge, TN 37830 (hereinafter referred to as”Non-Operator”). WHEREAS, by the agreements described in Exhibit B which is attachedhereto and made a part hereof, Non-Operator is vested with the right to drillone or more wells for the purpose of exploring for and producing natural gasand/or oil from the tracts or parcels covered thereby situate in Anderson,Campbell, Morgan, Roane and Scott Counties, Tennessee; and WHEREAS, Operator and Non-Operator desire to drill wells on theproperty covered by the agreements described in Exhibit B (as well as any otheragreements granting Non-Operator, either of the members of Non-Operator and/orany affiliate of any of them the right to drill one or more wells on theproperty within the area of mutual interest (the “AMI”) outlined on the mapattached hereto as Exhibit A and made a part hereof) for the production ofnatural gas and/or oil therefrom, and the processing, transportation andmarketing of such natural gas and/or oil, on the terms and conditionshereinafter set forth; the agreements described in Exhibit B, as well as anyother agreements described in this WHEREAS clause which are deemed Leases as setforth in Section 3.4 hereof, are referred to herein collectively as the “Leases”and individually as a “Lease”. NOW, THEREFORE, WITNESSETH, that for and in consideration of theforegoing premises, and the mutual covenants herein contained, the partieshereto mutually covenant and agree as follows: 1. Definitions ———– 1.1 The following terms used in this Agreement shall have themeanings set forth below: (a) The term “Assignment” shall mean, with respect to Wells(as defined below), the separate agreement in the form attached hereto and madea part hereof as Exhibit D, whereby Non-Operator will grant, assign and convey,as set forth herein, unto the Operator and/or its successor and assigns, theirProportionate Share (as defined below) of the right, title and interest ofNon-Operator in and to a part or portion of the property described in andcovered by the Leases. (b) The term “Casing Point” means the time when a Well hasbeen drilled to the depth or the formation or formations hereinafter designatedand such tests have been conducted so that a determination can be made as towhether the Well can be further developed to completion. (c) The term “Completion” means in the case of a natural gasWell or an oil Well the time when all Well equipment has been installed and theWell is capable of producing natural gas and/or oil without regard to whetherall facilities necessary to permit the delivery of natural gas or oil productionfrom the Well to a purchaser have been installed. (d) The term “Drilling Acreage” shall mean those tracts orparcels of land, or the parts or portions thereof other than the 1.628 acre,more or less, parcel referred to in Section 2.8 hereof, covered by the Leases. (e) The term “Dry Hole” means a Well that has been drilledto the Casing Point but which is not completed pursuant to the provisions ofthis Agreement. (f) The term “Gas Purchaser” shall mean that party, whetherone or more, designated by the Operator and/or the Non-Operator to purchase gasproduced from one or more Wells. (g) The term “Net Revenue” shall mean the gross receipts ofthe Wells less all royalties, overriding royalties, the Operator’s Fee (asdefined in Section 7.3 hereof) and Operating Expenses (as defined below) and anyother item of expense not expressly chargeable to the Operator. (h) The term “Operating Expenses” shall mean the customaryexpense of operation and maintenance of a Well, if it is producing, theproduction and marketing of natural gas and/or oil therefrom, and of pluggingand abandoning a Well, if unproductive. Such term includes business andoccupation, gross receipts, ad valorem and severance taxes and all other taxespayable with respect to the production from the Wells, and all legal fees, alltransportation charges (including compression charges), all materials utilizedin production, such as, but not limited to, alcohol, soap, solvents, cleaners,electric drops, electricity and other similar items and any other item commonlyor ordinarily used in connection with producing a natural gas and/or oil well ordesignated as an Operating Expense in this Agreement, but shall not include anycost or expense incurred by the Operator in discharging its obligation tosuperintend and maintain a Well, if producing (for which the Operator is toreceive monthly payments as set forth in Section 7.3 hereof) or any other suchcosts and expenses which the Operator is required by the terms of this Agreementto bear itself. Such term shall also include any amounts payable as damagessubsequent to reclamation of all well roads and drill sites in accordance withapplicable law to any owner of the surface estate where a Well is drilled or anyright of way or easement appurtenant thereto and costs of defending orarbitrating any action or claims asserted with respect thereto. (i) The term “Proportionate Share” shall mean the percentageshare of Operator or its successors or assigns and of Non-Operator in thedrilling and completion costs, Operating Expenses, Operator’s Fee, workinginterest, production revenues and ownership of each Well to be drilled pursuantto this Agreement. (j) The term “Well” shall mean a well, and the term “Wells”shall mean all wells, drilled in accordance with the terms of this Agreement. (k) The term “Well Acreage” shall mean that part or portionof the Drilling Acreage covered by one or more Leases included in a square areaof forty (40) acres having as its center the borehole of a Well to the extentsuch part or portion shall fall within the boundaries of such square area,provided, however, that if a Lease, or any governmental or other regulatory – 2 -authority or agency, provides or requires for a larger area or a differentconfiguration, the Well Acreage shall mean such larger area and/or differentconfiguration. 2. Minimum Well Drilling Schedule; Initial and Subsequent Drilling; Election to Participate; Gathering —————————————————————- 2.1 The Leases identified in Exhibit B provide that a minimumnumber of wells are to be drilled before certain dates as set forth on Exhibit Bas a condition to the drilling of additional wells on the property subject tosuch Leases. 2.2 It is understood and agreed by the parties that Operator ispresently unable to perform the duties and obligations of Operator hereunderwith respect to (i) permitting and titling of Wells, (ii) drilling andcompleting Wells, (iii) accounting for the costs of drilling and completingWells, (iv) tending Wells, (v) marketing production from the Wells or (vi)accounting for, and distributing, Net Revenues and royalties and overridingroyalties relating to production from the Wells. The parties agree thatNon-Operator will initially perform such duties and obligations and shall beentitled to receive payment from Operator of Operator’s Proportionate Share ofthe Drilling Costs, Operating Expenses and Operator’s Fee relating thereto. Theparties will fully cooperate with each other and use all reasonable efforts tohave Operator perform such duties and obligations relating to each of theforegoing numbered activities as soon as reasonably practicable (giving dueconsideration to effecting a smooth transition as to each of the foregoingnumbered activities when Operator has adequate personnel in place to performsuch duties and obligations with respect to such activities), provided, however,that Operator shall perform all such duties and obligations no later than whenfifty (50) Wells have been drilled hereunder. For example and without limiting the foregoing, until such time asOperator obtains any and all required governmental and other approvals andpermissions to drill, complete and operate Wells on the property subject to aLease identified in Exhibit B and has adequate personnel in place to conductsuch activities, Non-Operator shall perform such activities, and shall have allof the rights, of Operator hereunder with respect to such activities. Operatorshall promptly and diligently pursue all reasonable actions to obtain suchapprovals and permissions and have such adequate personnel in place. Uponobtaining such approvals and permissions and having such personnel in place,Operator shall thereafter perform all such activities, and shall have all of therights, of Operator hereunder with respect to such activities and Non-Operatorshall promptly transfer to Operator all permits and other authorizations todrill, complete and operate Wells on the property subject to the Leasesidentified in Exhibit B. 2.3 Non-Operator has obtained all governmental and other approvalsand permits to drill, complete and operate wells on the property subject to theLeases identified in Exhibit B as set forth on Exhibit B under the headingPresently Permitted Minimum Wells. Until Operator obtains any and all requiredgovernmental and other approvals and permissions to drill, complete and operateWells on the property subject to a Lease identified in Exhibit B, Non-Operatorshall promptly and diligently pursue all reasonable action to obtain suchapprovals and permissions to drill, complete and operate, and shall drill, theminimum number of Wells set forth on Exhibit B with respect to such Lease. Afterobtaining any and all required approvals and permissions to drill, complete andoperate Wells on the property subject to a Lease identified in Exhibit B,Operator shall promptly and diligently drill the minimum number of wells setforth on Exhibit B with respect to such Lease (less the number previouslydrilled) during the periods Operator has the right to drill wells under thisAgreement. – 3 – With respect to each of the first ten (10) Wells identified inExhibit B under the heading Presently Permitted Minimum Wells, Operator shallpay to Non-Operator, upon execution of this Agreement, Operator’s ProportionateShare of the Drilling Costs (as defined in Section 2.5 hereof) as estimated inthe AFE (as defined in Section 2.5 hereof) for such Well attached hereto asExhibit C and made a part hereof, and after Non-Operator determines the finalthird-party costs of drilling and completing such Well, Operator shall pay toNon-Operator, as set forth in Section 2.5 hereof, Operator’s Proportionate Shareof such final costs in excess of the amounts set forth in the AFE for such Well,subject to the refund or credit set forth in such Section. With respect to anyother Well which is drilled and completed by Non-Operator, not later than five(5) days prior to such drilling, Operator shall pay to Non-Operator theOperator’s Proportionate Share of the Drilling Costs as estimated in the AFE forsuch Well, and after Non-Operator determines the final third-party costs ofdrilling and completing such Well, Operator shall pay to Non-Operator, as setforth in Section 2.5 hereof, Operator’s Proportionate Share of such final costsin excess of the amounts set forth in the AFE for such Well, subject to therefund or credit set forth in such Section. Operator and Non-Operator agree that no other well will be drilledon the property subject to the Leases closer than one thousand three hundredtwenty (1,320) feet to any Well drilled pursuant hereto unless Operator andNon-Operator otherwise agree in writing; provided, however, that after theexpiration of the Initial Period or, if applicable, the Option Period, or thetermination of this Agreement if such termination occurs prior to the expirationof the Initial Period or the Option Period, Non-Operator shall have the right todrill wells on the property subject to the Leases which are closer than onethousand three hundred twenty (1,320) feet to any Well drilled pursuant heretoso long as no such well produces natural gas or oil from any formation (otherthan methane gas from coal beds or coal mines) from the surface to one hundred(100) feet below the deepest formation from which natural gas and/or oil isproduced from any such Well and so long as the drilling, completion andoperation (including the production, compression and transportation of naturalgas and/or oil) of all such wells do not unduly interfere with the operation(including the production, compression and transportation of natural gas and/oroil) of any Well and provided, further, that if a Well is plugged and abandoned,the limitations as to formations and interference in the foregoing proviso as tosuch Well shall not apply. If Non-Operator drills a well which is closer thanone thousand three hundred twenty (1,320) feet to any Well which has not beenplugged and abandoned, it shall promptly furnish to Operator copies of alldrilling reports, logs, completion reports and other data reasonably requestedby Operator for the purpose of verifying that such well is not producing, andwill not produce, any natural gas or oil from any formation (other than methanegas from coal beds or coal mines) from the surface to one hundred (100) feetbelow the deepest formation from which natural gas and/or oil is produced fromsuch Well. The agreements set forth above in this paragraph shall be covenantsrunning with the land and shall be set forth by reference to this Agreement inthe Assignment in the form attached hereto as Exhibit D and made a part hereof. 2.4 Non-Operator shall have the right to participate, on awell-by-well basis, for up to fifty percent (50%) of the working interests ineach Well drilled hereunder. Except as set forth in Exhibit B under the heading Wells To BeDrilled On Or Before March 31, 2005, Operator shall propose the number andlocation of the Wells to be drilled pursuant hereto and shall give writtennotice thereof to Non-Operator. Non-Operator may elect to participate by givingwritten notice to Operator of such election within thirty (30) days afterreceipt of Operator’s proposal. Failure of Non-Operator to give notice to – 4 -Operator of its election to participate within the period set forth above shallbe deemed, and shall constitute, an election by Non-Operator not to participate. Non-Operator has elected not to participate in the first ten (10)proposed Wells identified in Exhibit B under the heading Presently PermittedMinimum Wells for any working interest and Operator shall own one hundredpercent (100%) of the working interests in such Wells. 2.5 Operator and Non-Operator shall each pay its ProportionateShare of the actual third-party costs of drilling and completing each Well plusan amount to cover general and administrative, and technical supervision,expenses allocated to the drilling and completion of each Well (the “DrillingCosts”). For each Well for which the drilling is commenced prior to March 31,2005, the amount allocated for general and administrative, and technicalsupervision, expenses for the drilling and completion of each such Well shall beFourteen Thousand Dollars ($14,000). Thereafter, for each annual periodbeginning April 1 and ending March 31 of the following year, Operator shalldetermine the amount to be allocated for general and administrative, andtechnical supervision, expenses allocated to the drilling and completion of aWell for which the drilling is commenced during such period, such amount to beequal to the amount Operator allocates to Wells drilled for any limitedpartnership or other entity from which Operator receives funds to drill suchWells. Operator shall give Non-Operator thirty (30) days’ prior writtennotice of the anticipated drilling date for a Well in which Non-Operator haselected to participate. No later than five (5) days prior to the drilling byOperator of a Well in which Non-Operator has elected to participate,Non-Operator shall pay to Operator its Proportionate Share of the Drilling Costsof the Well as estimated in an Authority for Expenditure (“AFE”) to be furnishedto Non-Operator by Operator along with the written notice to be provided byOperator to Non-Operator pursuant to Section 2.4 hereof. Within thirty (30) daysafter Operator determines the final third-party costs of drilling and completinga Well, Operator shall either (i) invoice Non-Operator for its ProportionateShare of the final costs in excess of the amount prepaid by Non-Operator andNon-Operator shall pay such invoice within thirty (30) days after receipt or(ii) at the election of Non-Operator, Operator shall refund to Non-Operator, orcredit against Non-Operator’s Proportionate Share of the Drilling Costs for oneor more other Wells in which it has elected to participate, the amount prepaidby Non-Operator in excess of the final Drilling Costs for the Well. It isexpressly understood and agreed that if the final Drilling Costs for a Wellexceed one hundred ten percent (110%) of the Drilling Costs as estimated in theAFE for the Well, Non-Operator shall have no obligation to pay more than itsProportionate Share (based upon its election to participate in the Well pursuantto Section 2.4 hereof) of such excess, provided, however, that if Non-Operatordoes not pay such Proportionate Share of the excess, its Proportionate Share ofthe Well shall be reduced to a share equal to the share of the final DrillingCosts of the Well paid by it. 2.6 If Non-Operator elects to participate in a Well for afifty-percent (50%) working interest, the Well will be burdened with anoverriding royalty payable to Non-Operator equal to 1/64th (1.5625%); ifNon-Operator does not elect to participate in a Well for any working interest,the Well will be burdened with an overriding royalty payable to Non-Operatorequal to 1/32nd (3.125%). To the extent that Non-Operator participates in a Wellfor less than a fifty-percent (50%) working interest, the overriding royalty toNon-Operator shall be determined by subtracting from an overriding royalty of1/32nd (3.125%) an amount determined by multiplying 1/64th (1. 5625%) by afraction, the numerator of which is the Non-Operator’s working interest and thedenominator of which is fifty percent (50%). For example, if Non-Operator elects – 5 -to participate for a thirty-percent (30%) working interest in a Well, theoverriding royalty to Non-Operator shall be: 3.125% less (1.5625% x (30% / 50%)) = 3.125% less .9375% = 2.1875% 2.7 With respect to each of the first ten (10) Wells identified inExhibit B under the heading Presently Permitted Minimum Wells, Operator shallpay to Non-Operator, upon execution of this Agreement, Operator’s ProportionateShare of a site fee of Four Thousand Dollars ($4,000) and a completion fee ofTwo Thousand Dollars ($2,000) for each such Well. With respect to each otherWell drilled and completed during the Initial Period (as defined in Section 2.8hereof), Operator shall pay to Non-Operator, not later than five (5) days priorto drilling such Well, Operator’s Proportionate Share of a site fee of FourThousand Dollars ($4,000) and Operator shall pay to Non-Operator, not later thanthirty (30) days after completion of such Well, Operator’s Proportionate Shareof a completion fee of Two Thousand Dollars ($2,000). During the Option Period(as defined in Section 2.8 hereof), if applicable, the site fee shall be FiveThousand Dollars ($5,000) and the completion fee shall be Two Thousand FiveHundred Dollars ($2,500). 2.8 During the period ending June 30, 2007 (the “Initial Period”),Operator shall have the exclusive right to propose and drill three hundred (300)Net Wells (as defined in this Section 2.8) under this Agreement inclusive ofWells identified in Exhibit B under the heading Presently Permitted MinimumWells and other Wells drilled by Non-Operator under Section 2.3 hereof. Ifagreed to by Non-Operator in writing no later than December 31, 2006, Operatorshall have the exclusive right to propose and drill two hundred (200) additionalNet Wells under this Agreement during the period commencing July 1, 2007 andending June 30, 2009 (the “Option Period”). For purposes of this Agreement, aNet Well shall mean one or more Wells in which Operator’s (and its successors’and assigns’) total initial participation equals one hundred percent (100%) ofthe working interests; for example, if Operator has a working interest of onehundred percent (100%) in each of four (4) Wells, seventy-five percent (75%) ineach of four (4) Wells and fifty percent (50%) in each of four (4) Wells, thenumber of Net Wells shall be four (4), three (3) and two (2), respectively, or atotal of nine (9) Net Wells. Subject to the performance by Non-Operator of its obligations, andthe accuracy of its representations and warranties, herein contained (includingbut not limited to those set forth in Section 2.3 hereof, this Section 2.8 andSection 3.2 hereof) and subject to the provisions of Section 14 hereof, Operatorshall drill the minimum number of Wells set forth in the Leases to keep eachsuch Lease in full force and effect during the Initial Period and, ifapplicable, during the Option Period and, except with respect to the minimumnumber of Wells to be drilled prior to March 31, 2005 and one (1) Well to bedrilled under the Brimstone Lease on or before June 1, 2005 as set forth inExhibit B, Operator shall commence the drilling of such minimum number of Wellsno later than ninety (90) days prior to the dates set forth in each of theLeases to keep each of the Leases in full force and effect during the InitialPeriod and, if applicable, during the Option Period. Notwithstanding theprovisions of the foregoing sentence, (i) if Non-Operator substitutes a newOperator under Section 11.2 hereof, Operator shall have no obligation, norright, to drill any additional Wells and (ii) if the expiration of the InitialPeriod or, if applicable, the Option Period, occurs during a period when a Leaseprovides a minimum number of Wells is to be drilled to keep such Lease in fullforce and effect, the obligation of Operator to drill the minimum number ofWells to keep such Lease in full force and effect shall be prorated based uponthe time of such period prior to, and after, the expiration of the InitialPeriod and, if applicable, the Option Period; for example, if the period in the – 6 -Lease during which a minimum number of Wells to be drilled is from January 1 ofa year to December 31 of such year and the minimum number of Wells to be drilledin such period is ten (10), then in the calendar year 2007, Operator shall havean obligation to drill only five (5) Wells if the Option Period is notapplicable. Failure of the Operator to drill the minimum number of Wells as setforth above in the preceding paragraph shall result in the immediate terminationof Operator’s right to thereafter drill any Well and, except as set forth below,Operator’s right or obligation to participate in any Well thereafter drilled,provided, however, that if after such termination, Non-Operator drills, orcauses to be drilled, any Wells during the Initial Period or if applicable, theOption Period, to satisfy the minimum number of Wells as set forth in thepreceding paragraph to be drilled in such period, Operator shall participate ineach such Well drilled no deeper than one hundred (100) feet below theChattanooga Shale formation (or such deeper formation to which such Well isrequired to be drilled by a Lease) for such working interests, if any, asNon-Operator shall notify Operator in writing prior to the drilling of such Welland Operator shall be responsible for, and shall pay, its Proportionate Share ofthe Drilling Costs, Operating Expenses and Operator’s Fee for such Well; thetermination of the rights of Operator set forth above and the right ofNon-Operator to require Operator to participate in the minimum number of Wellsdrilled no deeper than one hundred (100) feet below the Chattanooga Shaleformation (or such deeper formation to which such Well is required to be drilledby a Lease) shall be the sole and exclusive remedy of Non-Operator with respectto Operator’s failure to drill the minimum number of Wells as set forth above inthe preceding paragraph. Non-Operator represents and warrants, to the best of its knowledge,to and for the benefit of Operator and its successors and assigns that noperson, corporation or other entity, other than Non-Operator, has the right toexplore for or produce natural gas or oil (including the right to drill,complete and operate Wells for the production, compression, transportation,marketing and sale of natural gas and oil produced therefrom) from the propertysubject to the Leases identified in Exhibit B other than the 1.628 acre, more orless, portion of the tract covered by the Coal Creek Lease described in ExhibitB under the heading Excluded Acreage. Non-Operator agrees that during theInitial Period, and if applicable, during the Option Period, Non-Operator shallnot grant, assign or otherwise transfer to any person, corporation or otherentity, except to Operator as set forth herein, the right to explore for andproduce natural gas or oil from the property subject to the Leases not includingmethane gas from coal beds and coal mines. Notwithstanding anything to the contrary contained in thisAgreement, upon the expiration of the Initial Period and, if applicable, theOption Period, Operator shall have no obligation or right to drill any well, andshall have no right to participate in any well drilled thereafter, on theproperty subject to any Lease. 2.9 Notwithstanding anything to the contrary contained in thisAgreement, without the written consent of Non-Operator, no Well drilled underthis Agreement shall be drilled or completed to produce any methane gas fromcoal beds or coal mines, and after the initial drilling and completion of aWell, such Well shall not be deepened without the consent of both Operator andNon-Operator. It is expressly understood and agreed that Operator has no rightsof ownership or otherwise in, nor liabilities with respect to, any well (whetherproducing, plugged or abandoned) drilled on the property subject to any Leaseidentified in Exhibit B by Non-Operator or any other person, corporation orother entity prior to the date of this Agreement or, unless otherwise agreed toin writing by Non-Operator and Operator, in any well (whether producing, pluggedor abandoned) drilled on the property subject to any other Lease prior to the – 7 -time it is deemed a Lease pursuant to Section 3.4 hereof; and to the extent ithas the right to do so, Non-Operator may produce, rework, deepen and performother operations on such wells for its sole account. 2.10 Operator and Non-Operator shall each have the right totransfer or otherwise assign working interests in any Well to any affiliate andto any limited partnership or other entity from which Operator or Non-Operatorreceives funds to drill the Well, provided, however, that each party must retainat least twenty percent (20%) of the working interests for which it participatedhereunder in each Well (such retention may be by the direct ownership of suchminimum working interest or indirectly by such party’s ownership of an affiliateor such limited partnership or other entity which owns working interests in theWell) unless otherwise consented to by the other party, such consent not to beunreasonably withheld. 3. Title; Lease Status; Assignment by Non-Operator; AMI Election ————————————————————- 3.1 Promptly after the execution of this Agreement, Non-Operatorshall provide to Operator all information in its possession or subject to itscontrol as to the title to the natural gas and oil underlying the propertysubject to the Leases identified in Exhibit B and the rights to explore for,develop, operate, produce and market such natural gas and oil including but notlimited to the names and addresses of all owners of royalties and overridingroyalties and the amounts of such royalties and overriding royalties.Additionally, at the time a copy of an agreement described in Section 3.4 hereofis sent to Operator, and thereafter, promptly after being requested to do so,Non-Operator shall provide to Operator all information in its possession orsubject to its control as to the title to the natural gas and oil underlying theproperty subject to such agreement and the rights to explore for, develop,operate, produce and market such natural gas and oil. As to the title to thenatural gas and oil underlying the property subject to the Leases and the rightto explore for, develop, operate, produce and market such natural gas and oil,Non-Operator represents and warrants to and for the benefit of Operator and itssuccessors and assigns that it will defend such title against every person,corporation or other entity claiming or to claim an interest therein by, throughor under Non-Operator, or any member of Non-Operator, or any affiliate of any ofthem, but not otherwise. Prior to the drilling of a Well, the Operator shall obtain areport, prepared by an attorney or title insurance company licensed to practiceor do business in Tennessee, as to whether the lessor(s) of the Lease, and eachassignee of such lessor(s) including Non-Operator, are vested with good andmarketable title to the rights to explore for, develop, operate, produce andmarket natural gas and oil on Well Acreage covered by the Lease on which theWell is to be drilled. Without limiting the foregoing, the report will cover,with respect to the Well Acreage covered by the Lease on which the Well is to bedrilled, the ownership of the (i) oil and natural gas, (ii) working interests,(iii) royalties, (iv) overriding royalties and (v) other production payments, ifany. Promptly after receipt of a report, Operator shall furnish a copy thereofto Non-Operator. If a report reveals defects in title, Operator may, in theexercise of its reasonable judgment, caused to be performed such curative workas Operator deems prudent (including obtaining pooling amendments or agreements)or may decide not to drill a Well on the Well Acreage subject to the report.Operator and Non-Operator shall each be responsible for, and pay, itsProportionate Share of the costs incurred to obtain such reports, and to performcurative work, including costs of abstracts, attorney’s fees, title companycharges, land broker charges and other related direct charges, provided,however, that Non-Operator shall not be responsible for, and shall not pay, anyamount for services rendered by in-house counsel or other personnel of Operatorwith respect to title to any Well Acreage or any curative work relating thereto. – 8 -Except as to the warranty of title set forth in the preceding paragraph, neitherOperator nor Non-Operator shall have any liability to the other for failure oftitle or any matter relating thereto. 3.2 Non-Operator hereby represents and warrants, as of the datehereof and continuing until March 31, 2005, to and for the benefit of Operatorand its successors and assigns, that the Leases identified in Exhibit B are infull force and effect in accordance with their terms and that there are nodefaults by lessee thereunder and that the lessee has no obligation under anysuch Lease to drill any well for the production of any methane or other gas fromcoal beds or coal mines and that all amendments to each such Lease areidentified in Exhibit B and that all consents required under such Leases topermit Operator to perform its obligations, and exercise its rights,contemplated hereby have been obtained including consents to the assignment ofsuch Leases and interests in the Wells and Well Acreage to Operator and to anyaffiliate of Operator or Non-Operator and to any limited partnerships and otherentities from which Operator or Non-Operator receives funds to drill Wells, trueand correct copies of such consents having been furnished by Non-Operator toOperator on or prior to the execution of this Agreement. Non-Operator shall notagree to any amendment or other modification of any Lease identified in ExhibitB without the prior written consent of Operator. Non-Operator shall be solelyresponsible for the payment of, and shall pay, all delay rentals, minimumroyalties and other amounts required to be paid under the Leases to keep theLeases in full force and effect and upon request of Operator, Non-Operator shallprovide evidence of such payment in such detail as Operator may reasonablyrequest; Non-Operator shall be entitled to recoup such delay rentals, minimumroyalties and/or other amounts as may be provided in the Lease and to the extentOperator receives funds from the sale or other disposition of natural gas andoil produced from the Wells which may be applied to such recoupment, it will paysuch funds to Non-Operator. Operator and Non-Operator shall each pay itsProportionate Share of any shut-in royalties required to be paid under theLeases with respect to a Well. Additionally, Non-Operator shall comply with allother provisions of the Leases (except, subject to Section 2.3 hereof, theprovisions to drill a minimum number of wells), and take all other actions tootherwise keep the Leases in full force and effect, with respect to the propertysubject thereto exclusive of Well Acreage. Promptly after receipt of any notice,or any document or other writing, from any lessor of a Lease, any governmentalor regulatory authority or agency or any other person, corporation or authorityrelating to any Lease or Well or any activities conducted on the propertysubject to the Leases or relating to any other matter concerning the drilling,completion or operation of one or more Wells, or the transportation,compression, processing, marketing or sale of natural gas and/or oil producedtherefrom, Non-Operator and Operator, as the case may be, shall provide theother with such notice, or document or other writing. 3.3 Upon payment by Operator of its Proportionate Share of the sitefee for a Well pursuant to Section 2.7 hereof, the Non-Operator shall promptlyexecute and deliver to the Operator or its successors and assigns an Assignmentin substantially the form attached hereto and made a part hereof as Exhibit Dwith respect to the Well Acreage on which the Well is to be drilled and thenon-exclusive right to construct, maintain, repair and operate one or morelines, compressors, processing facilities and meters on the property subject tothe Leases to transport, compress, process, measure, market and sell natural gasand oil produced from the Wells, which natural gas and oil shall be transportedthrough the Coalfield Pipeline pursuant to a Gas Gathering Agreement betweenOperator and Coalfield Pipeline Company being executed contemporaneously withthis Agreement. Unless otherwise agreed to by the Non-Operator, the Assignmentshall except and reserve to the Non-Operator all interests and estates withrespect to methane gas in coal beds and coal mines, together with the right toconduct operations on and drill through Well Acreage for the development, – 9 -extraction and processing of such methane gas so long as such operations anddrilling do not adversely affect the operation of, or production from, any Well.In the Assignment and subject to the non-exclusive right described in the firstsentence of this Section 3.3, Non-Operator shall further except and reserve untoitself all interests and estates in the Lease on which the Well is drilled,except as to the Well Acreage and as to all oil and gas formations from thesurface to one hundred (100) feet below the deepest producing formation in theWell. 3.4 If the Non-Operator, either member of the Non-Operator or anyaffiliate of any of them acquires the right to drill one or more wells on theAMI pursuant to an agreement not identified in Exhibit B, the Non-Operator shallprovide a copy of the agreement to the Operator promptly after the execution ofsuch agreement. The Operator shall have the right, within thirty (30) days afterreceipt of the executed agreement, to notify the Non-Operator in writing thatsuch agreement shall be deemed a Lease, subject to such conditions as may be setforth in the notice (including consents to assignment), for all purposes of thisAgreement and Non-Operator shall not agree to any amendment or othermodification of such Lease without the prior written consent of Operator. Ifsuch written notice is not given by the Operator within the thirty (30) dayperiod, such agreement shall not be deemed a Lease and the Operator shall haveno rights, or obligations, in regard to such agreement. Notwithstanding theforegoing, Operator shall have no right to have any acreage described in ExhibitB under the heading Excluded Acreage deemed subject to a Lease. With respect to the leases and other agreements (“AdditionalPotential Leases”) described in Exhibit B under the heading Additional PotentialLeases, on or before March 1, 2005, Non-Operator shall provide to Operator acopy of each such Additional Potential Lease. If Non-Operator desires to drill anatural gas and/or oil well on the property subject to an Additional PotentialLease, at least ninety (90) days prior to drilling such well, Non-Operator shallgive written notice to Operator of such desire along with the proposed location,target formation and anticipated drilling date of the well (as well as copies ofany amendment or other modification of such lease and of any consent toassignment required by such lease) and the Operator shall have the right toparticipate in such well for up to fifty percent (50%) of the working interests,if Operator elects, as provided below, to have the Additional Potential Leaseand well deemed a Lease and Well hereunder. If Operator notifies Non-Operator inwriting within thirty (30) days after receipt of the written notice fromNon-Operator that Operator desires to participate in the well and sets forth, insuch notice, its working interest participation, such well and AdditionalPotential Lease shall be deemed a Lease and a Well hereunder and Operator shallcommence the drilling of the Well before the drilling date set forth in thenotice from Non-Operator, it being understood and agreed that after Non-Operatorgives the written notice to Operator set forth above, Non Operator shall notagree to any amendment or other modification of such Lease without the priorwritten consent of Operator. 3.5 The Operator agrees that for a period of seven (7) years afterthe execution of this Agreement, it will not acquire, other than as provided inthis Agreement, the right to drill any wells or to mine any coal, or anyinterests in oil and gas or coal, on the AMI without the written consent of theNon-Operator. The provisions of this Section 3.5 shall survive the terminationof this Agreement prior to the end of such seven (7) year period. 3.6 Notwithstanding anything to the contrary herein contained, allrights and obligations of Operator and Non-Operator hereunder relating to theLeases are subject to the terms and provisions of the Leases including, but notlimited to, any rights of lessor or others to take over any Well to be pluggedand abandoned. – 10 – 4. Drilling and Certain Related Procedures; Abandonment —————————————————- 4.1 Other than the minimum number of Wells to test the KnoxFormation, the Monteagle formation or any other formation set forth in theLeases, the Operator shall drill each Well to such formation as it shalldesignate, unless natural gas or oil is discovered in commercial quantities at alesser depth which, in the opinion of the Operator, in its reasonablediscretion, makes further drilling inadvisable to such target formations. If theWell is found to be commercially productive in the reasonable discretion andjudgment of the Operator, the Operator shall complete the Well and if the Wellproduces natural gas, connect it to the Coalfield Pipeline, and if the Wellproduces oil, make appropriate arrangements for the prompt removal and sale ofthe oil produced from the Well. 4.2 The Operator shall provide or cause to be provided allmaterials, supplies, tools, labor and services required to drill and completethe Wells to be drilled pursuant to this Agreement through the wellhead,including, but not limited to, drilling rigs, casings, bits, drill pipe, and allwater, power, fuel and lubricants required at the Well sites. In connection withthe foregoing obligations, the Operator shall perform, or cause to be performed,with respect to the Wells, the following procedures, in accordance with industrycustom and standard in the locality: (a) Grade and prepare the well location, including furnishinga suitable roadway thereto, if required, and following completion, backfill,grade and reseed the well location, all in accordance with the requirements ofapplicable law; (b) Install and cement the well casing in accordance with thespecifications of the Operator and as required by state and federal law; (c) Electronically log and test the well in accordance withthe specifications of the Operator to determine its productive capacity; (d) Perforate such casing opposite such formations as Operatormay select in accordance with the specifications of the Operator; (e) Unless the Operator reasonably determines it is notnecessary, stimulate one or more of the productive formations by means ofnitrogen fracturing, hydrofracturing, acidizing, shooting, or other means inaccordance with the specifications of the Operator, such stimulation and theextent and scope thereof to be designed by the Operator in accordance withgenerally accepted industry practices in the locality; (f) If necessary, install an oil and gas separator to separateany recoverable liquids from the natural gas, if such liquids are contained bythe natural gas in commercial amounts, before such natural gas is delivered tothe designated pipeline or compressing equipment, together with a tank to storeany liquids so separated from the natural gas as required; (g) Use commercially reasonable efforts to obtain all rightsof way and related surface rights and easements required, provide pipe for, andconstruct and place in operation, an appropriate gathering or other pipelinesystem to connect the Wells to the Coalfield Pipeline, provided, however, thatto the extent Non-Operator or any of its members or any affiliate of any of themhas such rights-of-way and related surface rights and easements, it shall grantOperator the non-exclusive right to use the same for such purpose; – 11 – (h) Install all drips and other devices in the gathering orother lines as shall be needed to ensure that all natural gas entering the linesshall have a moisture content no greater than the maximum allowable undercurrent industry standards; and (i) In the event that Operator shall at any time determinethat a Well is capable of producing oil in paying quantities, as either aDrilling Cost or an Operating Expense (i) install well pumping equipmentfollowing its completion in order to produce oil from the Well in an amountequal to its allowable or capacity production and (ii) provide pipe for, andconstruct and place in operation, an appropriate, if necessary, line to connectthe Well to an oil transmission line (or, in the event that any oil produced isto be removed by tanker, construct a pipeline to an adequate tank battery at thedesignated pickup point). 4.3 Notwithstanding anything to the contrary contained in thisAgreement, the Operator shall have the right to subcontract any part of thedrilling, completion and operation of a Well, and any other work to be performedby Operator hereunder, to an affiliate of the Operator or any other partywithout the prior consent of the Non-Operator, provided, however, that no suchsubcontracting shall relieve the Operator of its obligations andresponsibilities hereunder and any such subcontract must be made on commerciallyreasonable terms. The term “affiliate” as used in this Agreement shall mean anybusiness entity which directly or indirectly through one or more intermediariescontrols or is under the common control of the Operator or Non-Operator. 4.4 The Operator shall conduct all operations hereunder in a goodand workmanlike manner. All materials and supplies to be provided shall be ofgood quality and suitable to the use to which they may be put and all equipment,appliances and tools shall be in operating order. Operator shall not beresponsible for loss resulting from any latent defect in any material suppliedby any third party or the negligence of any third party of any service. 4.5 In the event a Well is determined by the Operator, in itsreasonable discretion, to be commercially unproductive following drilling tototal depth and electronic logging thereof, and is thereby deemed a “Dry Hole,”the Operator may notify the Non-Operator of such fact and of Operator’sintention to plug and abandon, and the reasons for plugging and abandoning, theWell in accordance with the laws and regulations of the State of Tennessee.After sixty (60) days have expired from the date of mailing such notice,Operator may plug and abandon the Well and Operator and Non-Operator shall eachpay its Proportionate Share of the costs of plugging and abandoning the Well.Notwithstanding the foregoing, in the event the Non-Operator desires that theWell not be plugged and abandoned, it shall, within said sixty (60) day period,serve upon Operator a written notice requesting the resignation of the Operatoras to the Well. Such notice shall designate a new operator for the Well, andshall be accompanied by evidence of an operator’s bond with respect to the Well.Such notice shall also be accompanied by a written agreement, signed by theNon-Operator, agreeing to assume the operation of the Well through the newlydesignated operator and relieving and discharging Operator of all furtherresponsibility in connection with the operation or plugging and abandonment ofthe Well except for acts or activities occurring prior to the effective date ofsuch notice. After the Well is placed under the bond of the new operator,Operator shall promptly transfer to Non-Operator, free or charge, all rights,titles and interests of Operator in and to the Well and the Well Acreage onwhich the Well is drilled. – 12 – 5. Other Operating Responsibilities of the Operator ———————————————— 5.1 In connection with the performance of its duties andresponsibilities pursuant to the terms of this Agreement, Operator shall: (a) Keep the Leases free and clear of all labor, materials andother liens or encumbrances arising out of its operations; (b) Obtain and maintain at its own expense all worker’scompensation coverage required by law with respect to its employees and employeeliability insurance with a limit of $1,000,000 per occurrence, and require allof its subcontractors to obtain and maintain such coverage with respect to theiremployees; (c) Maintain in force at its own expense, with an insurancecompany or companies licensed to do business in Tennessee and rated A-, VII orbetter by A.M. Best, the following basic liability coverages (includingindependent contractor and completed operations and premises operations):comprehensive (including written contractual liability) general liabilityinsurance and bodily injury insurance – $1,000,000 each occurrence and$1,000,000 aggregate; property damage liability (with deletion of undergroundproperty damage exclusion provisions ) – $1,000,000 each occurrence and$1,000,000 aggregate; and comprehensive auto liability and property damage inthe same limits. The Operator shall also maintain an “umbrella” policyincreasing the liability coverage hereinbefore set forth by the additionalamount of $10,000,000. Upon receipt of a request of Non-Operator for acertificate of insurance, Operator shall request such a certificate and shall,upon receipt of the certificate, furnish the same to the Non-Operator.Non-Operator and its members, CNX Gas Company, LLC (and its members) and NewRiver Energy, LLC (and its members), and CONSOL Energy, Inc., and theirdirectors, officers and employees, shall be named as additional insureds underthe policies and the policies shall provide that they may not be cancelled as toany coverage with respect to any of them, except after thirty (30) days’ writtennotice to Non-Operator and CONSOL Energy, Inc. and the policies shall alsoprovide a waiver of subrogation rights in favor of Non-Operator and its members,CNX Gas Company, LLC (and its members) and New River Energy, LLC (and itsmembers) and CONSOL Energy, Inc., and their directors, officers and employees. In the event Operator is unable, or fails, to obtain ormaintain any of the insurance coverage described above, Operator shall giveNon-Operator notice thereof as soon as reasonably possible and in such event,Operator shall immediately cease conducting any activities on the propertysubject to the Leases until such time as Operator obtains such coverage unlesssuch inability, or failure, results from insurance companies licensed to dobusiness in Tennessee not generally offering such coverage. If Operator isunable, or fails, to obtain or maintain any of the insurance coverage describedabove for a period of thirty (30) days, Non-Operator shall have the right toimmediately terminate the right of Operator to thereafter drill any Well and,except as set forth in the third paragraph of Section 2.8 hereof, the right orobligation of Operator to participate in any Well drilled thereafter, uponsending written notice to Operator unless such inability, or failure, resultsfrom insurance companies licensed to do business in Tennessee not generallyoffering such coverage or unless one or more subcontractors of Operator who havesuch coverage conduct, to the exclusion of Operator, all activities on theproperty subject to the Leases to fulfill all obligations of Operator hereunderto be performed on such property and Operator provides to Non-Operator withinsuch thirty (30) day period a certificate of such insurance coverage of suchsubcontractor(s); – 13 – (d) Comply with all requirements of applicable federal, stateand local laws, and all regulations pursuant thereto, including, but not limitedto, (i) obtaining all permits and approvals required from any governmental orregulatory authority or agency for the drilling and other activities which arethe subject hereof, (ii) duly complying with all environmental and other similarlaws and regulations relating to well drilling operations and associatedearthmoving activities and with the terms of any orders issued by anygovernmental or regulatory authority or agency having jurisdiction with respectthereto, and (iii) filing all reports required to be filed with any governmentalor regulatory authority or agency in connection with the drilling and otheractivities which are the subject hereof. If Operator and/or any of itssubcontractors repeatedly violate the material provisions of applicable federal,state or local law, or of regulations pursuant thereto, and fail to cure suchviolations in a timely manner, Non-Operator shall have the right to immediatelyterminate the right of Operator to thereafter drill any Well and, except as setforth in the third paragraph of Section 2.8 hereof, the right or obligation ofOperator to participate in any Well drilled thereafter, upon sending to Operatorwritten notice setting forth such violations. Fines imposed as a result ofOperator and/or its subcontractors violating applicable federal, state or locallaw, or of regulations pursuant thereto, shall be payable solely by Operatorunless such violations do not result from a breach by Operator of itsobligations under paragraph (f) below, in which event Operator and Non-Operatorshall each pay its Proportionate Share of such fines; (e) Comply with all of the provisions of the Leases, and takeall actions required to keep the Leases in full force and effect, with respectto its operations hereunder; and (f) Perform its duties under this Agreement as a reasonableprudent operator, in a good and workmanlike manner, with due diligence anddispatch, in accordance with good oil field practice. Operator agrees toindemnify and hold Non-Operator, its employees, directors and affiliatesharmless from any third-party suits, claims, damages or actions related to theperformance of its duties hereunder except to the extent that such suits,claims, damages or actions arise from the negligence of Non-Operator. Except forthe indemnification provided in this paragraph (f), no party shall beresponsible to the other party for any special, indirect, consequential, lostprofit or punitive damages regardless of the type of breach (financially relatedor non-financially related). 6. Marketing of Natural Gas and Oil ——————————– 6.1 The Operator shall use commercially reasonable efforts to sell,upon such terms and conditions as it shall in its reasonable discretion deemadvisable, all natural gas and oil produced from the Wells, exclusive of anyproduction which may be used in development and producing operations and anyproduction lost due to loss or shrinkage or used in compression of natural gasor in preparing and treating oil for marketing. At least ten (10) days prior toentering into any agreement with respect to the sale of natural gas and/or oilproduced from the Wells, Operator shall furnish a copy of such agreement toNon-Operator. Unless Non-Operator notifies Operator in writing, within ten (10)days after receipt by Non-Operator of such agreement, that Non-Operator elects,pursuant to Section 6.2 hereof, to receive in kind its Proportionate Share ofthe production from the Wells, as well as the overriding royalty of Non-Operatorset forth in Section 2.6 hereof, Operator shall be authorized to sellNon-Operator’s Proportionate Share of the production from the Wells, as well assuch overriding royalty, pursuant to the terms and provisions of such agreement.Any such agreement shall be executed by Operator as agent for the Non-Operator,and the Non-Operator hereby appoints Operator as its agent and attorney-in-factfor such purpose and shall designate Operator as the payee of the gross proceeds – 14 -from the sale of natural gas and oil under such agreement so long as theOperator shall act as Operator hereunder. Notwithstanding anything to thecontrary contained in this Agreement, unless agreed to otherwise by Non-Operatorin writing, Operator shall have no authority to sell, and shall not sell,Non-Operator’s Proportionate Share of the natural gas produced from the Wellsexcept for a floating price determined daily or monthly based upon the commodityprice of natural gas as reflected in the future prices on the New YorkMercantile Exchange or a nationally recognized commodities index; Operator willuse reasonable efforts to notify Non-Operator if it intends to sell Operator’sProportionate Share of the natural gas produced from the Wells at a price otherthan set forth above, the parties recognizing, however, that such notice may begiven immediately before such sale because of market and other factors. Anyauthority delegated to the Operator to sell Non-Operator’s Proportionate Shareof the production from the Wells shall be limited to a period of time not inexcess of the minimum needs of the industry and in no event for more than oneyear unless agreed to in writing by Non-Operator. Operator shall be solely responsible for the payment of any and allcharges imposed by a pipeline or other transporter of natural gas which is toreceive natural gas produced from the Wells at its connection with the CoalfieldPipeline and which arise from an imbalance between (i) quantities of natural gasproduced from the Wells and nominated by Operator for delivery to such pipelineor other transporter and (ii) quantities of such natural gas actually delivered;provided, however, that Operator shall have no such responsibility, andNon-Operator shall bear its Proportionate Share of any and all such charges, ifthe imbalance results from “force majeure” (as such term is defined in Section14.1 hereof) or any other cause except the negligence of Operator. 6.2 Notwithstanding anything to the contrary contained in thisAgreement, the Non-Operator shall own its Proportionate Share of the Wells andthe natural gas and oil which is produced therefrom, and shall have, and mayexercise, at any time and from time to time, its right and privilege to receivein kind its Proportionate Share of the production from the Wells, as well as theoverriding royalty of Non-Operator set forth in Section 2.6 hereof, and make asale thereof for its own account, provided, however, that if Non-Operatorexercises its right and privilege to take in kind, such exercise shall be forone hundred percent (100%) of its Proportionate Share of the natural gasproduction from the Wells, as well as the natural gas overriding royalty ofNon-Operator set forth in Section 2.6 hereof and Non-Operator shall use its bestefforts to actually take in kind one hundred percent (100%) of such natural gasproduction and overriding royalty and provided further, that Non-Operator shallbe responsible for the payment of all costs and expenses incurred byNon-Operator, Operator or otherwise in connection with Non-Operator’s receipt inkind and failure, if any, to take in kind one hundred percent (100%) of suchnatural gas production and overriding royalty. Additionally, if Non-Operatorexercises its right and privilege to receive in kind its Proportionate Share ofthe natural gas production from the Wells, as well as the natural gas overridingroyalty of Non-Operator set forth in Section 2.6 hereof, to the extent Operatorhas the right, whether exclusive or otherwise, to have natural gas produced fromthe Wells compressed and transported through the Coalfield Pipeline, suchnatural gas production and overriding royalty of Non-Operator shall be deliveredby Operator into the Coalfield Pipeline on the same basis as all other naturalgas production from the Wells. 6.3 Operator shall distribute to Non-Operator on a monthly basisNon-Operator’s Proportionate Share of the Net Revenues from the Wells receivedby Operator and the overriding royalties payable to Non-Operator pursuant toSection 2.6 hereof unless Non-Operator receives in kind, as set forth in Section6.2 hereof, its Proportionate Share of the production from the Wells and/or theoverriding royalty of Non-Operator set forth in Section 2.6 hereof. 6.4 The balancing of the Proportionate Shares of Operator andNon-Operator of natural gas produced from the Wells, as well as the OverridingRoyalty of Non-Operator taken in kind, shall be governed by the terms andprovisions of the Gas Balancing Agreement attached hereto as Exhibit E and madea part hereof. – 15 – 7. Superintendence and Maintenance of the Wells; Operator’s Fee and Other Charges —————————————————————- 7.1 In addition to its other obligations hereunder, the Operator,shall be responsible for superintendence and maintenance of the Wells, ifproductive. In particular, and without limiting the generality of the foregoing,the Operator shall take the following actions with respect to each Well: (a) The Well shall remain connected to its transmission,gathering or other pipeline system, as appropriate, at all times, except to theextent disconnection is required: (i) For repairs to the Well or associated facilities; (ii) To accommodate surface or other coal miningoperations where the surface or other coal mining rights have priority over theoil and gas exploration and production rights; and (iii) To accommodate timbering operations where the timberrights have priority over the oil and gas exploration and production rights. (b) In the event the Well is disconnected for repairs,reconnection shall be made promptly following the completion of such repairs(after authorization from the Gas Purchaser, if required); (c) Appropriate shut-in pressure tests are conducted withrespect to the Well; (d) All metering, valves and other wellhead equipment arechecked regularly and maintained in good condition; and (e) The Well is kept in good condition for the production ofnatural gas and oil. 7.2 The number of employees required for the discharge of theOperator’s superintendence and maintenance responsibilities hereunder and theirselection and hours of labor shall be determined by the Operator, in its soleand absolute discretion. 7.3 In lieu of any direct charges by the Operator for the servicesof the Operator or any of its employees or subcontractors required forsuperintendence and maintenance of the Wells under this Agreement, ifproductive, and in lieu of any accounting, bookkeeping and distributionexpenses, the Operator shall be entitled to receive payment from Non-Operator ofits Proportionate Share of the rate of Two Hundred Twenty-Five Dollars ($225) – 16 -per month per Well (the “Operator’s Fee”), commencing with the first month orpart thereof that the Well is in production and continuing for each monththereafter whether or not the Well shall be in production, provided, however,that no Operator’s Fee shall be charged for any month during which the Well isshut-in for the entire month for reasons other than repair or maintenance. Suchamount is intended to compensate the Operator for the services supplied byOperator, its personnel and the personnel of any subcontractors engaged byOperator but excluding any allowance for materials, supplies, or the use ofOperator’s equipment. Notwithstanding the foregoing, in the event that it shallbe necessary for Operator to incur unusual or extraordinary expenses in theoperation of the Wells, such as in the case of a Well whose productivity of oilis such as to require intensive supervision, such additional expenses shall bedeemed to be an Operating Expense. The Operator’s Fee at the rate of Two Hundred Twenty-Five Dollars($225) per month per Well shall be fixed at such amount until December 31, 2007.The Operator’s Fee may be adjusted as of January 1, 2008 for the periodbeginning on such date and ending on December 31, 2008 and thereafter may beadjusted annually for the periods beginning January 1 of a year and endingDecember 31 of the same year. The adjustment shall be computed by multiplyingthe Operator’s Fee currently in effect by the percentage increase or decrease,if any, recommended by the Council of Petroleum Accountants Societies (“COPAS”)each year and the adjusted Operator’s Fee shall be the Operator’s Fee currentlyin use plus or minus the adjustment, provided, however, that the adjustedOperator’s Fee shall never be less than Two Hundred Twenty-Five Dollars ($225)per month per Well. 8. Costs and Expenses; Plugging Reserve Account ——————————————– 8.1 The Operator shall cause all Operating Expenses to be promptlypaid and discharged and Non-Operator shall be responsible for payment of itsProportionate Share of all Operating Expenses. In the event the Operator shallhave paid any Operating Expenses with respect to the Wells out of its own funds,Non-Operator’s Proportionate Share of the amounts thereof shall be reimbursed bythe Non-Operator to the Operator within thirty (30) days after receipt of astatement therefor to the extent Non-Operator’s Proportionate Share of suchOperating Expenses exceeds its Proportionate Share of the Net Revenues from theWells received by Operator. Additionally, Non-Operator’s Proportionate Share ofthe Operating Fee for the Wells shall be paid by the Non-Operator to theOperator within thirty (30) days after receipt of a statement therefore to theextent Non-Operator’s Proportionate Share of the Operator’s Fee for the Wellsexceeds its Proportionate Share of the Net Revenues from the Wells received byOperator. Operator is authorized hereby to establish a reasonable reserve fromthe revenues of the Wells in order to defray the Operator’s Fee and reasonablyanticipated Operating Expenses associated with the Wells and to deposit thefunds reserved in a separate and segregated interest-bearing reserve account(the “Operating Reserve Account”), provided, that the funds in the OperatingReserve Account (including accrued interest) shall not exceed Two ThousandDollars ($2,000) for any Well or Fifty Thousand Dollars ($50,000) in theaggregate for all Wells. Non-Operator hereby grants unto Operator a securityinterest or lien and right to off-set in the revenues of the Wells to secureOperator in the payment of Operating Expenses and the Operator’s Fee. 8.2 The Operator shall further pay promptly all charges for laborand materials which it incurs in performing its duties under this Agreement,whether or not the same are chargeable to the Non-Operator, and shall not,providing that all amounts due to Operator hereunder shall have been timely paidand shall not be in default in any respect, permit any liens for such labor -17 -and/or materials to be filed by any person against the Non-Operator’s interestsin the Wells or, if filed, shall take prompt action to have the same removed. 8.3 Notwithstanding anything to the contrary contained in thisAgreement, if after a Well has been placed into production for natural gasand/or oil, the Operator shall reasonably determine that the Well has becomeincapable of producing natural gas and/or oil in commercial quantities, theOperator may notify the Non-Operator of the fact of such non-productivity and ofOperator’s intention to plug and abandon, and the reasons for plugging andabandoning, the Well in accordance with the laws and regulations of the State ofTennessee. After sixty (60) days have expired from the date of mailing suchnotice, Operator may plug and abandon the Well. Operator shall first utilize thefunds in the Plugging Reserve Account (as defined in Section 8.4 hereof) to paythe costs of plugging and abandoning the Well. In the event the amounts in thePlugging Reserve Account are insufficient to pay all of the costs of pluggingand abandoning the Well, then Operator shall invoice the Non-Operator forNon-Operator’s Proportionate Share of the additional amounts (which shall be anOperating Expense) needed to pay such costs in full and the Non-Operator shallremit to Operator the Non-Operator’s Proportionate Share of such additionalamounts within thirty (30) days after receipt of an invoice from Operatortherefor, it being understood and agreed that in no event will Non-Operator beresponsible or liable for any costs to plug and abandon a Well beyond itsProportionate Share of such Well. Notwithstanding the foregoing, in the eventthe Non-Operator desires that the Well not be plugged and abandoned, it shall,within said sixty (60) day period, serve upon Operator a written noticerequesting the resignation of the Operator as to the Well. Such notice shalldesignate a new operator for the Well, and shall be accompanied by evidence ofan operator’s bond with respect to the Well. Such notice shall also beaccompanied by (i) a written agreement, signed by the Non-Operator, agreeing toassume the operation of the Well through the newly designated operator andrelieving and discharging Operator of all further responsibility in connectionwith the operation or plugging and abandonment of the Well except for acts oractivities occurring prior to the effective date of such notice and (ii) paymentto Operator and other working interest owners of their Proportionate Share ofthe then fair market value of the salvageable casing, tubing and fixtures of theWell. After the Well is placed under the bond of the new operator, Operator andthe other working interest owners shall promptly transfer to Non-Operator all oftheir rights, titles and interests in and to the Well and the Well Acreage onwhich the Well is drilled and shall promptly transfer to the new operator theNon-Operator’s Proportionate Share of the funds in the Plugging Reserve Accountattributable to the Well. 8.4 (a) Operator shall have the right to retain as an OperatingExpense, on a monthly basis, a portion of the Net Revenues (the “PluggingFunds”) for the payment of the anticipated future costs of plugging andabandoning Wells when the plugging and abandonment of one or more Wells becomesnecessary in the opinion of the Operator, in its reasonable discretion. ThePlugging Funds shall be placed in a separate and segregated interest-bearingreserve account for the Wells (the “Plugging Reserve Account”). The Operatorshall maintain an accounting system that will allow identification of thePlugging Funds which have been paid in for each Well, provided, however, thatNon-Operator’s Proportionate Share of the Plugging Funds for any Well may beused to pay Non-Operator’s Proportionate Share of the costs of plugging andabandoning any other Well. The amount of the Plugging Funds to beretained.monthly shall be determined by the Operator, acting in good faith,taking into account the following factors: (i) The anticipated life of the Well; – 18 – (ii) The anticipated costs of plugging and abandoning the Wellin accordance with all applicable statutes, codes and regulations at the end ofthe useful life of the Well; (iii) The effect of compounded interest upon amounts depositedinto the Plugging Reserve Account for the Well; and (iv) Any other factors which Operator reasonably deemsrelevant. (b) As of the date of this Agreement: (i) Operator has determined that after the first year ofproduction from a Well four percent (4%) of the monthly Net Revenues from suchWell, not to exceed Two Hundred Dollars ($200) for any month, will be placed inthe Plugging Reserve Account; and (ii) Operator has determined that such amount will be placedinto the Plugging Reserve Account until the principal sum (including accruedinterest) is equal to Ten Thousand Dollars ($10,000) for each Well. The Operator reserves the right to revise the monthly withholdingamounts and/or the total amounts set forth above when, acting in good faith, theOperator determines, taking into account the factors set forth in Section 8.4(a)above, that such amounts must be adjusted upward or downward in order to providefor the payment in full of the future plugging and abandonment costs of theWells. (c) Should the Operator determine, in its reasonable discretion,that at the time it becomes necessary to plug and abandon Wells, insufficientfunds for such abandonment and plugging are on deposit in the Plugging ReserveAccount, the Operator shall invoice the Non-Operator for its Proportionate Shareof the additional sums needed to plug and abandon the Wells, and such additionalsums shall be considered Operating Expenses under the terms of this Agreement,and Non-Operator shall pay such invoice within thirty (30) days after receipt. Should the Operator determine, in its reasonable discretion, thatfunds, including accrued interest, in the Plugging Reserve Account exceed theamount necessary to plug and abandon the Wells, the Operator shall, upon suchdetermination, refund to the Non-Operator and other working interest ownerstheir Proportionate Shares of such excess funds, provided, however, that norefund will be made to the extent it would reduce the funds, including accruedinterest, in the Plugging Reserve Account below Ten Thousand Dollars ($10,000)for any Well. (d) Non-Operator’s Proportionate Share of the interest accrued onthe Plugging Reserve Account shall be allocated as income to the Non-Operator. 9. Additional Operations ——————— 9.1 Without the prior consent of the Non-Operator, no expenditurein excess of Ten Thousand Dollars ($10,000) shall be made relating to any Wellin which Non-Operator has a working interest except the initial drilling andcompletion of such Well. – 19 – 9.2 Notwithstanding the foregoing, the Operator shall beauthorized, without being required to obtain the consent of the Non-Operator, inthe case of explosion, fire, flood, or discharge or release of any hydrocarbonor other hazardous substance which requires immediate remediation, or othersudden emergency whether of the same or different nature, to take such steps andincur such expenses as in its opinion are required to deal with the emergencyand to safeguard life and property. In such event, the Operator shall promptlynotify the Non-Operator of the matter which gave rise to the expenditures madeby the Operator and account to the Non-Operator for all such expenditures andsuch expenditures, once accounted for, shall be deemed to be an OperatingExpense unless the matter which gave rise to the expenditure resulted from thenegligence of the Operator. 9.3 Notwithstanding the foregoing, in the event that Operator shallpropose to make an expenditure with respect to a Well in excess of the amountspecified in Section 9.1 hereof and in the event that Non-Operator owns lessthan a fifty percent (50%) working interest in the Well, such proposedexpenditure may nevertheless be made and any party advancing any fundsattributable to the interest of Non-Operator may recoup an amount equal to twohundred percent (200%) of such funds from the Net Revenues of the Wellattributable to the interest of Non-Operator before any further distributionsshall be made from the Net Revenues of the Well to Non-Operator. 10. Non-Operator’s Access; Audit —————————- 10.1 The Non-Operator shall have access to the Wells and to anyinformation in the possession of the Operator pertaining to the Wells, and shallbe entitled to inspect and observe operations of every kind and character uponthe property covered by the Lease. 10.2 Upon reasonable notice to the Operator and at times mutuallyconvenient to the parties hereto, the Non-Operator shall also have access to,and is entitled to receive copies of, the records and other documents on file atthe Operator’s office relating to the drilling, completion and operation of theWells, including all Well logs and production records. In addition, during thedrilling and completion of a Well, such number (as the Non-Operator or itsdesignated agent may reasonably request) of copies of drilling reports, logs,completion reports and other data produced in connection with such activitiesshall be made available and provided to the Non-Operator or such agent, as theyare produced or promptly thereafter. 10.3 The Non-Operator shall have the right, at its own cost andexpense and not more frequently than once in each calendar year, to have anindependent audit made of the books and records of Operator to verify, for thepreceding two (2) calendar years, all Drilling Costs and Operating Expensescharged to Non-Operator, the production of natural gas and oil from the Wellsand the proceeds of the sale or other disposition of such natural gas and oilproduction, the royalties and overriding royalties paid with respect to suchproduction and the recoupment of delay rentals, minimum royalties and otheramounts as set forth in Section 3.2 hereof and the funds (including accruedinterest) in the Operating Reserve Account and the Plugging Reserve Account. 11. Term and Termination ——————– 11.1 This Agreement shall commence upon the effective date hereofand shall remain in full force and effect with respect to each Well until suchtime as such Well is abandoned and plugged in accordance with the laws andregulations of the State of Tennessee. – 20 – 11.2 In the event that the Non-Operator shall, in good faith,determine that Operator is in substantial or material breach of the duties andobligations imposed upon Operator by this Agreement, then the Non-Operator shallgive Operator written notice thereof specifying the event or events of defaultto be cured by Operator. In the event that Operator has substantially ormaterially breached the duties and obligations imposed upon the Operator by thisAgreement, Operator shall then have a period of ninety (90) days after receiptof said written notice of default to cure such breach or default, or in which toimplement a plan of action which, if taken to its natural conclusion andcontinuously prosecuted, would cure such breach or default. In the event thatOperator cures such breach or default or implements a plan of action which, iftaken to its natural conclusion and continuously prosecuted, would cure suchbreach or default, the Non-Operator shall not have the right to substitute a newoperator. In the event that Operator upon the expiration of the aforesaid ninety(90) day cure period has not cured such breach or default, and/or has notimplemented a plan of action which, if taken to its natural conclusion andcontinuously prosecuted, would cure such breach or default or if Operator hasfailed to continuously prosecute such plan of action, the Non-Operator maysubstitute a new operator. 11.3 After the Initial Period and, if applicable, after the OptionPeriod, Operator shall have the right to resign as Operator hereunder on ninety(90) days’ written notice to the Non-Operator, in which event the Non-Operatorshall appoint a new operator, provided, however, that if Non-Operator is unable,after having made reasonable efforts, to appoint a new operator within suchninety (90) day period, such period shall be extended for such additional timeas Non-Operator continuously and diligently seeks the appointment of a newoperator. Upon the effective date of such resignation, Operator shall have nofurther responsibility hereunder and shall, except for acts or activitiesoccurring prior to such effective date, have no liability for any loss to theNon-Operator as a result of Operator’s resignation. 11.4 In the event that Operator shall, for any reason, cease to bethe Operator hereunder, the Non-Operator shall promptly furnish a bond in formand substance satisfactory for the operation of natural gas and oil wells andshall cause the Wells to be transferred and placed under Non-Operator’s bond, orthe Non-Operator may designate a properly bonded new operator. Promptly afterall Wells are placed under the bond of Non-Operator or the new operator,Operator shall transfer to the Non-Operator or the new operator, as the case maybe, all funds in the Operating Reserve Account and the Plugging Reserve Account.Thereafter, Operator shall be deemed a non-operator hereunder with respect tothe interests in the Wells owned by it, or by any affiliate or by any limitedpartnership or other entity from which Operator received funds to drill Wells,with all the rights and liabilities of a non-operator hereunder relating to suchinterests, provided, however, that neither Operator nor any such affiliate,limited partnership or other entity shall have any right to participate in anyWells drilled thereafter, although Operator may have the obligation underSection 2.8 hereof to participate in one or more such Wells. Additionally, if Operator is no longer the operator hereunder,Non-Operator or the new operator, as the case may be, shall have no obligationor other liability to account for any matter relating to the Wells to anyaffiliate of Operator or to any limited partnership or other entity from whichOperator received funds to drill Wells, or to distribute to any such affiliate,limited partnership or other entity, any Net Revenues from such Wellsattributable to the interests in such Wells of any such affiliate, limitedpartnership or other entity. Non-Operator or the new operator, as the case maybe, shall account for matters relating to the Wells only to Operator and shall – 21 -make distributions of such Net Revenues only to Operator, who in turn shallaccount, and make distributions of such Net Revenues, to such affiliates,limited partnerships and other entities. 12. Contract Not Assignable ———————– 12.1 Except as set forth in Section 2.10 hereof, neither theOperator nor the Non-Operator shall assign its obligations or rights hereunderbut Operator shall have the right to subcontract for the performance of all orany portion of the work to be performed by Operator hereunder. 13. Relationship; Internal Revenue Code Election ——————————————– 13.1 None of the rights, duties, or obligations of the partieshereto or terms hereof shall be construed as creating a joint venture, apartnership, nor any other legal entity whereby one party is responsibleindividually for all debts, liabilities or charges incurred in connection withthe drilling, completion, operation or abandonment of the Wells or any otheractivities contemplated hereby; each of the parties hereto shall be responsibleonly for its Proportionate Share of such debts, liabilities or charges. 13.2 The parties by their execution of this Agreement hereby assertthat this Agreement and the activities contemplated hereby shall not constitutea partnership under the Internal Revenue Code of 1986, as amended (the “Code”);nevertheless, the parties elect, under the authority of Section 761 of the Code,to be excluded from the application of all of the provisions of Subchapter K ofChapter I of Subtitle A of the Code (“Subchapter K”). If future income tax lawsof the United States, or the present or future income tax laws of Tennessee,contain provisions similar to those contained in Subchapter K under which asimilar election is permitted, the parties agree that such election shall beexercised. The Non-Operator authorizes and directs the Operator to execute onbehalf of Non-Operator such evidence of this election as may be required by theUnited States Treasury Department or the Internal Revenue Service, includingspecifically, but not by way of limitation, all of the returns, statements anddata required by Treasury Regulations Section 1.761. Should there be anyrequirement that any party affected hereby give further evidence of thiselection, such party shall execute such documents and furnish such otherevidence as may be required by the Internal Revenue Service as may be necessaryto evidence this election. No party shall give any notices or take any otheraction inconsistent with the election made hereby. Should a gas imbalance arisewhere a party does not take its Proportionate Share of production from a Welland another person, corporation or other entity takes more than itsProportionate Share of such production, then the party which does not take itsProportionate Share shall use the “cumulative gas balancing method” as describedin Treasury Regulation Section 1.761-2(d) for purposes of accounting for suchimbalance. The parties agree to report their shares of the items of income,deductions and credits associated with the Wells in a manner consistent withexclusion from the application of the provisions of Subchapter K. 14. Force Majeure ————- 14.1 If any party is rendered unable, wholly or in part, by forcemajeure to carry out its obligations under this Agreement, other than theobligation to make money payments or furnish security, that party shall give tothe other party prompt written notice of the force majeure with reasonably fullparticulars concerning it; thereupon, the obligations of the party giving thenotice, so far as they are affected by the force majeure, shall be suspendedduring, but no longer than, the continuance of the force majeure. The term”force majeure”, as here employed, shall mean an act of God, strike, lockout, or – 22 -other industrial disturbance, act of the public enemy, war, blockade, publicriot, lightning, fire, storm, flood or other act of nature, explosion,governmental action, governmental delay, restraint or inaction, unavailabilityof equipment, and any other cause, whether of the kind specifically enumeratedabove or otherwise, which is not reasonably within the control of the partyclaiming suspension; provided, however, that unavailability of equipment shallnot constitute “force majeure” for purposes of this Agreement with respect tothe drilling, as set forth in Section 2.8 hereof, of the minimum number of Wellsset forth in the Leases to keep such Leases in full force and effect during theInitial Period and, if applicable, during the Option Period. The affected party shall use all reasonable diligence to remove theforce majeure situation as quickly as practicable. The requirement that anyforce majeure shall be remedied with all reasonable dispatch shall not requirethe settlement of strikes, lockouts, or other labor difficulty by the partyinvolved, contrary to its wishes; how all such difficulties shall be handledshall be entirely within the discretion of the party concerned. 15. Notices ——- 15.1 All notices or other correspondence required or made necessaryby the terms of this Agreement shall be in writing and shall be considered ashaving been given to a party (i) if given by telecopy, at the time the telecopyis transmitted to the following telecopier numbers and the appropriate answerback is received or receipt is otherwise confirmed, (ii) if given by mail, two(2) business days after being mailed by registered or certified mail, postageprepaid, to the following addresses, or (iii) if given by any other means(including but not limited to overnight delivery), when delivered at thefollowing addresses: (a) Operator: Atlas America, Inc. 311 Rouser Road Moon Township Coraopolis, PA 15108 Attention: Frank Carolas Telecopier No.: (412) 262-3927 (b) Non-Operator: Knox Energy, LLC P.O. Box 947 Bluefield, VA 24605 Attention: Claude Morgan Telecopier: (276) 988-1076 with a copy to: Knox Energy, LLC 132 Mitchell Road Oak Ridge, TN 37830 Telecopier No.: (865) 481-3896 – 23 -Each party shall have the right to change its address at any time, and from timeto time, by giving written notice thereof to the other party. 16. Governing Law ————- 16.1 This Agreement shall be governed by and construed inaccordance with the laws of the Commonwealth of Pennsylvania, without givingeffect to the principles of conflicts of laws of the Commonwealth ofPennsylvania, provided, however, that as to real property issues, this Agreementshall be governed by and construed in accordance with the laws of the State ofTennessee, without giving effect to the principles of conflicts of laws of theState of Tennessee. 17. Successors in Interest ———————- 17.1 Each and all of the covenants, agreements, terms andprovisions of this Agreement shall be binding on and inure to the benefit of theparties hereto and their successors and assigns. 18. Integration; Amendment; Interpretation ————————————– 18.1 This Agreement constitutes the entire agreement between theparties pertaining to the subject matter hereof and supercedes all prior andcontemporaneous agreements and understandings of the parties in connectionherewith. Any amendment or supplement made hereto shall be in writing and signedby all parties. The headings contained in this Agreement are for referencepurposes only and shall not affect in any way the meaning or interpretation ofthis Agreement. Terms such as “herein”, “hereby”, “hereto”, “hereunder”, and”hereof” refer to this Agreement as a whole. 19. Severability ———— 19.1 If any term or other provision of this Agreement is invalid,illegal or incapable of being enforced by any rule of law or public policy, allother terms and provisions of this Agreement shall nevertheless remain in fullforce and effect so long as the economic or legal substance of the transactionscontemplated hereby is not affected in any manner adverse to any party. Upon anybinding determination that any term or other provision is invalid, illegal orincapable of being enforced, the parties hereto shall negotiate in good faith tomodify this Agreement so as to effect the original intent of the parties asclosely as possible in an acceptable and legally enforceable manner, to the endthat the transactions contemplated hereby may be completed to the fullest extentpossible. 20. Waivers ——- 20.1 No waiver by any party of any default hereunder by any otherparty shall operate as a waiver of any other default or of the same default on asubsequent occasion. No failure to exercise, and no delay in exercising, by anyparty of any power, remedy or right shall operate as a waiver thereof, nor shallany single or partial exercise of any power, remedy or right preclude other orfurther exercise thereof or the exercise of any other power, remedy or right.All powers, rights and remedies may be asserted concurrently, cumulatively,successively or independently from time to time. – 24 – 21. Further Assurances —————— 21.1 The parties agree to promptly execute and deliver, or cause tobe executed and delivered, at such times as shall be reasonably requested, anyadditional instrument or take any further action as may be reasonably necessaryor appropriate that any party may reasonably request for the purpose of carryingout the transactions contemplated by, and the purposes and intents of, thisAgreement. 22. Attorneys’ Fees ————— 22.1 In any dispute among the parties hereto arising under thisAgreement, the prevailing party shall be entitled to recover from the otherparty its reasonable attorney fees and other reasonable costs of litigation inaddition to all other remedies. 23. Public Statements —————– 23.1 Neither party shall make any statements or releases to thegeneral public relating to this Agreement or the activities conducted pursuanthereto without the permission of the other party, not to be unreasonablywithheld, except (i) in filings required of either Operator or its parent,Resource America, Inc., or any affiliate of either of them, under federalsecurities laws, rules and regulations, or under the laws, rules, regulations orordinances of the United States or any other jurisdiction, or by any federal,state or local governmental or regulatory authority or agency, (ii) disclosurerequired by the rules, regulations or policies of any stock exchange orautomated interdealer quotation system on which any securities of Operator orthe parent of Operator, or any affiliate of either of them, may be listed, or(iii) if compelled to do so in any legal proceeding or otherwise. 24. Counterpart; Fax —————- 24.1 This Agreement may be executed in any number of counterparts,each of which shall be deemed an original and all of which together shallconstitute but one and the same agreement. It is agreed by the parties thatfacsimile signature pages signed by the parties shall be binding to the sameextent as original signature pages. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] – 25 – IN WITNESS WHEREOF, the parties have caused their names to be signedhereto by their proper officers duly authorized all as of the day and year firsthereinabove written. OPERATOR:WITNESS: ATLAS AMERICA, INC., a Pennsylvania corporation___________________________ By:__________________________________ Name:________________________________ Title:_______________________________ NON-OPERATOR: KNOX ENERGY, LLC By its members:WITNESS: CNX Gas Company, LLC, a Virginia limited liability company___________________________ By:__________________________________ Name:________________________________ Title:_______________________________WITNESS: New River Energy, LLC, a Tennessee limited liability company___________________________ By:__________________________________ Name:________________________________ Title:_______________________________ – 26 –