Document:

Exhibit 4.2

EXHIBIT 4.2

AMENDED AND RESTATED

CERTIFICATE AND AGREEMENT OF

LIMITED PARTNERSHIP

FOR ATLAS RESOURCES SERIES 28-2010 L.P.

 

 

 

EXHIBIT (A)

FORM OF

AMENDED AND RESTATED CERTIFICATE

AND AGREEMENT OF LIMITED PARTNERSHIP

FOR

ATLAS RESOURCES SERIES 28-2010 L.P.

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	Section No.	 	Description	 	Page	 
	 	 	 
	 	 	 	 
	I.	 	FORMATION
	 	 	 	 
	 	 	1.01 Formation
	 	 	1	 
	 	 	1.02 Certificate of Limited Partnership
	 	 	1	 
	 	 	1.03 Name, Principal Office and Residence
	 	 	1	 
	 	 	1.04 Purpose
	 	 	1	 
	 	 	 
	 	 	 	 
	II.	 	DEFINITION OF TERMS
	 	 	 	 
	 	 	2.01 Definitions
	 	 	2	 
	 	 	 
	 	 	 	 
	III.	 	SUBSCRIPTIONS AND FURTHER CAPITAL CONTRIBUTIONS
	 	 	 	 
	 	 	3.01 Designation of Managing General Partner and Participants
	 	 	11	 
	 	 	3.02 Participants
	 	 	11	 
	 	 	3.03 Subscriptions to the Partnership
	 	 	11	 
	 	 	3.04 Capital Contributions of the Managing General Partner
	 	 	13	 
	 	 	3.05 Payment of Subscriptions
	 	 	14	 
	 	 	3.06 Partnership Funds
	 	 	14	 
	 	 	 
	 	 	 	 
	IV.	 	CONDUCT OF OPERATIONS
	 	 	 	 
	 	 	4.01 Acquisition of Leases
	 	 	15	 
	 	 	4.02 Conduct of Operations
	 	 	17	 
	 	 	4.03 General Rights and Obligations of the Participants and Restricted and Prohibited Transactions
	 	 	21	 
	 	 	4.04 Designation, Compensation and Removal of Managing General Partner and Removal of Operator
	 	 	29	 
	 	 	4.05 Indemnification and Exoneration
	 	 	32	 
	 	 	4.06 Other Activities
	 	 	34	 
	 	 	 
	 	 	 	 
	V.	 	PARTICIPATION IN COSTS AND REVENUES, CAPITAL ACCOUNTS, ELECTIONS AND DISTRIBUTIONS
	 	 	 	 
	 	 	5.01 Participation in Costs and Revenues
	 	 	35	 
	 	 	5.02 Capital Accounts and Allocations Thereto
	 	 	39	 
	 	 	5.03 Allocation of Income, Deductions and Credits
	 	 	40	 
	 	 	5.04 Elections
	 	 	42	 
	 	 	5.05 Distributions
	 	 	43	 
	 	 	 
	 	 	 	 
	VI.	 	TRANSFER OF UNITS
	 	 	 	 
	 	 	6.01 Transferability of Units
	 	 	44	 
	 	 	6.02 Special Restrictions on Transfers of Units by Participants
	 	 	44	 
	 	 	6.03 Presentment
	 	 	46	 
	 	 	6.04 Redemption of Units from Non-Citizens
	 	 	48	 
	 	 	 
	 	 	 	 
	VII.	 	DURATION, DISSOLUTION, AND WINDING UP
	 	 	 	 
	 	 	7.01 Duration
	 	 	48	 
	 	 	7.02 Dissolution and Winding Up
	 	 	48	 
	 	 	 
	 	 	 	 
	VIII.	 	MISCELLANEOUS PROVISIONS
	 	 	 	 
	 	 	8.01 Notices
	 	 	49	 
	 	 	8.02 Time
	 	 	50	 
	 	 	8.03 Applicable Law
	 	 	50	 
	 	 	8.04 Agreement in Counterparts
	 	 	50	 
	 	 	8.05 Amendment
	 	 	50	 
	 	 	8.06 Additional Partners
	 	 	51	 
	 	 	8.07 Legal Effect
	 	 	51	 

EXHIBITS

	 	 	 	 	 
	EXHIBIT (I-A)

	 	—
	 	Form of Managing General Partner Signature Page
	EXHIBIT (I-B)

	 	—
	 	Form of Subscription Agreement
	EXHIBIT (II)

	 	—
	 	Form of Drilling and Operating Agreement

 

i

 

FORM OF AMENDED AND RESTATED CERTIFICATE AND AGREEMENT OF

LIMITED PARTNERSHIP FOR ATLAS RESOURCES SERIES 28-2010 L.P.

THIS AMENDED AND RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP (“AGREEMENT”), amending
and restating the original Certificate of Limited Partnership, is made and entered into as of the
date set forth below, by and among Atlas Resources, LLC, referred to as “Atlas” or the “Managing
General Partner,” and the remaining parties from time to time signing a Subscription Agreement for
Limited Partner Units, these parties sometimes referred to as “Limited Partners,” or for Investor
General Partner Units, these parties sometimes referred to as “Investor General Partners.”

ARTICLE I

FORMATION

1.01. Formation. The parties have formed a limited partnership under the Delaware Revised Uniform
Limited Partnership Act on the terms and conditions set forth in this Agreement.

1.02. Certificate of Limited Partnership. This document is not only an agreement among the
parties, but also is the Amended and Restated Certificate and Agreement of Limited Partnership of
the Partnership. This document shall be filed or recorded in the public offices required under
applicable law or deemed advisable in the discretion of the Managing General Partner. Amendments
to the certificate of limited partnership shall be filed or recorded in the public offices required
under applicable law or deemed advisable in the discretion of the Managing General Partner.

1.03. Name, Principal Office and Residence.

1.03(a). Name. The name of the Partnership is Atlas Resources Series 28-2010 L.P.

1.03(b). Residence. The residence of the Managing General Partner is its principal place of
business at Westpointe Corporate Center One, 1550 Coraopolis Heights Road, Suite 300, Moon
Township, Pennsylvania 15108, which shall also serve as the principal place of business of the
Partnership.

The residence of each Participant shall be as set forth on the Subscription Agreement executed by
the Participant.

All addresses shall be subject to change on notice to the parties.

1.03(c). Agent for Service of Process. The name and address of the agent for service of process
shall be Andrew M. Lubin at 110 S. Poplar Street, Suite 101, Wilmington, Delaware 19801.

1.04. Purpose. The Partnership shall engage in all phases of the natural gas and oil business.
This includes, without limitation, exploration for, development and production of natural gas and
oil on the terms and conditions set forth below and any other proper purpose under the Delaware
Revised Uniform Limited Partnership Act.

The Managing General Partner may not, without the affirmative vote of Participants whose Units
equal a majority of the total Units, do the following:

	 	(i)	 	change the investment and business purpose of the Partnership; or

	 	(ii)	 	cause the Partnership to engage in activities outside the stated business
purposes of the Partnership through joint ventures with other entities.

 

1

 

ARTICLE II

DEFINITION OF TERMS

2.01. Definitions. As used in this Agreement, the following terms shall have the meanings set
forth below:

	 	1.	 	“Administrative Costs” means all customary and routine expenses incurred by the
Sponsor for the conduct of Partnership administration, including: in-house legal,
finance, in-house accounting, secretarial, travel, office rent, telephone, data
processing and other items of a similar nature. Administrative Costs shall be limited
as follows:

	 	(i)	 	no Administrative Costs charged shall be duplicated under any
other category of expense or cost; and

	 	(ii)	 	no portion of the salaries, benefits, compensation or
remuneration of controlling persons of the Managing General Partner shall be
reimbursed by the Partnership as Administrative Costs. Controlling persons
include directors, executive officers and those holding a 5% or more equity
interest in the Managing General Partner or a person having power to direct or
cause the direction of the Managing General Partner, whether through the
ownership of voting securities, by contract, or otherwise.

	 	2.	 	“Administrator” means the official or agency administering the securities laws
of a state.
	 
	 	3.	 	“Affiliate” means with respect to a specific person:

	 	(i)	 	any person directly or indirectly owning, controlling, or holding
with power to vote 10% or more of the outstanding voting securities of the
specified person;

	 	(ii)	 	any person 10% or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote, by the
specified person;

	 	(iii)	 	any person directly or indirectly controlling, controlled by, or
under common control with the specified person;

	 	(iv)	 	any officer, director, trustee or partner of the specified
person; and

	 	(v)	 	if the specified person is an officer, director, trustee or
partner, any person for which the person acts in any such capacity.

	 	4.	 	“Agreement” means this Amended and Restated Certificate and Agreement of
Limited Partnership, including all exhibits to this Agreement.

	 	5.	 	“Anthem Securities” means Anthem Securities, Inc., whose principal executive
offices are located at Westpointe Corporate Center One, 1550 Coraopolis Heights Road,
Suite 300, P.O. Box 926, Moon Township, Pennsylvania 15108-0926.

	 	6.	 	“Assessments” means additional amounts of capital which may be mandatorily
required of or paid voluntarily by a Participant beyond his subscription commitment.

	 	7.	 	“Atlas” means Atlas Resources, LLC, a Pennsylvania limited liability company,
whose principal executive offices are located at Westpointe Corporate Center One, 1550
Coraopolis Heights Road, Suite 300, Moon Township, Pennsylvania 15108, and any
successor entity to Atlas Resources, LLC, whether by merger or any other form of
reorganization, or the acquisition of all, or substantially all, of Atlas Resources,
LLC’s assets.

	 	8.	 	“Capital Account” or “account” means the account established for each party,
maintained as provided in §5.02 and its subsections.

	 	9.	 	“Capital Contribution” means the amount agreed to be contributed to the
Partnership by a Partner pursuant to §§3.04 and 3.05 and their subsections.

 

2

 

	 	10.	 	“Carried Interest” means an equity interest in the Partnership issued to a
Person without consideration, in the form of cash or tangible property, in an amount
proportionately equivalent to that received from the Participants.
	 
	 	11.	 	“Code” means the Internal Revenue Code of 1986, as amended.

	 	12.	 	“Cost,” when used with respect to the sale or transfer of property to the
Partnership, means:

	 	(i)	 	the sum of the prices paid by the seller or transferor to an
unaffiliated person for the property, including bonuses;

	 	(ii)	 	title insurance or examination costs, brokers’ commissions,
filing fees, recording costs, transfer taxes, if any, and like charges in
connection with the acquisition of the property;

	 	(iii)	 	a pro rata portion of the seller’s or transferor’s actual
necessary and reasonable expenses for seismic and geophysical services; and

	 	(iv)	 	rentals and ad valorem taxes paid by the seller or transferor for
the property to the date of its transfer to the buyer, interest and points
actually incurred on funds used to acquire or maintain the property, and the
portion of the seller’s or transferor’s reasonable, necessary and actual
expenses for geological, geophysical, engineering, drafting, accounting, legal
and other like services allocated to the property cost in conformity with
generally accepted accounting principles and industry standards, except for
expenses in connection with the past drilling of wells which are not producers
of sufficient quantities of oil or gas to make commercially reasonable their
continued operations, and provided that the expenses enumerated in this
subsection (iv) shall have been incurred not more than 36 months before the sale
or transfer to the Partnership.

“Cost,” when used with respect to services, means the reasonable, necessary and
actual expense incurred by the seller on behalf of the Partnership in providing the
services, determined in accordance with generally accepted accounting principles.

As used elsewhere, “Cost” means the price paid by the seller in an arm’s-length
transaction.

	 	13.	 	“Dealer-Manager” means Anthem Securities, Inc., an Affiliate of the Managing
General Partner, the broker/dealer which will manage the offering and sale of the
Units.

	 	14.	 	“Developed Reserves” means oil and gas reserves of any category that can be
expected to be recovered through existing wells with existing equipment and operating
methods or in which the cost of the required equipment is relatively minor compared to
the cost of a new well. To see other SEC definitions of terms relating to oil and gas
reserves, visit http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml, click on
“Regulation S-X,” and then scroll down and click the link in the “Section Contents” to
§210.4-10 and then read §210.4-10 (a) Definitions.

	 	15.	 	“Development Well” means a well drilled within the proved area of a natural gas
or oil reservoir to the depth of a stratigraphic Horizon known to be productive.

	 	16.	 	“Direct Costs” means all actual and necessary costs directly incurred for the
benefit of the Partnership and generally attributable to the goods and services
provided to the Partnership by parties other than the Sponsor or its Affiliates.
Direct Costs may not include any cost otherwise classified as Organization and Offering
Costs, Administrative Costs, Intangible Drilling Costs, Tangible Costs, Operating Costs
or costs related to the Leases, but may include the cost of services provided by the
Sponsor or its Affiliates if the services are provided pursuant to written contracts
and in compliance with §4.03(d)(7) or pursuant to the Managing General Partner’s role
as Tax Matters Partner.

 

3

 

	 	17.	 	“Distribution Interest” means an undivided interest in the Partnership’s assets
after payments to the Partnership’s creditors or the creation of a reasonable reserve
therefor, in the ratio the positive balance of a party’s Capital Account bears to the
aggregate positive balance of the Capital Accounts of all of the parties determined
after taking into account all Capital Account adjustments for the taxable year during
which liquidation occurs (other than those made pursuant to liquidating distributions
or restoration of deficit Capital Account balances). Provided, however, after the
Capital Accounts of all of the parties have been reduced to zero, the interest in the
remaining Partnership assets shall equal a party’s interest in the related Partnership
revenues as set forth in §5.01 and its subsections.

	 	18.	 	“Drilling and Operating Agreement” means the proposed Drilling and Operating
Agreement between the Managing General Partner or an Affiliate as Operator, and the
Partnership as Developer, a copy of the proposed form of which is attached to this
Agreement as Exhibit (II).
	 
	 	19.	 	“Exploratory Well” means a well drilled to:

	 	(i)	 	find commercially productive hydrocarbons in an unproved area;
	 
	 	(ii)	 	find a new commercially productive Horizon in a field previously
found to be productive of hydrocarbons at another Horizon; or
	 
	 	(iii)	 	significantly extend a known prospect.

	 	20.	 	“Farmout” means an agreement by the owner of the leasehold or Working Interest
to assign his interest in certain acreage or well to the assignees, retaining some
interest such as an Overriding Royalty Interest, an oil and gas payment, offset acreage
or other type of interest, subject to the drilling of one or more specific wells or
other performance as a condition of the assignment.
	 
	 	21.	 	“Final Terminating Event” means any one of the following:

	 	(i)	 	the expiration of the Partnership’s fixed term;
	 
	 	(ii)	 	notice to the Participants by the Managing General Partner of its
election to terminate the Partnership’s affairs;

	 	(iii)	 	notice by the Participants to the Managing General Partner of
their similar election through the affirmative vote of Participants whose Units
equal a majority of the total Units; or

	 	(iv)	 	the termination of the Partnership under §708(b)(1)(A) of the
Code or the Partnership ceases to be a going concern.

	 	22.	 	“Horizon” means a zone of a particular formation; that part of a formation of
sufficient porosity and permeability to form a petroleum reservoir.

	 	23.	 	“Independent Expert” means a person with no material relationship to the
Sponsor or its Affiliates who is qualified and in the business of rendering opinions
regarding the value of natural gas and oil properties based on the evaluation of all
pertinent economic, financial, geologic and engineering information available to the
Sponsor or its Affiliates.

	 	24.	 	“Initial Closing Date” means the date after the minimum amount of subscription
proceeds has been received when subscription proceeds are first withdrawn from the
escrow account.

 

4

 

	 	25.	 	“Intangible Drilling Costs” or “Non-Capital Expenditures” means those
expenditures associated with property acquisition and the drilling and completion of
natural gas and oil wells that under present law are generally accepted as fully
deductible currently for federal income tax purposes. This includes:

	 	(i)	 	all expenditures made for any well before production in
commercial quantities for wages, fuel, repairs, hauling, supplies and other
costs and expenses incident to and necessary for drilling the well and preparing
the well for production of natural gas or oil, that are currently deductible
pursuant to Section 263(c) of the Code and Treasury Reg. Section 1.612-4, and
are generally termed “intangible drilling and development costs”;

	 	(ii)	 	the expense of plugging and abandoning any well before a
completion attempt; and

	 	(iii)	 	the costs (other than Tangible Costs and Lease acquisition
costs) to re-enter and deepen an existing well, complete the well to deeper
reservoirs, or plug and abandon the well if it is nonproductive from the
targeted deeper reservoirs.

	 	26.	 	“Interim Closing Date” means those date(s) after the Initial Closing Date, but
before the Offering Termination Date, that the Managing General Partner, in its sole
discretion, applies additional subscription proceeds to additional Partnership
activities, including drilling activities.
	 
	 	27.	 	“Investor General Partners” means:

	 	(i)	 	the Persons signing the Subscription Agreement as Investor
General Partners; and

	 	(ii)	 	the Managing General Partner to the extent of any optional
subscription as an Investor General Partner under §3.03(b)(1).

All Investor General Partners shall be of the same class and have the same rights.

	 	28.	 	“Landowner’s Royalty Interest” means an interest in production, or its
proceeds, to be received free and clear of all costs of development, operation, or
maintenance, reserved by a landowner on the creation of a Lease.

	 	29.	 	“Leases” means full or partial interests in natural gas and oil leases, oil and
natural gas mineral rights, fee rights, licenses, concessions, or other rights under
which the holder is entitled to explore for and produce oil and/or natural gas, and
includes any contractual rights to acquire any such interest.
	 
	 	30.	 	“Limited Partners” means:

	 	(i)	 	the Persons signing the Subscription Agreement as Limited
Partners;

	 	(ii)	 	the Managing General Partner to the extent of any optional
subscription as a Limited Partner under §3.03(b)(1);

	 	(iii)	 	the Investor General Partners on the conversion of their
Investor General Partner Units to Limited Partner Units pursuant to §6.01(b);
and

	 	(iv)	 	any other Persons who are admitted to the Partnership as
additional or substituted Limited Partners.

Except as provided in §3.05(b), with respect to the required additional Capital
Contributions of Investor General Partners, all Limited Partners shall be of the same
class and have the same rights.

	 	31.	 	“Managing General Partner” means:

	 	(i)	 	Atlas; or

	 	(ii)	 	any Person admitted to the Partnership as a general partner,
other than as an Investor General Partner, who is designated to exclusively
supervise and manage the operations of the Partnership.

 

5

 

	 	32.	 	“Managing General Partner Signature Page” means an execution and subscription
instrument in the form attached as Exhibit (I-A) to this Agreement, which is
incorporated in this Agreement by reference.

	 	33.	 	“Offering Termination Date” means the date after the minimum amount of
subscription proceeds has been received on which the Managing General Partner
determines, in its sole discretion, that the Partnership’s subscription period is
closed and the acceptance of subscriptions ceases, which may be any date up to and
including December 31, 2010.

Notwithstanding the above, the Offering Termination Date may not extend beyond the
time that subscriptions for the maximum number of Units set forth in §3.03(c)(1) have
been received and accepted by the Managing General Partner.

	 	34.	 	“Operating Costs” means expenditures made and costs incurred in producing and
marketing natural gas or oil from completed wells. These costs include, but are not
limited to:

	 	(i)	 	labor, fuel, repairs, hauling, materials, supplies, utility
charges and other costs incident to or related to producing and marketing
natural gas and oil;
	 
	 	(ii)	 	ad valorem and severance taxes;
	 
	 	(iii)	 	insurance and casualty loss expense; and
	 
	 	(iv)	 	compensation to well operators or others for services rendered in conducting these operations.

Operating Costs also include disposal and injection wells, transporting waste water
by pipeline, truck or barge, reworking, workover, subsequent equipping, and similar
expenses relating to any well, the Managing General Partner’s gathering fees set
forth in §4.04(a)(2)(d) and the reimbursement of the Managing General Partner’s
Administrative Costs set forth in §4.04(a)(2)(c); but do not include the costs to
re-enter and deepen an existing well, complete the well to deeper formations or
reservoirs, or plug and abandon the well if it is nonproductive from the targeted
deeper formations or reservoirs.

	 	35.	 	“Operator” means Atlas, as operator of Partnership Wells in Pennsylvania, and
Atlas or an Affiliate as Operator of Partnership Wells in other areas of the United
States.

	 	36.	 	“Organization and Offering Costs” means all costs of organizing and selling the
offering including, but not limited to:

	 	(i)	 	total underwriting and brokerage discounts and commissions,
including fees of the underwriters’ attorneys, the Dealer-Manager fee, sales
commissions and reimbursement for bona fide due diligence expenses;

	 	(ii)	 	expenses for printing, engraving, mailing, salaries of employees
while engaged in sales activities, charges of transfer agents, registrars,
trustees, escrow holders, depositaries, engineers and other experts;

	 	(iii)	 	expenses of qualification of the sale of the securities under
federal and state law, including taxes and fees, accountants’ and attorneys’
fees; and
	 
	 	(iv)	 	other front-end fees.

	 	37.	 	“Organization Costs” means all costs of organizing the offering including, but
not limited to:

	 	(i)	 	expenses for printing, engraving, mailing, salaries of employees
while engaged in sales activities, charges of transfer agents, registrars,
trustees, escrow holders, depositaries, engineers and other experts;

 

6

 

	 	(ii)	 	expenses of qualification of the sale of the securities under
federal and state law, including taxes and fees, accountants’ and attorneys’
fees; and
	 
	 	(iii)	 	other front-end fees.

	 	38.	 	“Overriding Royalty Interest” means an interest in the natural gas and oil
produced under a Lease, or the proceeds from the sale thereof, carved out of the
Working Interest, to be received free and clear of all costs of development, operation,
or maintenance.
	 
	 	39.	 	“Participants” means:

	 	(i)	 	the Managing General Partner to the extent of its optional
subscription under §3.03(b)(1);
	 
	 	(ii)	 	the Limited Partners; and
	 
	 	(iii)	 	the Investor General Partners.

	 	40.	 	“Partners” means:

	 	(i)	 	the Managing General Partner;
	 
	 	(ii)	 	the Investor General Partners; and
	 
	 	(iii)	 	the Limited Partners.

	 	41.	 	“Partnership” means Atlas Resources Series 28-2010 L.P.

	 	42.	 	“Partnership Net Production Revenues” means gross revenues after deduction of
the related Operating Costs, Direct Costs, Administrative Costs and all other
Partnership costs not specifically allocated.

	 	43.	 	“Partnership Well” means a well, some portion of the revenues from which is
received by the Partnership.

	 	44.	 	“Person” means a natural person, partnership, corporation, association, trust
or other legal entity.

	 	45.	 	“Private Placement Memorandum” means the Private Placement Memorandum relating
to the offer and sale of the Units.

	 	46.	 	“Production Purchase” or “Income” Program means any program whose investment
objective is to directly acquire, hold, operate, and/or dispose of producing oil and
gas properties. Such a program may acquire any type of ownership interest in a
producing property, including, but not limited to, working interests, royalties, or
production payments. A program which spends at least 90% of capital contributions and
funds borrowed (excluding offering and organizational expenses) in the above described
activities is presumed to be a production purchase or income program.

	 	47.	 	“Program” means one or more limited or general partnerships or other investment
vehicles formed, or to be formed, for the primary purpose of:

	 	(i)	 	exploring for natural gas, oil and other hydrocarbon substances;
or

	 	(ii)	 	investing in or holding any property interests which permit the
exploration for or production of hydrocarbons or the receipt of such production
or its proceeds.

 

7

 

	 	48.	 	“Prospect” means the minimum area permitted by state law or local practice on
which one well may be drilled, which may be different for different Horizons. Subject
to the foregoing, “Prospect” shall be deemed:

	 	•	 	the wellbore plus 125 feet on either side of the center line of a lateral in
the well extending from the beginning of the first perforation to the end of the
last perforation and from the bottom of the Tully zone to the bottom of the
Marcellus Shale formation, in horizontal wells in the Marcellus Shale formation
in western Pennsylvania;

	 	•	 	the wellbore plus 125 feet on either side of the center line of a lateral in
the well extending from the beginning of the first perforation or open hole
section to the end of the last perforation or last open hole section and from
the top of the Borden Shale zone to the bottom of the New Albany zone, in
horizontal wells in the New Albany Shale reservoir in Indiana;

	 	•	 	the wellbore plus 125 feet on either side of the center line of a lateral in
the well extending from the beginning of the first perforation to the end of the
last perforation and from the top of the Fort Payne zone to the bottom of the
Chattanooga zone, in any horizontal wells in the Chattanooga Shale reservoir in
Tennessee;

	 	•	 	the wellbore plus 125 feet on either side of the center line of a lateral in
the well extending from the beginning of the first perforation to the end of the
last perforation and from the top of the Lachine Member to the bottom of the
Antrim zone, in any horizontal wells in the Antrim Shale reservoir in Michigan;
and

	 	•	 	approximately 80 acres for any vertical wells in the Antrim Shale reservoir
in Michigan.

	 	49.	 	“Proved Reserves” means those quantities of oil and gas, which, by analysis of
geoscience and engineering data, can be estimated with reasonable certainty to be
economically producible, from a given date forward, from known reservoirs, and under
existing economic conditions, operating methods, and government regulations, prior to
the time at which contracts providing the right to operate expire, unless evidence
indicates that renewal is reasonably certain, regardless of whether deterministic or
probabilistic methods are used for the estimation. The project to extract the
hydrocarbons must have commenced or the operator must be reasonably certain that it
will commence the project within a reasonable time.

	 	(i)	 	The area of the reservoir considered as proved includes:

	 	(a)	 	the area identified by drilling and limited by
fluid contacts, if any; and

	 	(b)	 	adjacent undrilled portions of the reservoir that
can, with reasonable certainty, be judged to be continuous with it and to
contain economically producible oil or gas on the basis of available
geoscience and engineering data.

	 	(ii)	 	In the absence of data on fluid contacts, proved quantities in a
reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well
penetration unless geoscience, engineering, or performance data and reliable
technology establishes a lower contact with reasonable certainty.

	 	(iii)	 	Where direct observation from well penetrations has defined a
highest known oil (HKO) elevation and the potential exists for an associated gas
cap, proved oil reserves may be assigned in the structurally higher portions of
the reservoir only if geoscience, engineering, or performance data and reliable
technology establish the higher contact with reasonable certainty

	 	(iv)	 	Reserves which can be produced economically through application
of improved recovery techniques (including, but not limited to, fluid injection)
are included in the proved classification when:

	 	(a)	 	successful testing by a pilot project, in an area
of the reservoir with properties no more favorable than in the reservoir
as a whole, the operation of an installed program in the reservoir or an
analogous reservoir, or other evidence using reliable technology
establishes
the reasonable certainty of the engineering analysis on which the
project or program was based; and

	 	(b)	 	the project has been approved for development by
all necessary parties and entities, including governmental entities.

 

8

 

	 	(v)	 	Existing economic conditions include prices and costs at which
economic producibility from a reservoir is to be determined. The price shall be
the average price during the 12-month period prior to the ending date of the
period covered by the report, determined as an unweighted arithmetic average of
the first-day-of-the-month price for each month within such period, unless
prices are defined by contractual arrangements, excluding escalations based upon
future conditions.

To see other SEC definitions of terms relating to oil and gas reserves, visit

http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml, click on “Regulation S-X,” and
then scroll down and click the link in the “Section Contents” to §210.4-10 and then
read §210.4-10 (a) Definitions.

	 	50.	 	“Reserves” means estimated remaining quantities of oil and gas and related
substances anticipated to be economically producible, as of a given date, by
application of development projects to known accumulations. In addition, there must
exist, or there must be a reasonable expectation that there will exist, the legal right
to produce or a revenue interest in the production, installed means of delivering oil
and gas or related substances to market, and all permits and financing required to
implement the project. To see other SEC definitions of terms relating to oil and gas
reserves, visit http://www.sec.gov/divisions/corpfin/ ecfrlinks.shtml, click on
“Regulation S-X,” and then scroll down and click the link in the “Section Contents” to
§210.4-10 and then read §210.4-10 (a) Definitions.

	 	51.	 	“Roll-Up” means a transaction involving the acquisition, merger, conversion or
consolidation, either directly or indirectly, of the Partnership and the issuance of
securities of a Roll-Up Entity. The term does not include:

	 	(i)	 	a transaction involving securities of the Partnership that have
been listed for at least 12 months on a national exchange or traded through the
National Association of Securities Dealers Automated Quotation National Market
System; or

	 	(ii)	 	a transaction involving the conversion to corporate, trust or
association form of only the Partnership if, as a consequence of the
transaction, there will be no significant adverse change in any of the
following:

	 	(a)	 	voting rights;
	 
	 	(b)	 	the Partnership’s term of existence;
	 
	 	(c)	 	the Managing General Partner’s compensation; and
	 
	 	(d)	 	the Partnership’s investment objectives.

	 	52.	 	“Roll-Up Entity” means a partnership, trust, corporation or other entity that
would be created or survive after the successful completion of a proposed roll-up
transaction.

	 	53.	 	“Sales Commissions” means all underwriting and brokerage discounts and
commissions incurred in the sale of Units payable to registered broker/dealers, but
excluding the following:

	 	(i)	 	the 2.5% Dealer-Manager fee; and

	 	(ii)	 	the reimbursement for bona fide due diligence expenses.

 

9

 

	 	54.	 	“Selling Agents” means the broker/dealers which are selected by the
Dealer-Manager to participate in the offer and sale of the Units.

	 	55.	 	“Sponsor” means any person directly or indirectly instrumental in organizing,
wholly or in part, a program or any person who will manage or is entitled to manage or
participate in the management or control of a program. The definition includes:

	 	(i)	 	the managing and controlling general partner(s) and any other
person who actually controls or selects the person who controls 25% or more of
the exploratory, development or producing activities of the program, or any
segment thereof, even if that person has not entered into a contract at the time
of formation of the program; and

	 	(ii)	 	whenever the context so requires, the term “sponsor” shall be
deemed to include its affiliates.

“Sponsor” does not include wholly independent third-parties such as attorneys,
accountants, and underwriters whose only compensation is for professional services
rendered in connection with the offering of units.

	 	56.	 	“Subscription Agreement” means an execution and subscription instrument in the
form attached as Exhibit (I-B) to this Agreement, which is incorporated in this
Agreement by reference.

	 	57.	 	“Tangible Costs” or “Capital Expenditures” means those costs associated with
property acquisition and drilling and completing natural gas and oil wells which are
generally accepted as capital expenditures under the Code. This includes all of the
following:

	 	(i)	 	costs of equipment, parts and items of hardware used in drilling
and completing a well;

	 	(ii)	 	the costs (other than Intangible Drilling Costs and Lease
acquisition costs) to re-enter and deepen an existing well, complete the well to
deeper reservoirs, or plug and abandon the well if it is nonproductive from the
targeted deeper reservoirs; and

	 	(iii)	 	those items necessary to deliver acceptable natural gas and oil
production to purchasers to the extent installed downstream from the wellhead of
any well and which are required to be capitalized under the Code and its
regulations.

	 	58.	 	“Tax Matters Partner” means the Managing General Partner.

	 	59.	 	“Undeveloped Reserves” means reserves of any category that are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for recompletion, provided that:

	 	(i)	 	Reserves on undrilled acreage shall be limited to those directly
offsetting development spacing areas that are reasonably certain of production
when drilled, unless evidence using reliable technology exists that establishes
reasonable certainty of economic producibility at greater distances.

	 	(ii)	 	Undrilled locations can be classified as having undeveloped
reserves only if a development plan has been adopted indicating that they are
scheduled to be drilled within five years, unless the specific circumstances,
justify a longer time.

	 	(iii)	 	Under no circumstances shall estimates for undeveloped reserves
be attributable to any acreage for which an application of fluid injection or
other improved recovery technique is contemplated, unless such techniques have
been proved effective by actual projects in the same reservoir or an analogous
reservoir, or by other evidence using reliable technology establishing
reasonable certainty.

To see other SEC definitions of terms relating to oil and gas reserves, visit
http://www.sec.gov/divisions/ corpfin/ ecfrlinks.shtml, click on “Regulation S-X,”
and then scroll down and click the link in the “Section Contents” to §210.4-10 and
then read §210.4-10 (a) Definitions.

 

10

 

	 	60.	 	“Units” or “Units of Participation” means Limited Partner interests and
Investor General Partner interests, which will be converted to Limited Partner Units as
set forth in §6.01(b), purchased by Participants in the Partnership under the
provisions of §3.03 and its subsections, including any rights to profits, losses,
income, gain, credits, deductions, cash distributions or returns of capital or other
attributes of the Units.

	 	61.	 	“Working Interest” means an interest in a Lease which is subject to some
portion of the cost of development, operation, or maintenance of the Lease.

ARTICLE III

SUBSCRIPTIONS AND FURTHER CAPITAL CONTRIBUTIONS

3.01. Designation of Managing General Partner and Participants. Atlas shall serve as Managing
General Partner of the Partnership. Atlas shall further serve as a Participant to the extent of
any subscription made by it pursuant to §3.03(b)(1).

Limited Partners and Investor General Partners, including the Managing General Partner and its
Affiliates to the extent, if any, they purchase Units, shall serve as Participants.

3.02. Participants.

3.02(a). Limited Partner at Formation. Atlas Energy Resources, LLC, as Original Limited Partner,
has acquired one Unit and has made a Capital Contribution of $100. On the admission of one or more
Limited Partners, the Partnership shall return to the Original Limited Partner its Capital
Contribution and shall reacquire its Unit. The Original Limited Partner shall then cease to be a
Limited Partner in the Partnership with respect to that Unit.

3.02(b). Offering of Interests. The Partnership is authorized to admit to the Partnership at the
Initial Closing Date, any Interim Closing Date(s), and the Offering Termination Date additional
Participants whose Subscription Agreements are accepted by the Managing General Partner if, after
the admission of the additional Participants, the total Units sold do not exceed the maximum number
of Units set forth in §3.03(c)(1).

3.02(c). Admission of Participants. No action or consent by the Participants shall be required
for the admission of additional Participants pursuant to this Agreement.

All subscribers’ funds shall be held in an interest bearing account or accounts by an independent
escrow holder and shall not be released to the Partnership until the receipt and acceptance of the
minimum amount of subscription proceeds set forth in §3.03(c)(2). Thereafter, subscriptions may be
paid directly to a Partnership account.

3.03. Subscriptions to the Partnership.

3.03(a). Subscriptions by Participants.

3.03(a)(1). Subscription Price and Minimum Subscription. The subscription price of a Unit in the
Partnership shall be $20,000, except as set forth below, and shall be designated on each
Participant’s Subscription Agreement and payable as set forth in §3.05(b)(1). The minimum
subscription per Participant shall be one Unit ($20,000). Larger subscriptions shall be accepted
in $5,000 increments, beginning with $25,000, $30,000, etc.

Notwithstanding the foregoing, the subscription price for:

	 	(i)	 	the Managing General Partner, its officers, directors, and Affiliates, and
Participants who buy Units through the officers and directors of the Managing General
Partner, shall be reduced by an amount equal to the 2.5% Dealer-Manager fee and the 7%
Sales Commission, which shall not be paid with respect to those sales; and

 

11

 

	 	(ii)	 	Registered Investment Advisors and their clients, and Selling Agents and their
registered representatives and principals, shall be reduced by an amount equal to the
7% Sales Commission, which shall not be paid with respect to those sales.

No more than 5% of the total Units in the Partnership shall be sold with the discounts described
above.

3.03(a)(2). Effect of Subscription. Execution of a Subscription Agreement shall serve as an
agreement by the Participant to be bound by each and every term of this Agreement.

3.03(b). Optional Subscriptions for Units by Managing General Partner.

3.03(b)(1). Managing General Partner’s Optional Subscriptions for Units. In addition to the
Managing General Partner’s required Capital Contributions under §3.04(a), beginning on the Initial
Closing Date the Managing General Partner may subscribe under the provisions of §3.03(a) and its
subsections for up to 5% of the total Units sold in the Partnership as of the applicable closing
date, which shall not be applied towards the minimum number of Units required to be sold under
§3.03(c)(2), and, subject to the limitations on voting rights set forth in §4.03(c)(3), to that
extent shall be deemed to be a Participant in the Partnership for all purposes under this
Agreement.

3.03(b)(2). Effect of and Evidencing Subscription. The Managing General Partner has executed a
Managing General Partner Signature Page which:

	 	(i)	 	evidences the Managing General Partner’s required Capital Contributions under
§3.04(a); and

	 	(ii)	 	may be amended, from time-to-time, to reflect the amount of any optional
subscriptions for Units as a Participant under §3.03(b)(1).

Execution of the Managing General Partner Signature Page serves as an agreement by the Managing
General Partner to be bound by each and every term of this Agreement.

3.03(c). Maximum and Minimum Number of Units.

3.03(c)(1). Maximum Number of Units. The maximum number of Units may not exceed 7,500 Units,
which is $150,000,000 of cash subscription proceeds, excluding the subscription discounts permitted
under §3.03(a)(1).

3.03(c)(2). Minimum Number of Units. The minimum number of Units shall equal at least 100 Units,
but in any event not less than the number of Units that provides the Partnership with cash
subscription proceeds of $2,000,000, excluding the subscription discounts permitted under
§3.03(a)(1).

If subscriptions for the minimum number of Units have not been received and accepted at the
Offering Termination Date, then all monies deposited by subscribers shall be promptly returned to
them. They shall receive interest earned on their subscription proceeds from the date the monies
were deposited in escrow through the date of refund, without deduction for any fees.

The Partnership may break escrow and begin its drilling activities, in the Managing General
Partner’s sole discretion, on receipt and acceptance of the minimum subscription proceeds.

3.03(d). Acceptance of Subscriptions.

3.03(d)(1). Discretion by the Managing General Partner. Acceptance of subscriptions is
discretionary with the Managing General Partner. The Managing General Partner may reject any
subscription for any reason it deems appropriate.

3.03(d)(2). Time Period in Which to Accept Subscriptions. Subscriptions shall be accepted or
rejected by the Managing General Partner within 30 days of their receipt. If a subscription is
rejected, then all of the subscriber’s funds shall be returned to the subscriber promptly, with
interest earned and without deduction for any fees.

 

12

 

3.03(d)(3). Admission to the Partnership. The Participants shall be admitted to the Partnership
as follows:

	 	(i)	 	not later than 15 days after the release from the escrow account of
Participants’ subscription proceeds to the Partnership; or

	 	(ii)	 	if a Participant’s subscription proceeds are received by the Partnership after
the close of the escrow account, then not later than the last day of the calendar month
in which his Subscription Agreement was accepted by the Managing General Partner.

3.04. Capital Contributions of the Managing General Partner.

3.04(a). Managing General Partner’s Required Capital Contributions. The Managing General Partner,
as a general partner and not as a Participant, is required to pay the costs or make the other
required Capital Contributions charged to it under this Agreement, which includes its credit for
Organization and Offering Costs under §5.01(a)(1), contributing to the Leases to the Partnership to
be drilled on the terms set forth in §4.01(a)(4), and the Managing General Partner’s administration
and oversight fee and 18% mark up on the portion of the Partnership’s Tangible Costs paid by the
Managing General Partner under §5.01(a)(3), in an amount equal to not less than 15%, in the
aggregate, of all Capital Contributions to the Partnership, at the time the costs are required to
be paid by the Partnership, but in any event no later than December 31, 2011.

3.04(b). On Liquidation the Managing General Partner Must Contribute Deficit Balance in Its
Capital Account. The Managing General Partner shall contribute to the Partnership any deficit
balance in its Capital Account on the occurrence of either of the following events:

	 	(i)	 	the liquidation of the Partnership; or
	 
	 	(ii)	 	the liquidation of the Managing General Partner’s interest in the Partnership.

This shall be determined after taking into account all adjustments for the Partnership’s taxable
year during which the liquidation occurs, other than adjustments made pursuant to this requirement,
by the end of the taxable year in which the liquidation occurs or, if later, within 90 days after
the date of the liquidation.

3.04(c). Managing General Partner’s Partnership Interest for Capital Contributions. The interest
of the Managing General Partner, as Managing General Partner and not as a Participant, in the
capital and profits of the Partnership is fully vested and nonforfeitable as of the date of the
formation of the Partnership and is in consideration for, and is the only consideration for, its
required Capital Contributions to the Partnership.

3.04(d). Managing General Partner’s Right to Assign Its Partnership Interest. Subject to
§5.01(b)(4)(a) regarding the Managing General Partner’s subordination obligation, the Managing
General Partner has the right at any time, in its discretion, without the consent of the
Participants, and without affecting the allocation of costs and revenues to the Participants or the
Managing General Partner’s voting rights under this Agreement, to sell, contribute, exchange or
otherwise transfer all or any portion of its interest as Managing General Partner or as a
Participant (if it purchases Units) in the Partnership, or any interest therein to an Affiliate of
the Managing General Partner. In that event, except as otherwise may be permitted under this
Agreement, if the Affiliated transferee of the Managing General Partner’s transferred interest in
the Partnership does not become a substituted Managing General Partner in the Partnership, the
Affiliated transferee, as a partner in the Partnership for tax purposes only, shall have the right
to receive the share of the Partnership’s profits, losses, income, gains, deductions, credits and
depletion allowances, or items thereof, and cash distributions and returns of capital (including,
but not limited to, cash distributions and returns of capital on dissolution and liquidation of the
Partnership) to which the Managing General Partner would otherwise be entitled under this Agreement
with respect to its transferred interest in the Partnership.

Subject to the foregoing, the transfer of the Managing General Partner’s interest in the
Partnership to any of its Affiliates may be made on any terms and conditions as the Managing
General Partner determines, in its discretion, and the Partnership and the Participants shall have
no right to receive or otherwise share in any consideration received by the Managing General
Partner from its Affiliates for the transfer of the Managing General Partner’s interest in the
Partnership.

 

13

 

No transfer of the Managing General Partner’s interest in the Partnership to its Affiliates under
this §3.04(d) shall require an accounting by the Managing General Partner or the Partnership to the
Participants.

3.05. Payment of Subscriptions.

3.05(a). Managing General Partner’s Subscriptions. The Managing General Partner shall pay any
optional subscription under §3.03(b)(1) as set forth in §3.05(b)(1).

3.05(b). Participant Subscriptions and Additional Capital Contributions of the Investor General
Partners.

3.05(b)(1). Payment of Subscription Agreements. A Participant shall pay the subscription amount
designated on his Subscription Agreement 100% in cash at the time of subscribing. A Participant
shall receive interest on the amount he pays from the time his subscription proceeds are deposited
in the escrow account, or a Partnership account after the minimum number of Units has been received
as provided in §3.06(b), until his subscription proceeds are paid by the Partnership to the
Managing General Partner under the Drilling and Operating Agreement for use in the Partnership’s
drilling activities. All interest distributions shall be in the ratio that the number of Units
held by each Participant multiplied by the number of days the Participant’s subscription proceeds
were held in the escrow account, or a Partnership account after the minimum number of Units have
been received as provided in §3.06(b), bears to the sum of that calculation for all Participants
whose subscription proceeds were paid to the Managing General Partner at the same time. Interest
on subscription amounts shall be paid as provided in §5.01(b)(2).

3.05(b)(2). Additional Required Capital Contributions of the Investor General Partners. Investor
General Partners must make Capital Contributions to the Partnership when called by the Managing
General Partner, in addition to their subscription amounts, for their pro rata share of any
Partnership obligations and liabilities which are recourse to the Investor General Partners and are
represented by their ownership of Units before the conversion of Investor General Units to Limited
Partner Units under §6.01(b).

3.05(b)(3). Default Provisions. The failure of an Investor General Partner to timely make a
required additional Capital Contribution under this section results in his personal liability to
the other Investor General Partners for the amount in default. The remaining Investor General
Partners, in proportion to their respective number of Units, must pay the defaulting Investor
General Partner’s share of Partnership liabilities and obligations called for by the Managing
General Partner. In that event, the remaining Investor General Partners:

	 	(i)	 	shall have a first and preferred lien on the defaulting Investor General
Partner’s interest in the Partnership to secure payment of the amount in default plus
interest at the legal rate;

	 	(ii)	 	shall be entitled to receive 100% of the defaulting Investor General Partner’s
cash distributions, in proportion to their respective number of Units, until the amount
in default is recovered in full plus interest at the legal rate; and

	 	(iii)	 	may commence legal action to collect the amount due plus interest at the legal
rate.

3.06. Partnership Funds.

3.06(a). Fiduciary Duty. The Managing General Partner has a fiduciary responsibility for the
safekeeping and use of all funds and assets of the Partnership, whether or not in the Managing
General Partner’s possession or control. The Managing General Partner shall not employ, or permit
another to employ, the funds and assets of the Partnership in any manner except for the exclusive
benefit of the Partnership.

 

14

 

3.06(b). Special Account After the Receipt of the Minimum Partnership Subscriptions. Following
the receipt of the minimum number of Units and breaking escrow, the funds of the Partnership shall
be held in a separate interest-bearing account maintained for the Partnership and shall not be
commingled with funds of any other entity.

3.06(c). Investment.

3.06(c)(1). Investments in Other Entities. Partnership funds shall not be invested in the
securities of another person except in the following instances:

	 	(i)	 	investments in Working Interests or undivided Lease interests made in the
ordinary course of the Partnership’s business;
	 
	 	(ii)	 	temporary investments made as set forth in §3.06(c)(2);
	 
	 	(iii)	 	multi-tier arrangements meeting the requirements of §4.03(d)(15);

	 	(iv)	 	investments involving less than 5% of the Partnership’s subscription proceeds
which are a necessary and incidental part of a property acquisition transaction; and

	 	(v)	 	investments in entities established solely to limit the Partnership’s
liabilities associated with the ownership or operation of property or equipment,
provided that duplicative fees and expenses shall be prohibited.

3.06(c)(2). Permissible Investments Before Investment in Partnership Activities. After the
Initial Closing Date and until proceeds from the offering are invested in the Partnership’s
operations, the proceeds may be temporarily invested in income producing short-term, highly liquid
investments, in which there is appropriate safety of principal, such as U.S. Treasury Bills.

ARTICLE IV

CONDUCT OF OPERATIONS

4.01. Acquisition of Leases.

4.01(a). Assignment to Partnership.

4.01(a)(1). In General. The Managing General Partner shall select, acquire and assign or cause to
have assigned to the Partnership full or partial interests in Leases, by any method customary in
the natural gas and oil industry, subject to the terms and conditions set forth below.

The Partnership may acquire and develop interests in Leases covering one or more of the same
Prospects, in the Managing General Partner’s discretion.

The Partnership shall acquire only Leases reasonably expected to meet the stated purposes of the
Partnership. No Leases shall be acquired for the purpose of a subsequent sale, Farmout, or other
disposition unless the acquisition is made after a well has been drilled to a depth sufficient to
indicate that the acquisition would be in the Partnership’s best interest.

4.01(a)(2). Federal and State Leases. The Partnership is authorized to acquire Leases on federal
and state lands.

4.01(a)(3). Managing General Partner’s Discretion as to Terms and Burdens of Acquisition. Subject
to the provisions of §4.03(d) and its subsections, the acquisitions of Leases or other property may
be made under any terms and obligations, including any limitations as to the Horizons to be
assigned to the Partnership and subject to any burdens as the Managing General Partner deems
necessary in its sole discretion.

 

15

 

4.01(a)(4). Cost of Leases. All Leases shall be:

	 	(i)	 	contributed to the Partnership by the Managing General Partner or its
Affiliates; and

	 	(ii)	 	credited towards the Managing General Partner’s required Capital Contribution
set forth in §3.04(a) at the Cost of the Lease as described in the Private Placement
Memorandum under “Compensation — Lease Costs,” unless the Managing General Partner has
cause to believe that Cost is materially more than the fair market value of the
property, in which case the credit for the contribution must be made at a price not in
excess of
the fair market value. Also, the Managing General Partner may average the cost of
the Leases by area or type of drilling to arrive at an average Lease cost per
Prospect for each area as described in the Private Placement Memorandum under
“Compensation — Lease Costs,” which the Managing General Partner believes is less
than fair market value. Additionally, from time to time, the Managing General
Partner’s Lease costs on a Prospect may be significantly higher than the amount set
forth in the Private Placement Memorandum under “Compensation — Lease Costs,” and in
that event the Managing General Partner’s credit to its Capital Contribution to the
Partnership and its Capital Account under this Agreement shall be the greater amount.

A determination of fair market value must be supported by an appraisal from an Independent Expert.

4.01(a)(5). The Managing General Partner, Operator or Their Affiliates’ Rights in the Remainder
Interests. Subject to the provisions of §4.03(d) and its subsections, to the extent the
Partnership does not acquire a full interest in a Lease from the Managing General Partner or its
Affiliates, the remainder of the interest in the Lease may be held by the Managing General Partner
or its Affiliates. They may either:

	 	(i)	 	retain and exploit the remaining interest for their own account; or
	 
	 	(ii)	 	sell or otherwise dispose of all or a part of the remaining interest.

Profits from the exploitation and/or disposition of their retained interests in the Leases shall be
for the benefit of the Managing General Partner or its Affiliates to the exclusion of the
Partnership and the Participants.

4.01(a)(6). No Breach of Duty. Subject to the provisions of §4.03 and its subsections,
acquisition of Leases from the Managing General Partner, the Operator or their Affiliates shall not
be considered a breach of any obligation owed by them to the Partnership or the Participants.

4.01(b). No Overriding Royalty Interests. Neither the Managing General Partner, the Operator nor
any Affiliate shall retain any Overriding Royalty Interest on the Leases acquired by the
Partnership.

4.01(c). Title and Nominee Arrangements.

4.01(c)(1). Legal Title. Legal title to all Leases acquired by the Partnership shall be held on a
permanent basis in the name of the Partnership. However, Partnership properties may be held
temporarily in the name of:

	 	(i)	 	the Managing General Partner;
	 
	 	(ii)	 	the Operator;
	 
	 	(iii)	 	their Affiliates; or

	 	(iv)	 	in the name of any nominee designated by the Managing General Partner to
facilitate the acquisition of the properties.

4.01(c)(2). Managing General Partner’s Discretion. The Managing General Partner shall take the
steps which are necessary in its best judgment to render title to the Leases to be acquired by the
Partnership acceptable for the purposes of the Partnership. The Managing General Partner shall be
free, however, to use its own best judgment in waiving title requirements.

 

16

 

The Managing General Partner shall not be liable to the Partnership or to the other parties for any
mistakes of judgment; nor shall the Managing General Partner be deemed to be making any warranties
or representations, express or implied, as to the validity or merchantability of the title to the
Leases assigned to the Partnership or the extent of the interest covered thereby except as
otherwise provided in the Drilling and Operating Agreement.

4.01(c)(3). Commencement of Operations. The Partnership shall not begin operations on its Leases
unless the Managing General Partner is satisfied that necessary title requirements have been
satisfied.

4.02. Conduct of Operations.

4.02(a). In General. The Managing General Partner shall establish a program of operations for the
Partnership. Subject to the limitations contained in Article III of this Agreement concerning the
maximum Capital Contribution which can be required of a Limited Partner, the Managing General
Partner, the Limited Partners, and the Investor General Partners agree to participate in the
program so established by the Managing General Partner.

4.02(b). Management. Subject to any restrictions contained in this Agreement, the Managing
General Partner shall exercise full control over all operations of the Partnership.

4.02(c). General Powers of the Managing General Partner.

4.02(c)(1). In General. Subject to the provisions of §4.03 and its subsections, and to any
authority that may be granted the Operator under §4.02(c)(3)(b), the Managing General Partner shall
have full authority to do all things deemed necessary or desirable by it in the conduct of the
business of the Partnership. Without limiting the generality of the foregoing, the Managing
General Partner is expressly authorized to engage in:

	 	(i)	 	the making of all determinations of which Leases, wells and operations will be
participated in by the Partnership, which includes:

	 	(a)	 	which Leases are developed;
	 
	 	(b)	 	which Leases are abandoned; or

	 	(c)	 	which Leases are sold or assigned to other parties, including
other investor ventures organized by the Managing General Partner, the Operator,
or any of their Affiliates;

	 	(ii)	 	the negotiation and execution on any terms deemed desirable in its sole
discretion of any contracts, conveyances, or other instruments, considered useful to
the conduct of the operations or the implementation of the powers granted it under this
Agreement, including, without limitation:

	 	(a)	 	the making of agreements for the conduct of operations, including
agreements and financial instruments relating to hedging the Partnership’s
natural gas and oil and the pledge of up to 100% of the Partnership’s assets and
reserves in connection therewith, and in this regard the Partnership has
confirmed its authorization to Atlas Energy, Inc. and Atlas Energy Resources,
LLC to enter into hedging agreements on its behalf, and has ratified all actions
previously taken by Atlas Energy, Inc., Atlas Energy Resources, LLC, their
Affiliates, or their successors in interest by merger or otherwise, in
connection therewith;

	 	(b)	 	the exercise of any options, elections, or decisions under any
such agreements; and

	 	(c)	 	the furnishing of equipment, facilities, supplies and material,
services, and personnel;

	 	(iii)	 	the exercise, on behalf of the Partnership or the parties, as the Managing
General Partner in its sole judgment deems best, of all rights, elections and options
granted or imposed by any agreement, statute, rule, regulation, or order;

	 	(iv)	 	the making of all decisions concerning the desirability of payment, and the
payment or supervision of the payment, of all delay rentals and shut-in and minimum or
advance royalty payments;

 

17

 

	 	(v)	 	the selection of full or part-time employees and outside consultants and
contractors and the determination of their compensation and other terms of employment
or hiring;

	 	(vi)	 	the maintenance of insurance for the benefit of the Partnership and the parties
as it deems necessary, but in no event less in amount or type than the following:

	 	(a)	 	worker’s compensation insurance in full compliance with the laws
of the Commonwealth of Pennsylvania and any other applicable state laws;

	 	(b)	 	liability insurance, including automobile, which has a $1,000,000
combined single limit for bodily injury and property damage in any one accident
or occurrence and in the aggregate; and

	 	(c)	 	liability and excess liability insurance as to bodily injury and
property damage with combined limits of $50,000,000 during drilling operations
and thereafter, per occurrence or accident and in the aggregate, which includes
$1,000,000 of seepage, pollution and contamination insurance which protects and
defends the insured against property damage or bodily injury claims from
third-parties, other than a co-owner of the Working Interest, alleging seepage,
pollution or contamination damage resulting from a pollution incident. The
excess liability insurance, which is for general liability only, shall be in
place and effective no later than the date drilling operations begin and, for
purposes of satisfying this requirement, the Partnership shall have the benefit
of the Managing General Partner’s $50,000,000 liability insurance on the same
basis as the Managing General Partner and its other Affiliates, including the
Managing General Partner’s other Programs;

	 	(vii)	 	the use of the funds and revenues of the Partnership, and the borrowing on
behalf of, and the loan of money to, the Partnership, on any terms it sees fit, for any
purpose, including without limitation:

	 	(a)	 	the conduct or financing, in whole or in part, of the drilling
and other activities of the Partnership;
	 
	 	(b)	 	the conduct of additional operations; and

	 	(c)	 	the repayment of any borrowings or loans used initially to
finance these operations or activities;

	 	(viii)	 	the disposition, hypothecation, sale, exchange, release, surrender, reassignment or
abandonment of any or all assets of the Partnership, including without limitation, the
Leases, wells, equipment and production therefrom, provided that the sale of all or
substantially all of the assets of the Partnership shall only be made as provided in
§4.03(d)(6);

	 	(ix)	 	the formation of any further limited or general partnership, tax partnership,
joint venture, or other relationship which it deems desirable with any parties who it,
in its sole discretion, selects, including any of its Affiliates;

	 	(x)	 	the control of any matters affecting the rights and obligations of the
Partnership, including:

	 	(a)	 	the employment of attorneys to advise and otherwise represent the
Partnership;
	 
	 	(b)	 	the conduct of litigation and incurring other legal expenses; and
	 
	 	(c)	 	the settlement of claims and litigation;

	 	(xi)	 	the operation of producing wells drilled on the Leases or on a Prospect which
includes any part of the Leases;

	 	(xii)	 	the exercise of the rights granted to it under the power of attorney created
under this Agreement; and

	 	(xiii)	 	the incurring of all costs and the making of all expenditures in any way related to
any of the foregoing.

 

18

 

4.02(c)(2). Scope of Powers. The Managing General Partner’s powers shall extend to any operation
participated in by the Partnership or affecting its Leases, or other property or assets,
irrespective of whether or not the Managing General Partner is designated operator of the operation
by any outside persons participating therein.

4.02(c)(3). Delegation of Authority.

4.02(c)(3)(a). In General. The Managing General Partner may subcontract and delegate all or any
part of its duties under this Agreement to any entity chosen by it, including an entity Affiliated
with it, which party shall have the same powers in the conduct of the duties as would the Managing
General Partner. The delegation, however, shall not relieve the Managing General Partner of its
responsibilities under this Agreement.

4.02(c)(3)(b). Delegation to Operator. The Managing General Partner is specifically authorized to
delegate any or all of its duties to the Operator by executing the Drilling and Operating
Agreement. This delegation shall not relieve the Managing General Partner of its responsibilities
under this Agreement.

4.02(c)(4). Related Party Transactions. Subject to the provisions of §4.03 and its subsections,
any transaction which the Managing General Partner is authorized to enter into on behalf of the
Partnership under the authority granted in this section and its subsections, may be entered into by
the Managing General Partner with itself or with any other general partner, the Operator, or any of
their Affiliates.

4.02(d). Additional Powers. In addition to the powers granted the Managing General Partner under
§4.02(c) and its subsections or elsewhere in this Agreement, the Managing General Partner, when
specified, shall have the following additional express powers.

4.02(d)(1). Drilling Contracts. All Partnership Wells shall be drilled under the Drilling and
Operating Agreement for an amount equal to the sum of the following items:

	 	(i)	 	the Cost of permits, supplies, materials, equipment, and all other items used
in the drilling and completion of a well provided by third-parties, or if the foregoing
items are provided by Affiliates of the Managing General Partner, then those items will
be charged at competitive rates;
	 
	 	(ii)	 	fees for third-party services;

	 	(iii)	 	fees for services provided by the Managing General Partner’s Affiliates, which
will be charged at competitive rates;

	 	(iv)	 	a competitive administration and oversight fee as described in the Drilling and
Operating Agreement, which will be charged to the Participants as part of each well’s
Intangible Drilling Costs and the portion of Tangible Costs paid by the Participants;
and

	 	(v)	 	a mark-up in an amount equal to 18% of the sum of (i), (ii), (iii) and (iv),
above, for the Managing General Partner’s services as general drilling contractor.

Additionally, if the Managing General Partner drills a well for the Partnership that the Managing
General Partner determines is not an average well in the area because of the well’s depth,
complexity associated with either drilling or completing the well, or as otherwise determined by
the Managing General Partner, the administration and oversight fee of the well described in
§4.02(d)(1)(iv) may be increased to a competitive rate as determined by the Managing General
Partner.

4.02(d)(2). Power of Attorney.

 

19

 

4.02(d)(2)(a). In General. Each Participant appoints the Managing General Partner his true and
lawful attorney-in-fact for him and in his name, place, and stead and for his use and benefit, from
time to time:

	 	(i)	 	to create, prepare, complete, execute, file, swear to, deliver, endorse, and
record any and all documents, certificates, government reports, or other instruments as
may be required by law, or are necessary to amend this Agreement as authorized under
the terms of this Agreement, or to qualify the Partnership as a limited partnership or
partnership in commendam and to conduct business under the laws of any jurisdiction in
which the Managing General Partner elects to qualify the Partnership or conduct
business; and

	 	(ii)	 	to create, prepare, complete, execute, file, swear to, deliver, endorse and
record any and all instruments, assignments, security agreements, financing statements,
certificates, and other documents as may be necessary from time to time to implement
the borrowing powers granted under this Agreement and any agreements entered into by
the Partnership to hedge its natural gas and oil reserves and pledge up to 100% of its
assets and natural gas and oil reserves in connection therewith.

4.02(d)(2)(b). Further Action. Each Participant authorizes the attorney-in-fact to take any
further action which the attorney-in-fact considers necessary or advisable in connection with any
of the foregoing powers and rights granted the Managing General Partner under this section and its
subsections. Each party acknowledges that the power of attorney granted under §4.02(d)(2)(a):

	 	(i)	 	is a special power of attorney coupled with an interest and is irrevocable; and

	 	(ii)	 	shall survive the assignment by the Participant of the whole or a portion of
his Units; except when the assignment is of all of the Participant’s Units and the
purchaser, transferee, or assignee of the Units is admitted as a successor Participant,
the power of attorney shall survive the delivery of the assignment for the sole purpose
of enabling the attorney-in-fact to execute, acknowledge, and file any agreement,
certificate, instrument or document necessary to effect the substitution.

4.02(d)(2)(c). Power of Attorney to Operator. The Managing General Partner is hereby authorized
to grant a Power of Attorney to the Operator on behalf of the Partnership.

4.02(e). Borrowings and Use of Partnership Revenues.

4.02(e)(1). Power to Borrow or Use Partnership Revenues.

4.02(e)(1)(a). In General. If additional funds over the Participants’ Capital Contributions are
needed for Partnership operations, then the Managing General Partner may:

	 	(i)	 	use Partnership revenues for such purposes; or

	 	(ii)	 	the Managing General Partner and its Affiliates may advance the necessary funds
to the Partnership under §4.03(d)(8)(b), although they are not obligated to advance the
funds to the Partnership.

4.02(e)(1)(b). Limitation on Borrowing. Partnership borrowings, other than credit transactions on
open account customary in the industry to obtain goods and services, shall be subject to the
following limitations:

	 	(i)	 	the borrowings must be without recourse to the Investor General Partners and
the Limited Partners except as otherwise provided in this Agreement; and

	 	(ii)	 	the amount that may be borrowed at any one time may not exceed an amount equal
to 5% of the Partnership’s subscription proceeds.

Notwithstanding, the above limitations shall not affect the Partnership’s ability to enter into
agreements and financial instruments relating to hedging the Partnership’s natural gas and oil and
the pledge of up to 100% of the Partnership’s assets and reserves in connection therewith.

 

20

 

4.02(f). Tax Matters Partner.

4.02(f)(1). Designation of Tax Matters Partner. The Managing General Partner is hereby designated
the Tax Matters Partner of the Partnership under Section 6231(a)(7) of the Code. The Managing
General Partner is authorized to act in this capacity on behalf of the Partnership and the
Participants and to take any action, including settlement or litigation, which it in its sole
discretion deems to be in the best interest of the Partnership.

4.02(f)(2). Costs Incurred by Tax Matters Partner. Costs incurred by the Tax Matters Partner
shall be considered a Direct Cost of the Partnership.

4.02(f)(3). Notice to Participants of IRS Proceedings. The Tax Matters Partner shall notify all
of the Participants of any administrative or other legal proceedings involving the Partnership and
the IRS or any other taxing authority, and thereafter shall furnish all of the Participants
periodic reports at least quarterly on the status of the proceedings.

4.02(f)(4). Participant Restrictions. Each Participant agrees as follows:

	 	(i)	 	he will not file the statement described in Section 6224(c)(3)(B) of the Code
prohibiting the Managing General Partner as the Tax Matters Partner for the Partnership
from entering into a settlement on his behalf with respect to Partnership items, as
that term is defined in Section 6231(a)(3) of Code, of the Partnership;

	 	(ii)	 	he will not form or become and exercise any rights as a member of a group of
Partners having a 5% or greater interest in the profits of the Partnership under
Section 6223(b)(2) of the Code; and

	 	(iii)	 	the Managing General Partner is authorized to file a copy of this Agreement,
or pertinent portions of this Agreement, with the IRS under Section 6224(b) of the Code
if necessary to perfect the waiver of rights under this subsection.

4.03. General Rights and Obligations of the Participants and Restricted and Prohibited
Transactions.

4.03(a)(1). Limited Liability of Limited Partners. Limited Partners shall not be bound by the
obligations of the Partnership other than as provided under the Delaware Revised Uniform Limited
Partnership Act. Limited Partners shall not be personally liable for any debts of the Partnership
or any of the obligations or losses of the Partnership beyond the subscription amount designated on
the Subscription Agreement executed by each respective Limited Partner unless:

	 	(i)	 	they also subscribe to the Partnership as Investor General Partners; or

	 	(ii)	 	in the case of the Managing General Partner, it purchases Limited Partner
Units.

4.03(a)(2). No Management Authority of Participants. Participants, other than the Managing
General Partner if it buys Units, shall have no power over the conduct of the affairs of the
Partnership. No Participant, other than the Managing General Partner if it buys Units, shall take
part in the management of the business of the Partnership, or have the power to sign for or to bind
the Partnership.

4.03(b). Reports and Disclosures.

4.03(b)(1). Annual Reports and Financial Statements. Beginning with the 2010 calendar year, the
Partnership shall provide each Participant an annual report within 120 days after the close of the
calendar year, and beginning with the 2011 calendar year, a report within 75 days after the end of
the first six months of its calendar year, containing unaudited financial statements of the
Partnership. The reports shall include a balance sheet and statements of income, cash flow, and
Partners’ equity, which shall be prepared either in accordance with accounting principals followed
for federal tax reporting purposes or generally accepted accounting principles as determined in the
discretion of the Managing General Partner. Notwithstanding the above, if the Partnership sells
Units to 500 or more Participants and receives and accepts cash subscription proceeds exceeding $10
million, which the Partnership may do in the Managing General Partner’s sole discretion, it must
register the Units with the SEC under the Securities Exchange Act of 1934 (“Exchange Act”). This
would require the Partnership to comply with the reporting requirements of the Exchange Act,
including timely filing of quarterly reports on Form 10-Q, annual reports on Form 10-K and current
reports on Form 8-K, and would subject the Partnership to other actions including, but not limited
to, compliance with corporate governance and disclosure requirements under the Sarbanes-Oxley Act
of 2002. This would increase the Partnership’s Administrative Costs and Direct Costs, including
legal and accounting fees, which would be paid by the Participants and the Managing General Partner
as described in §5.01(a)(4). These additional expenses also would include the costs of required
annual audited financial statements that would not otherwise be required under this Agreement.

 

21

 

4.03(b)(2). Tax Information. The Partnership shall, by March 15 of each year, prepare, or
supervise the preparation of, and transmit to each Participant the information needed for the
Participant to file the following:

	 	(i)	 	his federal income tax return;
	 
	 	(ii)	 	any required state income tax return; and

	 	(iii)	 	any other reporting or filing requirements imposed by any governmental agency
or authority.

4.03(b)(3). Reserve Report. Beginning with the second calendar year after the Offering
Termination Date and every year thereafter, the Partnership shall provide to each Participant the
following:

	 	(i)	 	a summary of the computation of the Partnership’s total natural gas and oil
Proved Reserves;

	 	(ii)	 	a summary of the computation of the present worth of the reserves determined
using:

	 	(a)	 	a discount rate of 10%;
	 
	 	(b)	 	a constant price for the oil; and

	 	(c)	 	basing the price of natural gas on the existing natural gas
contracts; and

	 	(iii)	 	a statement of each Participant’s interest in the reserves.

The reserve computations shall be based on engineering reports prepared by the Managing General
Partner and reviewed by an Independent Expert.

4.03(b)(4). Cost of Reports. The cost of all reports described in this §4.03(b), including the
additional required reports if the Units must be registered with the SEC as described in
§4.03(b)(1), shall be paid by the Partnership as Direct Costs.

4.03(b)(5). Participant Access to Records. The Participants and/or their representatives shall be
permitted access to all Partnership records, provided that access to the list of Participants shall
be subject to §4.03(b)(7) below. Subject to the foregoing, a Participant may inspect and copy any
of the Partnership’s records after giving adequate notice to the Managing General Partner at any
reasonable time.

Notwithstanding the foregoing, the Managing General Partner may keep logs, well reports, and other
drilling and operating data confidential for reasonable periods of time. The Managing General
Partner may release information concerning the operations of the Partnership to the sources that
are customary in the industry or required by rule, regulation, or order of any regulatory body.

4.03(b)(6). Required Length of Time to Hold Records. The Managing General Partner must maintain
and preserve during the term of the Partnership and for six years thereafter all accounts, books
and other relevant documents which include:

	 	(i)	 	a record that a Participant meets the suitability standards established in
connection with an investment in the Partnership; and

	 	(ii)	 	any appraisal of the fair market value of the Leases as set forth in
§4.01(a)(4), along with associated supporting information, or the fair market value of
any producing property as set forth in §4.03(d)(3).

 

22

 

4.03(b)(7). Participant Lists. The following provisions apply regarding access to the list of
Participants:

	 	(i)	 	an alphabetical list of the names, addresses, and business telephone numbers of
the Participants along with the number of Units held by each of them (the “Participant
List”) must be maintained as a part of the Partnership’s books and records and be
available for inspection by any Participant or his designated agent at the home office
of the Partnership on the Participant’s request;

	 	(ii)	 	the Participant List must be updated at least quarterly to reflect changes in
the information contained in the Participant List;

	 	(iii)	 	except as provided below, a copy of the Participant List must be mailed to any
Participant requesting the Participant List within 10 days of the written request,
printed in alphabetical order on white paper, and in a readily readable type size in no
event smaller than 10-point type and a reasonable charge for copy work will be charged
by the Partnership;

	 	(iv)	 	the purposes for which a Participant may request a copy of the Participant List
include, without limitation, matters relating to Participant’s voting rights under this
Agreement and the exercise of Participant’s rights under the federal proxy laws; and

	 	(v)	 	the Managing General Partner may refuse to exhibit, produce, or mail a copy of
the Participant List as requested, if the Managing General Partner believes that the
actual purpose and reason for the request for inspection or for a copy of the
Participant List is to secure the list of Participants or other information for the
purpose of selling the list or information or copies of the list, or of using the same
for a commercial purpose other than in the interest of the applicant as a Participant
relative to the affairs of the Partnership. The Managing General Partner will require
the Participant requesting the Participant List to represent in writing that the list
was not requested for a commercial purpose unrelated to the Participant’s interest in
the Partnership.

4.03(c). Meetings of Participants.

4.03(c)(1). Procedure for a Participant Meeting.

4.03(c)(1)(a). Meetings May Be Called by Managing General Partner or Participants. Meetings of
the Participants may be called as follows:

	 	(i)	 	by the Managing General Partner; or

	 	(ii)	 	by Participants whose Units equal 10% or more of the total Units for any
matters on which Participants may vote.

The call for a meeting by the Participants as described above shall be deemed to have been made on
receipt by the Managing General Partner of a written request from holders of the requisite
percentage of Units stating the purpose(s) of the meeting.

4.03(c)(1)(b). Notice Requirement. The Managing General Partner shall deposit in the United
States mail within 15 days after the receipt of the request, written notice to all Participants of
the meeting and the purpose of the meeting. The meeting shall be held on a date not less than 30
days nor more than 60 days after the date of the mailing of the notice, at a reasonable time and
place.

Notwithstanding the foregoing, the date for notice of the meeting may be extended for a period of
up to 60 days if, in the opinion of the Managing General Partner, the additional time is necessary
to permit preparation of proxy or information statements or other documents required to be
delivered in connection with the meeting by the SEC or other regulatory authorities.

 

23

 

4.03(c)(1)(c). May Vote by Proxy. Participants shall have the right to vote at any Participant
meeting either:

	 	(i)	 	in person; or
	 
	 	(ii)	 	by proxy.

4.03(c)(2). Special Voting Rights. At the request of Participants whose Units equal 10% or more
of the total Units, the Managing General Partner shall call for a vote by Participants. Each Unit
is entitled to one vote on all matters, and each
fractional Unit is entitled to that fraction of one vote equal to the fractional interest in the
Unit. Participants whose Units equal a majority of the total Units may, without the concurrence of
the Managing General Partner or its Affiliates, vote to:

	 	(i)	 	dissolve the Partnership;
	 
	 	(ii)	 	remove the Managing General Partner and elect a new Managing General Partner;

	 	(iii)	 	elect a new Managing General Partner if the Managing General Partner elects to
withdraw from the Partnership;
	 
	 	(iv)	 	remove the Operator and elect a new Operator;

	 	(v)	 	approve or disapprove the sale of all or substantially all of the assets of the
Partnership;

	 	(vi)	 	cancel any contract for services with the Managing General Partner, the
Operator, or their Affiliates that is not described in the Private Placement Memorandum
or this Agreement without penalty on 60 days notice; and
	 
	 	(vii)	 	amend this Agreement; provided however:

	 	(a)	 	any amendment may not increase the duties or liabilities of any
Participant or the Managing General Partner or increase or decrease the profit
or loss sharing or required Capital Contribution of any Participant or the
Managing General Partner without the approval of the Participant or the Managing
General Partner, respectively; and

	 	(b)	 	any amendment may not affect the classification of Partnership
income and loss for federal income tax purposes without the unanimous approval
of all Participants.

4.03(c)(3). Restrictions on Managing General Partner’s Voting Rights. With respect to Units owned
by the Managing General Partner or its Affiliates, the Managing General Partner and its Affiliates
may vote or consent on all matters other than the matters set forth in §4.03(c)(2)(ii) and (iv)
above.

In determining the requisite percentage in interest of Units necessary to approve any Partnership
matter on which the Managing General Partner and its Affiliates may not vote or consent, any Units
owned by the Managing General Partner and its Affiliates shall not be included.

4.03(c)(4). Restrictions on Limited Partner Voting Rights. The exercise by the Limited Partners
of the rights granted Participants under §4.03(c), except for the special voting rights granted
Participants under §4.03(c)(2), shall be subject to the prior legal determination that the grant or
exercise of the powers will not adversely affect the limited liability of Limited Partners.
Notwithstanding the foregoing, if in the opinion of counsel to the Partnership the legal
determination is not necessary under Delaware law to maintain the limited liability of the Limited
Partners, then it shall not be required. A legal determination under this paragraph may be made
either pursuant to:

	 	(i)	 	an opinion of counsel, the counsel being independent of the Partnership and
selected on the vote of Limited Partners whose Units equal a majority of the total
Units held by Limited Partners; or
	 
	 	(ii)	 	a declaratory judgment issued by a court of competent jurisdiction.

 

24

 

The Investor General Partners may exercise the rights granted to the Participants whether or not
the Limited Partners can participate in the vote if the Investor General Partners represent the
requisite percentage of Units necessary to take the action.

4.03(d). Transactions with the Managing General Partner.

4.03(d)(1). Managing General Partner May Waive Lease Encroachments by Affiliated Programs and May
Waive Lease Encroachments by the Partnership, If Any. Horizontal drilling by the Partnership may,
in the case of some
horizontal wells, encroach on Lease interests that have been assigned to prior drilling
partnerships sponsored by the Managing General Partner. In this event, the encroachment will be
waived and allowed by the prior partnerships without restriction or charge to the Partnership
unless the Managing General Partner determines, in its discretion, that the encroachment results in
drainage from one or more of the prior partnership’s wells. In that event, this Partnership shall
compensate the prior partnership for the drainage, either by a cash payment or an overriding
royalty interest or portion of the working interest in the well that encroaches on the prior
partnership’s acreage, as determined by the Managing General Partner in its discretion, consistent
with its fiduciary duties to its partnerships. On the other hand, these provisions may also apply
to the Partnership if its Lease interests are encroached on by horizontal drilling conducted by
other drilling partnerships sponsored by the Managing General Partner in the future. The
resolution of these conflicts of interest by the Managing General Partner involves many subjective
determinations and may not be made in the best interests of the partnership.

4.03(d)(2). Transfer of Less than the Managing General Partner’s and its Affiliates’ Entire
Interest. A sale, transfer or a conveyance to the Partnership of less than all of the ownership of
the Managing General Partner or an Affiliate (excluding another Program in which the interest of
the Managing General Partner or its Affiliates is substantially similar to or less than their
interest in the Partnership) in any Prospect shall not be made unless:

	 	(i)	 	the interest retained by the Managing General Partner or the Affiliate is a
proportionate Working Interest;

	 	(ii)	 	the respective obligations of the Managing General Partner or its Affiliates
and the Partnership are substantially the same after the sale of the interest by the
Managing General Partner or its Affiliates; and

	 	(iii)	 	the Managing General Partner’s interest in revenues does not exceed the amount
proportionate to its retained Working Interest.

This section does not prevent the Managing General Partner or its Affiliates from subsequently
dealing with their retained interest as they may choose with unaffiliated parties or Affiliated
partnerships.

4.03(d)(3). Limitations on Sale of Undeveloped and Developed Leases to the Managing General
Partner. Other than another Program managed by the Managing General Partner and its Affiliates as
set forth in §4.03(d)(5), the Managing General Partner and its Affiliates shall not purchase any
undeveloped Leases from the Partnership other than at the higher of Cost or fair market value.
However, when a well is plugged and abandoned the Partnership’s Lease rights may be assigned by the
Partnership to the Managing General Partner in return for a cash payment, Farmout, Overriding
Royalty Interest or other interest in the Prospect as determined by the Managing General Partner,
in its discretion, consistent with its fiduciary duty to the Partnership. Farmouts to the Managing
General Partner and its Affiliates may be made as set forth in §4.03(d)(9).

Subject to the foregoing, the Managing General Partner and its Affiliates, other than an Affiliated
Income Program, shall not purchase any producing natural gas or oil property from the Partnership
unless:

	 	(i)	 	the sale is in connection with the liquidation of the Partnership; or

	 	(ii)	 	the Managing General Partner’s well supervision fees under the Drilling and
Operating Agreement for the well have exceeded the net revenues of the well, determined
without regard to the Managing General Partner’s well supervision fees for the well,
for a period of at least three consecutive months.

Under both (i) and (ii) above, the sale must be at fair market value supported by an appraisal of
an Independent Expert selected by the Managing General Partner.

 

25

 

4.03(d)(4). Transactions Must Be Fair and Reasonable. Neither the Managing General Partner nor
any Affiliate shall sell, transfer, or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except under transactions that are fair and reasonable, nor
take any action with respect to the assets or property of the Partnership which does not primarily
benefit the Partnership.

4.03(d)(5). Transfer of Leases Between Affiliated Limited Partnerships. The transfer of an
undeveloped Lease from the Partnership to another drilling Program sponsored or managed by the
Managing General Partner or its Affiliates must be made
at fair market value if the undeveloped Lease has been held by the Partnership for more than two
years. Otherwise, if the Managing General Partner deems it to be in the best interest of the
Partnership, the transfer may be made at Cost.

An Affiliated Income Program may purchase a producing natural gas and oil property from the
Partnership at any time at:

	 	(i)	 	fair market value as supported by an appraisal from an Independent Expert if
the property has been held by the Partnership for more than six months or the
Partnership has made significant expenditures have been made in connection with the
property; or

	 	(ii)	 	Cost, as adjusted for intervening operations, if the Managing General Partner
deems it to be in the best interest of the Partnership.

However, these prohibitions shall not apply to joint ventures or Farmouts among Affiliated
partnerships, provided that:

	 	(i)	 	the respective obligations and revenue sharing of all parties to the
transaction are substantially the same; and

	 	(ii)	 	the compensation arrangement or any other interest or right of either the
Managing General Partner or its Affiliates is the same in each Affiliated partnership
or if different, the aggregate compensation of the Managing General Partner or the
Affiliate is reduced to reflect the lower compensation arrangement.

4.03(d)(6). Sale of All Assets. The sale of all or substantially all of the assets of the
Partnership, including without limitation, Leases, wells, equipment and production therefrom, shall
be made only with the consent of Participants whose Units equal a majority of the total Units.

4.03(d)(7). Services.

4.03(d)(7)(a). Competitive Rates. The Managing General Partner and any Affiliate shall not render
to the Partnership any oil field, equipage, or other services nor sell or lease to the Partnership
any equipment or related supplies unless the compensation, price, or rental therefor is competitive
with the compensation, price, or rental of other persons in the area engaged in the business of
rendering comparable services or selling or leasing comparable equipment and supplies which could
reasonably be made available to the Partnership.

4.03(d)(7)(b). If Not Disclosed in the Private Placement Memorandum or This Agreement, Then
Services by the Managing General Partner Must be Described in a Separate Contract and Cancelable.
Any services for which the Managing General Partner or an Affiliate is to receive compensation,
other than those described in this Agreement or the Private Placement Memorandum, shall be set
forth in a written contract which precisely describes the services to be rendered and all
compensation to be paid. These contracts shall be cancelable without penalty on 60 days written
notice by Participants whose Units equal a majority of the total Units.

4.03(d)(8). Loans.

4.03(d)(8)(a). No Loans from the Partnership. No loans or advances shall be made by the
Partnership to the Managing General Partner or its Affiliates.

4.03(d)(8)(b). Loans to the Partnership. Neither the Managing General Partner nor any Affiliate
shall loan money to the Partnership if the interest to be charged exceeds either:

	 	(i)	 	the Managing General Partner’s or the Affiliate’s interest cost; or

	 	(ii)	 	that which would be charged to the Partnership, without reference to the
Managing General Partner’s or the Affiliate’s financial abilities or guarantees, by
unrelated lenders, on comparable loans for the same purpose.

 

26

 

Neither the Managing General Partner nor any Affiliate shall receive points or other financing
charges or fees, regardless of the amount, although the actual amount of the charges incurred by
them from third-party lenders may be reimbursed to the Managing General Partner or the Affiliate.

4.03(d)(9). Farmouts. The Managing General Partner shall not enter into a Farmout to avoid its
paying its share of costs related to drilling a well on an undeveloped Lease.

The Partnership may Farmout an undeveloped lease or well activity only if the Managing General
Partner, exercising the standard of a prudent operator, determines that:

	 	(i)	 	the Partnership lacks the funds to complete the oil and gas operations on the
Lease or well and cannot obtain suitable financing;

	 	(ii)	 	drilling on the Lease or the intended well activity would concentrate excessive
funds in one location, creating undue risks to the Partnership;

	 	(iii)	 	the Leases or well activity have been downgraded by events occurring after
assignment to the Partnership so that development of the Leases or well activity would
not be desirable; or
	 
	 	(iv)	 	the best interests of the Partnership would be served.

If the Partnership Farmouts a Lease or well activity, the Managing General Partner must retain on
behalf of the Partnership the economic interests and concessions as a reasonably prudent oil and
gas operator would or could retain under the circumstances prevailing at the time, consistent with
industry practices.

4.03(d)(10). No Compensating Balances. Neither the Managing General Partner nor any Affiliate
shall use the Partnership’s funds as compensating balances for its own benefit.

4.03(d)(11). Future Production. Neither the Managing General Partner nor any Affiliate shall
commit the future production of a well developed by the Partnership exclusively for its own
benefit.

4.03(d)(12). Marketing Arrangements. Subject to §4.06(c), all benefits from marketing
arrangements or other relationships affecting the property of the Managing General Partner or its
Affiliates, including its Affiliated partnerships and the Partnership, shall be fairly and
equitably apportioned according to the respective interests of each in the property. In this
regard, the benefits and liabilities of the hedging agreements shall be equitably allocated by
Atlas Energy, Inc., Atlas Energy Resources, LLC, their Affiliates, or their successors in interest
by merger or otherwise, and the Managing General Partner to the Partnership and the other
partnerships sponsored by the Managing General Partner and its Affiliates pro rata based on actual
production, consistent with past practice, and the Partnership and the other partnerships sponsored
by the Managing General Partner and its Affiliates shall be severally liable for their respective
allocated share thereof, but shall not be jointly and severally liable for the entire amount of the
liabilities under the hedging agreements. Additionally, Atlas Energy, Inc., Atlas Energy
Resources, LLC, their Affiliates, and their successors in interest by merger or otherwise, shall
not be liable for any such liabilities, or be entitled to any such benefits, to the extent they are
so allocated. Atlas Energy, Inc. has transferred ownership of the Managing General Partner to
Atlas Energy Resources, LLC and it is anticipated that Atlas Energy Resources, LLC or an Affiliate,
rather than Atlas Energy, Inc., will enter into future hedging agreements. Notwithstanding, the
Partnership may enter into agreements and financial instruments relating to hedging the
Partnership’s natural gas and oil and the pledging of up to 100% of the Partnership’s assets and
reserves in connection therewith separate from and in addition to the hedging agreements described
above.

4.03(d)(13). Advance Payments. Advance payments by the Partnership to the Managing General
Partner and its Affiliates are prohibited except when advance payments are required to secure the
tax benefits of prepaid Intangible Drilling Costs for a business purpose as set forth in the
Drilling and Operating Agreement.

 

27

 

4.03(d)(14). No Rebates. No rebates or give-ups may be received by the Managing General Partner
or any Affiliate nor may the Managing General Partner or any Affiliate participate in any
reciprocal business arrangements that would circumvent the provisions of this section.

4.03(d)(15). Participation in Other Partnerships. If the Partnership participates in other
partnerships or joint ventures (multi-tier arrangements), then the terms of any of these
arrangements shall not result in the circumvention of any of the requirements or prohibitions
contained in this Agreement, including the following:

	 	(i)	 	there shall be no duplication or increase in Organization and Offering Costs,
the Managing General Partner’s compensation, Partnership expenses or other fees and
costs;

	 	(ii)	 	there shall be no substantive alteration in the fiduciary and contractual
relationship between the Managing General Partner and the Participants; and
	 
	 	(iii)	 	there shall be no diminishment in the voting rights of the Participants.

4.03(d)(16). Roll-Up Limitations.

4.03(d)(16)(a). Requirement for Appraisal and Its Assumptions. In connection with a proposed
Roll-Up, an appraisal of all Partnership assets shall be obtained from a competent Independent
Expert. If the appraisal will be included in a prospectus used to offer securities of a Roll-Up
Entity, then the appraisal shall be filed with the SEC and the Administrator as an exhibit to the
registration statement for the offering. Thus, an issuer using the appraisal shall be subject to
liability for violation of Section 11 of the Securities Act of 1933 and comparable provisions under
state law for any material misrepresentations or material omissions in the appraisal.

Partnership assets shall be appraised on a consistent basis. The appraisal shall be based on all
relevant information, including current reserve estimates prepared as set forth in §4.03(b)(3), and
shall indicate the value of the Partnership’s assets as of a date immediately before the
announcement of the proposed Roll-Up transaction. The appraisal shall assume an orderly
liquidation of the Partnership’s assets over a 12-month period.

The terms of the engagement of the Independent Expert shall clearly state that the engagement is
for the benefit of the Partnership and the Participants. A summary of the independent appraisal,
indicating all material assumptions underlying the appraisal, shall be included in a report to the
Participants in connection with a proposed Roll-Up.

4.03(d)(16)(b). Rights of Participants Who Vote Against Proposal. In connection with a proposed
Roll-Up, Participants who vote “no” on the proposal shall be offered the choice of:

	 	(i)	 	accepting the securities of the Roll-Up Entity offered in the proposed Roll-Up;
or
	 
	 	(ii)	 	one of the following:

	 	(a)	 	remaining as Participants in the Partnership and preserving their
Units in the Partnership on the same terms and conditions as existed previously;
or

	 	(b)	 	receiving cash in an amount equal to the Participants’ pro rata
share of the appraised value of the net assets of the Partnership based on their
respective number of Units.

4.03(d)(16)(c). No Roll-Up If Diminishment of Voting Rights. The Partnership shall not
participate in any proposed Roll-Up which, if approved, would result in the diminishment of any
Participant’s voting rights under the Roll-Up Entity’s chartering agreement. In no event shall the
democracy rights of Participants in the Roll-Up Entity be less than those provided for under
§§4.03(c)(1) and 4.03(c)(2). If the Roll-Up Entity is a corporation, then the democracy rights of
Participants shall correspond to the democracy rights provided for in this Agreement to the
greatest extent possible.

 

28

 

4.03(d)(16)(d). No Roll-Up If Accumulation of Shares Would be Impeded. The Partnership shall not
participate in any proposed Roll-Up transaction which includes provisions that would operate to
materially impede or frustrate the accumulation of shares by any purchaser of the securities of the
Roll-Up Entity, except to the minimum extent necessary to preserve the tax status of the Roll-Up
Entity. The Partnership shall not participate in any proposed Roll-Up transaction which would
limit the
ability of a Participant to exercise the voting rights of its securities of the Roll-Up Entity on
the basis of the number of Units held by that Participant.

4.03(d)(16)(e). No Roll-Up If Access to Records Would Be Limited. The Partnership shall not
participate in a Roll-Up in which Participants’ rights of access to the records of the Roll-Up
Entity would be less than those provided for under §§4.03(b)(5), 4.03(b)(6) and 4.03(b)(7).

4.03(d)(16)(f). Cost of Roll-Up. The Partnership shall not participate in any proposed Roll-Up
transaction in which any of the costs of the transaction would be borne by the Partnership if
Participants whose Units equal a majority of the total Units do not vote to approve the proposed
Roll-Up.

4.03(d)(16)(g). Roll-Up Approval. The Partnership shall not participate in a Roll-Up transaction
unless the Roll-Up transaction is approved by Participants whose Units equal a majority of the
total Units.

4.03(d)(17). Disclosure of Binding Agreements. Any agreement or arrangement which binds the
Partnership must be disclosed in the Private Placement Memorandum.

4.04. Designation, Compensation and Removal of Managing General Partner and Removal of Operator.

4.04(a). Managing General Partner.

4.04(a)(1). Term of Service. Except as otherwise provided in this Agreement, Atlas shall serve as
the Managing General Partner of the Partnership until either it:

	 	(i)	 	is removed pursuant to §4.04(a)(3); or
	 
	 	(ii)	 	withdraws pursuant to §4.04(a)(3)(f).

4.04(a)(2). Compensation of Managing General Partner. In addition to the compensation set forth
in §§4.01(a)(4) and 4.02(d)(1), the Managing General Partner shall receive the compensation set
forth in §§4.04(a)(2)(b) through 4.04(a)(2)(g).

4.04(a)(2)(a). Charges Must Be Necessary and Reasonable. Charges by the Managing General Partner
for goods and services must be fully supportable as to:

	 	(i)	 	the necessity of the goods and services; and
	 
	 	(ii)	 	the reasonableness of the amount charged.

All actual and necessary expenses incurred by the Partnership may be paid out of the Partnership’s
subscription proceeds and revenues.

4.04(a)(2)(b). Direct Costs. The Managing General Partner and its Affiliates shall be reimbursed
for all Direct Costs. Direct Costs, however, shall be billed directly to and paid by the
Partnership to the extent practicable.

4.04(a)(2)(c). Administrative Costs. The Managing General Partner shall receive a nonaccountable,
fixed payment reimbursement for its Administrative Costs of $75 per well per month. The
nonaccountable, fixed payment reimbursement of $75 per well per month shall be subject to the
following:

	 	(i)	 	it shall be proportionately reduced to the extent the Partnership acquires less
than 100% of the Working Interest in the well; and

	 	(ii)	 	it shall not be received for wells plugged or abandoned during drilling
operations.

 

29

 

4.04(a)(2)(d). Gas Gathering. The Managing General Partner, not acting as a Partner, shall be
responsible for gathering and transporting the natural gas produced by the Partnership to
interstate pipeline systems, local distribution companies, and/or
end-users in the area (the “gathering services”). In providing the gathering services, the
Managing General Partner may use the gathering system owned by Laurel Mountain Midstream, LLC, as
described in the Private Placement Memorandum, natural gas processing plants in Indiana in which an
Affiliate of the Managing General Partner owns an interest, and gathering systems owned by
independent third-parties and/or Affiliates of Atlas Energy, Inc. other than Laurel Mountain
Midstream, LLC.

The Partnership shall pay a gathering fee directly to the Managing General Partner at competitive
rates for the gathering services. The gathering fee paid by the Partnership to the Managing
General Partner may be increased from time-to-time by the Managing General Partner, in its sole
discretion, but may not increase beyond competitive rates as determined by the Managing General
Partner. Initially, the Managing General Partner has determined that the competitive rate is an
amount equal to 16% of the gross sales price received by the Partnership for its natural gas in the
Marcellus Shale (western Pennsylvania) primary area. In the New Albany Shale (Indiana) primary
area the Managing General Partner has determined that the initial competitive natural gas
transportation rate is a gathering fee in an amount equal to $0.005 (1/2 of one cent) per mcf per
mile the Partnership’s natural gas is transported, plus a processing fee in an amount equal to
$1.00 per mcf for natural gas that is processed in a processing plant in Indiana in which an
Affiliate of the Managing General Partner owns an interest. Gross sales price means the price that
is actually received, adjusted to take into account proceeds received or payments made pursuant to
hedging arrangements.

The payment of a competitive fee to the Managing General Partner for its gathering services shall
be subject to the following conditions:

	 	(i)	 	If the Partnership’s natural gas production is gathered and transported through
the gathering system owned by Laurel Mountain Midstream, LLC, then the Managing General
Partner shall apply its gathering fee towards the related gathering fee obligation of
Atlas America, LLC, Atlas Energy Resources, LLC, Atlas Energy Operating Company, LLC,
Atlas Noble LLC, Resource Energy, LLC, and Viking Resources LLC (the “Atlas Entities”)
under their agreement with Laurel Mountain Midstream, LLC, as described in the Private
Placement Memorandum.

	 	(ii)	 	If a third-party gathering system is used by the Partnership, then the Managing
General Partner’s gathering fee charged to the Partnership shall be the actual
transportation and compression fees charged by the third-party gathering system with
respect to the Partnership’s natural gas in the area, and the Managing General Partner
shall pay all of the gathering fee it receives from the Partnership to the third-party
gathering the natural gas. The Managing General Partner shall not receive any gathering
fees from the Partnership that exceed the payments it makes to the third-party gas
gatherer.

	 	(iii)	 	If both a third-party gathering system and the Laurel Mountain Midstream, LLC
gathering system, or a gas gathering system owned by an Affiliate other than Laurel
Mountain Midstream, LLC, are used by the Partnership, then the Managing General Partner
shall receive an amount equal to a competitive fee, as described above, for the natural
gas transported by the segment provided by the Laurel Mountain Midstream, LLC gathering
system or a gas gathering system owned by an Affiliate other than Laurel Mountain
Midstream, LLC, plus the amount charged by the third-party gathering system for the
natural gas transported by the segment provided by the third-party.

4.04(a)(2)(e). Dealer-Manager Fee. Subject to §3.03(a)(1), the Dealer-Manager shall receive on
each Unit sold to investors:

	 	(i)	 	a 2.5% Dealer-Manager fee; and
	 
	 	(ii)	 	a 7% Sales Commission.

4.04(a)(2)(f). Drilling and Operating Agreement. The Managing General Partner and its Affiliates
shall receive compensation as set forth in the Drilling and Operating Agreement.

 

30

 

4.04(a)(2)(g). Other Transactions. The Managing General Partner and its Affiliates may enter into
transactions pursuant to §4.03(d)(7) with the Partnership and shall be entitled to compensation
under that section.

4.04(a)(3). Removal of Managing General Partner.

4.04(a)(3)(a). Majority Vote Required to Remove the Managing General Partner. The Managing
General Partner may be removed at any time on 60 days’ advance written notice to the outgoing
Managing General Partner by the affirmative vote of Participants whose Units equal a majority of
the total Units.

If the Participants vote to remove the Managing General Partner from the Partnership, then
Participants must elect by an affirmative vote of Participants whose Units equal a majority of the
total Units either to:

	 	(i)	 	dissolve, wind-up, and terminate the Partnership; or

	 	(ii)	 	continue as a successor limited partnership under all the terms of this
Partnership Agreement as provided in §7.01(c).

If the Participants elect to continue as a successor limited partnership, then the Managing General
Partner shall not be removed until a substituted Managing General Partner has been selected by an
affirmative vote of Participants whose Units equal a majority of the total Units and installed as
such.

4.04(a)(3)(b). Valuation of Managing General Partner’s Interest in the Partnership. If the
Managing General Partner is removed, then its interest in the Partnership shall be determined by
appraisal by a qualified Independent Expert. The Independent Expert shall be selected by mutual
agreement between the removed Managing General Partner and the incoming Managing General Partner.
The appraisal shall take into account an appropriate discount, to reflect the risk of recovering
natural gas and oil reserves, which shall not be less than that used to calculate the presentment
price in the most recent presentment offer under §6.03, if any.

The cost of the appraisal shall be borne equally by the removed Managing General Partner and the
Partnership.

4.04(a)(3)(c). Incoming Managing General Partner’s Option to Purchase. The incoming Managing
General Partner shall have the option to purchase 20% of the removed Managing General Partner’s
interest in the Partnership as Managing General Partner, but not as a Participant, for the value
determined by the Independent Expert.

4.04(a)(3)(d). Method of Payment. The method of payment for the removed Managing General
Partner’s interest must be fair and protect the solvency and liquidity of the Partnership. The
method of payment shall be as follows:

	 	(i)	 	when the termination is voluntary, the method of payment shall be a
non-interest bearing unsecured promissory note with principal payable, if at all, from
distributions which the Managing General Partner otherwise would have received under
this Agreement had the Managing General Partner not been terminated; and

	 	(ii)	 	when the termination is involuntary, the method of payment shall be an interest
bearing unsecured promissory note coming due in no less than five years with equal
installments each year. The interest rate shall be that charged on comparable loans.

4.04(a)(3)(e). Termination of Contracts. At the time of its removal, the removed Managing General
Partner shall cause, to the extent it is legally possible to do so, its successor to be transferred
or assigned all of its rights, obligations and interests as Managing General Partner of the
Partnership in contracts entered into by it on behalf of the Partnership. In any event, the
removed Managing General Partner shall cause all of its rights, obligations and interests as
Managing General Partner of the Partnership in any such contract to terminate at the time of its
removal.

 

31

 

4.04(a)(3)(f). The Managing General Partner’s Right to Voluntarily Withdraw. At any time
beginning 10 years after the Offering Termination Date and the Partnership’s primary drilling
activities, the Managing General Partner may voluntarily withdraw as Managing General Partner on
giving 120 days’ written notice of withdrawal to the Participants. If the Managing General Partner
withdraws, then the following conditions shall apply:

	 	(i)	 	the Managing General Partner’s interest in the Partnership shall be determined
as described in §4.04(a)(3)(b) above with respect to removal; and

	 	(ii)	 	the interest shall be distributed to the Managing General Partner as described
in §4.04(a)(3)(d)(i) above.

Any successor Managing General Partner shall have the option to purchase 20% of the withdrawing
Managing General Partner’s interest in the Partnership at the value determined as described above
with respect to removal.

4.04(a)(3)(g). Right of Managing General Partner to Hypothecate Its Interests. The Managing
General Partner shall have the authority without the consent of the Participants and without
affecting the allocation of costs and revenues received or incurred under this Agreement, to
hypothecate, pledge, or otherwise encumber, on any terms it chooses for its own general purposes,
either:

	 	(i)	 	its Partnership interest; or

	 	(ii)	 	an undivided interest in the assets of the Partnership equal to or less than
its respective interest as Managing General Partner in the revenues of the Partnership.

All repayments of these borrowings and costs, interest or other charges related to the borrowings
shall be borne and paid separately by the Managing General Partner. In no event shall the
repayments, costs, interest, or other charges related to the borrowing be charged to the account of
the Participants.

4.04(a)(3)(h). The Managing General Partner’s Right to Withdraw Property Interest. The Managing
General Partner shall have the right to withdraw a property interest held by the Partnership in the
form of a Working Interest in the Partnership’s Wells equal to or less than its respective interest
as Managing General Partner in the revenues of the Partnership at any time and without the consent
of the Participants.

If the Managing General Partner withdraws a property interest from the Partnership as described
above, then the Managing General Partner shall:

	 	(i)	 	pay the expenses of withdrawing; and

	 	(ii)	 	fully indemnify the Partnership against any additional expenses which may
result from the withdrawal of its property interest, including insuring that a greater
amount of Direct Costs or Administrative Costs is not allocated to the Participants.

4.04(a)(4). Removal of Operator. The Operator may be removed and a new Operator may be
substituted at any time on 60 days advance written notice to the outgoing Operator by the Managing
General Partner acting on behalf of the Partnership on the affirmative vote of Participants whose
Units equal a majority of the total Units.

The Operator shall not be removed until a substituted Operator has been selected by an affirmative
vote of Participants whose Units equal a majority of the total Units and installed as such.

4.05. Indemnification and Exoneration.

4.05(a)(1). Standards for the Managing General Partner Not Incurring Liability to the Partnership
or Participants. The Managing General Partner, the Operator, and their Affiliates shall not have
any liability whatsoever to the Partnership, or to any Participant for any loss suffered by the
Partnership or the Participants which arises out of any action or inaction of the Managing General
Partner, the Operator, or their Affiliates if:

	 	(i)	 	the Managing General Partner, the Operator, and their Affiliates determined in
good faith that the course of conduct was in the best interest of the Partnership;

 

32

 

	 	(ii)	 	the Managing General Partner, the Operator, and their Affiliates were acting on
behalf of, or performing services for, the Partnership; and

	 	(iii)	 	the course of conduct did not constitute negligence or misconduct of the
Managing General Partner, the Operator, or their Affiliates.

4.05(a)(2). Standards for Managing General Partner Indemnification. The Managing General Partner,
the Operator, and their Affiliates shall be indemnified by the Partnership against any losses,
judgments, liabilities, expenses, and amounts paid in settlement of any claims sustained by them in
connection with the Partnership, provided that:

	 	(i)	 	the Managing General Partner, the Operator, and their Affiliates determined in
good faith that the course of conduct which caused the loss or liability was in the
best interest of the Partnership;

	 	(ii)	 	the Managing General Partner, the Operator, and their Affiliates were acting on
behalf of, or performing services for, the Partnership; and

	 	(iii)	 	the course of conduct was not the result of negligence or misconduct of the
Managing General Partner, the Operator, or their Affiliates.

Provided, however, payments arising from such indemnification or agreement to hold harmless are
recoverable only out of the following:

	 	(i)	 	the Partnership’s tangible net assets, which include its revenues; and
	 
	 	(ii)	 	any insurance proceeds received by the partnership.

4.05(a)(3). Standards for Securities Law Indemnification. Notwithstanding anything to the
contrary contained in this section, the Managing General Partner, the Operator, and their
Affiliates and any person acting as a broker/dealer with respect to the offer or sale of the Units,
shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged
violation of federal or state securities laws by such party unless:

	 	(i)	 	there has been a successful adjudication on the merits of each count involving
alleged securities law violations as to the particular indemnitee;

	 	(ii)	 	the claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee; or

	 	(iii)	 	a court of competent jurisdiction approves a settlement of the claims against
a particular indemnitee and finds that indemnification of the settlement and the
related costs should be made, and the court considering the request for indemnification
has been advised of the position of the SEC, the Massachusetts Securities Division, and
any state securities regulatory authority in which plaintiffs claim they were offered
or sold Units with respect to the issue of indemnification for violation of securities
laws.

4.05(a)(4). Standards for Advancement of Funds to the Managing General Partner and Insurance. The
advancement of Partnership funds to the Managing General Partner, the Operator, or their Affiliates
for legal expenses and other costs incurred as a result of any legal action for which
indemnification is being sought from the Partnership is permissible only if the Partnership has
adequate funds available and the following conditions are satisfied:

	 	(i)	 	the legal action relates to acts or omissions with respect to the performance
of duties or services on behalf of the Partnership;

	 	(ii)	 	the legal action is initiated by a third-party who is not a Participant, or the
legal action is initiated by a Participant and a court of competent jurisdiction
specifically approves the advancement; and

	 	(iii)	 	the Managing General Partner or its Affiliates undertake to repay the advanced
funds to the Partnership, together with the applicable legal rate of interest thereon,
in cases in which such party is found not to be entitled to indemnification.

 

33

 

The Partnership shall not bear the cost of that portion of insurance which insures the Managing
General Partner, the Operator, or their Affiliates for any liability for which they could not be
indemnified pursuant to §§4.05(a)(1) and 4.05(a)(2).

4.05(b). Liability of Partners. Under the Delaware Revised Uniform Limited Partnership Act, the
Investor General Partners are liable jointly and severally for all liabilities and obligations of
the Partnership. Notwithstanding the foregoing, as among themselves, the Investor General Partners
agree that each shall be solely and individually responsible only for his pro rata share of the
liabilities and obligations of the Partnership based on his respective number of Units.

In addition, the Managing General Partner agrees to use its corporate assets to indemnify each of
the Investor General Partners against all Partnership related liabilities which exceed the Investor
General Partner’s interest in the undistributed net assets of the Partnership and insurance
proceeds, if any. Further, the Managing General Partner agrees to indemnify each Investor General
Partner against any personal liability as a result of the unauthorized acts of another Investor
General Partner.

If the Managing General Partner provides indemnification, then each Investor General Partner who
has been indemnified shall transfer and subrogate his rights for contribution from or against any
other Investor General Partner to the Managing General Partner.

4.05(c). Order of Payment of Claims. Claims shall be paid as follows:

	 	(i)	 	first, out of any insurance proceeds;
	 
	 	(ii)	 	second, out of Partnership assets and revenues; and

	 	(iii)	 	last, by the Managing General Partner as provided in §§3.05(b)(2) and (3) and
4.05(b).

No Limited Partner shall be required to reimburse the Managing General Partner, the Operator, their
Affiliates, or the Investor General Partners for any liability in excess of his agreed Capital
Contribution, except:

	 	(i)	 	for a liability resulting from the Limited Partner’s unauthorized participation
in management of the Partnership; or
	 
	 	(ii)	 	from some other breach by the Limited Partner of this Agreement.

4.05(d). Authorized Transactions Are Not Deemed to Be a Breach. No transaction entered into or
action taken by the Partnership, or by the Managing General Partner, the Operator, or their
Affiliates, which is authorized by this Agreement shall be deemed a breach of any obligation owed
by the Managing General Partner, the Operator, or their Affiliates to the Partnership or the
Participants.

4.06. Other Activities.

4.06(a). The Managing General Partner May Pursue Other Natural Gas and Oil Activities for Its Own
Account. The Managing General Partner, the Operator, and their Affiliates are now engaged, and
will engage in the future, for their own account and for the account of others, including other
investors, in all aspects of the natural gas and oil business. This includes without limitation,
the evaluation, acquisition, and sale of producing and nonproducing Leases, and the exploration for
and production of natural gas, oil and other minerals.

 

34

 

The Managing General Partner is required to devote only so much of its time to the Partnership as
it determines in its sole discretion, but consistent with its fiduciary duties, is necessary to
manage the affairs of the Partnership. Except as expressly provided to the contrary in this
Agreement, and subject to fiduciary duties, the Managing General Partner, the Operator, and their
Affiliates may do the following:

	 	(i)	 	continue their activities, or initiate further such activities, individually,
jointly with others, or as a part of any other limited or general partnership, tax
partnership, joint venture, or other entity or activity to which they are or may become
a party, in any locale and in the same fields, areas of operation or prospects in which
the Partnership may likewise be active;

	 	(ii)	 	reserve partial interests in Leases being assigned to the Partnership or any
other interests not expressly prohibited by this Agreement;

	 	(iii)	 	deal with the Partnership as independent parties or through any other entity
in which they may be interested;
	 
	 	(iv)	 	conduct business with the Partnership as set forth in this Agreement; and
	 
	 	(v)	 	participate in such other investor operations, as investors or otherwise.

The Managing General Partner and its Affiliates shall not be required to permit the Partnership or
the Participants to participate in or share in any profits or other benefits from any of the other
operations in which the Managing General Partner and its Affiliates may be interested as permitted
under this section.

4.06(b). Managing General Partner May Manage Multiple Partnerships. The Managing General Partner
or its Affiliates may manage multiple Programs simultaneously.

4.06(c). Partnership Has No Interest in Natural Gas Contracts or Pipelines and Gathering Systems.
Notwithstanding any other provision in this Agreement, the Partnership shall not:

	 	(i)	 	be a party to any natural gas supply agreement that the Managing General
Partner, the Operator, or their Affiliates enter into with Laurel Mountain Midstream,
LLC or a third-party or have any rights pursuant to such natural gas supply agreement;
or

	 	(ii)	 	receive any interest in the Managing General Partner’s, the Operator’s and
their Affiliates’, including Laurel Mountain Midstream, LLC’s, natural gas pipeline and
gathering systems, contracts or processing and compression facilities.

ARTICLE V

PARTICIPATION IN COSTS AND REVENUES,

CAPITAL ACCOUNTS, ELECTIONS AND DISTRIBUTIONS

5.01. Participation in Costs and Revenues. Except as otherwise provided in this Agreement, costs
and revenues of the Partnership shall be charged and credited to the Managing General Partner and
the Participants as set forth in this section and its subsections.

5.01(a). Costs. Costs shall be charged as set forth below.

5.01(a)(1). Organization and Offering Costs. Organization and Offering Costs shall be charged
100% to the Managing General Partner. For purposes of sharing in revenues under §5.01(b)(4), the
Managing General Partner shall be credited with Organization and Offering Costs paid by it and for
services provided by it as Organization Costs up to an amount equal to 15% of the Partnership’s
subscription proceeds. Any Organization and Offering Costs paid and/or provided in services by
the Managing General Partner in excess of this amount shall not be credited towards the Managing
General Partner’s required Capital Contribution or revenue share set forth in §5.01(b)(4). The
Managing General Partner’s credit for services provided to the Partnership as Organization Costs
shall be determined based on generally accepted accounting principles.

5.01(a)(2). Intangible Drilling Costs. Not less than eighty-five percent (85%) of the
Partnership’s subscription proceeds received from the Participants shall be used by the Partnership
to pay 100% of the Intangible Drilling Costs as provided in Section 5.01(a)(5).

 

35

 

5.01(a)(3). Tangible Costs. Up to fifteen percent (15%) of the Partnership’s subscription
proceeds received from the Participants shall be used by the Partnership to pay Tangible Costs as
provided in Section 5.01(a)(5). All remaining Tangible Costs in excess of the amount of Tangible
Costs paid with the Partnership’s subscription proceeds shall be charged 100% to the Managing
General Partner.

5.01(a)(4). Operating Costs, Direct Costs, Administrative Costs and All Other Costs. Operating
Costs, Direct Costs, Administrative Costs, and all other Partnership costs not specifically
allocated shall be charged to the parties in the same ratio as the related production revenues are
being credited.

5.01(a)(5). Allocation of Intangible Drilling Costs and Tangible Costs at Partnership Closings.
Intangible Drilling Costs and the Participants’ share of Tangible Costs of a well or wells to be
drilled and completed with the proceeds of a Partnership closing shall be charged 100% to the
Participants who are admitted to the Partnership in that closing and shall not be reallocated to
take into account other Partnership closings.

Although the subscription proceeds received by the Partnership in each closing may be used to pay
the costs of drilling different wells, not less than 85% of each Participant’s subscription
proceeds shall be applied to Intangible Drilling Costs and up to 15% of each Participant’s
subscription proceeds shall be applied to Tangible Costs regardless of when the Participant
subscribes for his Units or is admitted to the Partnership. In this regard, after the
Partnership’s Wells have been drilled and completed the Managing General Partner shall have the
right to revise the allocation of the well’s costs between Intangible Drilling Costs and Tangible
Costs based on the actual costs of drilling and completing the wells, rather than the initial
estimate of those costs by the Managing General Partner before the wells were drilled, provided
that the Intangible Drilling Costs allocated to each Participant for the wells shall not be less
than 85% of the Participant’s subscription amount for his Units, and each Participant’s share of
the Partnership’s Tangible Costs for the wells shall not exceed 15% of the Participant’s
subscription amount for his Units.

5.01(a)(6). Lease Costs. The Leases shall be contributed to the Partnership by the Managing
General Partner as set forth in §4.01(a)(4).

5.01(b). Revenues. Revenues shall be credited as set forth below.

5.01(b)(1). Allocation of Revenues on Disposition of Property. If the parties’ Capital Accounts
are adjusted to reflect the simulated depletion of a natural gas or oil property of the
Partnership, then the portion of the total amount realized by the Partnership on the taxable
disposition of the property that represents recovery of its simulated tax basis in the property
shall be allocated to the parties in the same proportion as the aggregate adjusted tax basis of the
property was allocated to the parties or their predecessors in interest. If the parties’ Capital
Accounts are adjusted to reflect the actual depletion of a natural gas or oil property of the
Partnership, then the portion of the total amount realized by the Partnership on the taxable
disposition of the property that equals the parties’ aggregate remaining adjusted tax basis in the
property shall be allocated to the parties in proportion to their respective remaining adjusted tax
bases in the property. Thereafter, any excess shall be allocated to the Managing General Partner
in an amount equal to the difference between the fair market value of the Lease at the time it was
contributed to the Partnership and its simulated or actual adjusted tax basis at that time.
Finally, any excess shall be credited as provided in §5.01(b)(4), below.

In the event of the Partnership’s sale of developed natural gas and oil properties with equipment
on the properties, the Managing General Partner may make any reasonable allocation of the sales
proceeds between the equipment and the Leases.

5.01(b)(2). Interest. Interest earned on each Participant’s subscription proceeds under
§3.05(b)(1) shall be credited to the accounts of the respective subscribers who paid the
subscription proceeds to the Partnership. The interest shall be paid to the Participants not later
than the Partnership’s first cash distribution from operations.

After the Offering Termination Date and until proceeds from the offering are invested in the
Partnership’s natural gas and oil operations, any interest income from temporary investments shall
be allocated pro rata to the Participants providing the subscription proceeds.

 

36

 

All other interest income, including interest earned on the deposit of production revenues, shall
be credited as provided in §5.01(b)(4), below.

5.01(b)(3). Sale or Disposition of Equipment. Proceeds from the sale or disposition of equipment
shall be credited to the parties charged with the costs of the equipment in the ratio in which the
costs were charged.

5.01(b)(4). Other Revenues. Subject to §5.01(b)(4)(a), the Managing General Partner and the
Participants shall share in all other Partnership revenues in the same percentage as their
respective Capital Contribution bears to the Partnership’s total Capital Contributions, except that
the Managing General Partner shall receive an additional 10% of Partnership revenues. For example,
if the Managing General Partner contributes 15% of the Partnership’s total Capital Contributions
and the Participants contribute 85% of the Partnership’s total Capital Contributions, then the
Managing General Partner would receive 25% of the Partnership revenues and the Participants would
receive 75% of the Partnership revenues.

5.01(b)(4)(a). Subordination. The Managing General Partner shall subordinate up to 50% of its
share of Partnership Net Production Revenues to the receipt by Participants, regardless of the
actual subscription price they paid for their Units, of cumulative cash distributions from the
Partnership equal to $2,400 per Unit (which is 12% of $20,000 per Unit) during the Partnership’s
first 12-month subordination period, $2,000 per Unit (which is 10% of $20,000 per Unit) in each of
the Partnership’s next three 12-month subordination periods and $1,600 per Unit (which is 8% of
$20,000 per Unit) in the fifth 12-month subordination period, as set forth below. In this regard:

	 	(i)	 	all Partnership distributions of cash from the Partnership’s natural gas and
oil operations to the Participants before the first 12-month subordination period
begins shall be included in the Participants’ cumulative cash distributions from the
Partnership for all purposes of this Section 5.01(b)(4)(a), and, for example, shall be
added to the Participants’ other cash distributions from the Partnership during the
Partnership’s aggregate 60-month subordination period to determine whether the
Participants’ received the specified return of capital set forth above in each of the
Partnership’s five 12-month subordination periods;

	 	(ii)	 	the aggregate 60-month subordination period shall begin when the Managing
General Partner determines that natural gas or oil is being sold from at least 75% of
the Partnership Wells, excluding any wells drilled that were nonproductive;

	 	(iii)	 	subsequent subordination distributions, if any, shall be determined and made
at the time of each subsequent distribution of revenues to the Participants; and

	 	(iv)	 	the Managing General Partner shall not subordinate more than 50% of its share
of Partnership Net Production Revenues in any 12-month subordination period.

The Managing General Partner’s subordination obligation shall be determined by:

	 	(i)	 	carrying forward to subsequent 12-month subordination periods the amount, if
any, by which cumulative cash distributions to Participants, including any
subordination payments, are less than:

	 	(a)	 	$2,400 per Unit (12% of $20,000 per Unit) in the first 12-month
period;

	 	(b)	 	$4,400 per Unit (22% of $20,000 per Unit) in the second 12-month
period;

	 	(c)	 	$6,400 per Unit (32% of $20,000 per Unit) in the third 12-month
period; or

	 	(d)	 	$8,400 per Unit (42% of $20,000 per Unit) in the fourth 12-month
period (no carry forward is required if the Participant’s cumulative cash
distributions are less than $10,000 per Unit (50% of $20,000 per Unit) in the
fifth 12-month period, because the Managing General Partner’s subordination
obligation terminates on the expiration of the fifth 12-month period); and

 

37

 

	 	(ii)	 	reimbursing the Managing General Partner for any previous subordination
payments to the extent cumulative cash distributions to Participants, including any
subordination payments, would exceed:

	 	(a)	 	$2,400 per Unit (12% of $20,000 per Unit) in the first 12-month
period;

	 	(b)	 	$4,400 per Unit (22% of $20,000 per Unit) in the second 12-month
period;

	 	(c)	 	$6,400 per Unit (32% of $20,000 per Unit) in the third 12-month
period;

	 	(d)	 	$8,400 per Unit (42% of $20,000 per Unit) in the fourth 12-month
period; or

	 	(e)	 	$10,000 per Unit (50% of $20,000 per Unit) in the fifth 12-month
period.

The Managing General Partner’s subordination obligation also shall be subject to the following
conditions:

	 	(i)	 	the subordination obligation may be prorated in the Managing General Partner’s
discretion (e.g. in the second, third and fourth 12-month subordination periods, in the
case of a monthly distribution, the Managing General Partner shall not have any
subordination obligation if the cumulative monthly distributions to Participants equal
$166.66 per Unit (which is 8.333% of $2,000 per Unit) or more, assuming there are no
subordination distributions owed for any preceding period);

	 	(ii)	 	the Managing General Partner shall not be required to return Partnership
distributions previously received by it, even though a subordination obligation arises
after the distributions;

	 	(iii)	 	subject to the foregoing provisions of this section, only Partnership revenues
in the current distribution period shall be debited or credited to the Managing General
Partner as may be necessary to provide, to the extent possible, subordination
distributions to the Participants and reimbursements to the Managing General Partner;

	 	(iv)	 	no subordination distributions to the Participants or reimbursements to the
Managing General Partner shall be made after the expiration of the fifth 12-month
subordination period; and

	 	(v)	 	subordination payments to the Participants shall be subject to any lien or
priority granted by the Managing General Partner and/or its Affiliates to its lenders
pursuant to agreements either entered into by the Managing General Partner and/or its
Affiliates before the subordination obligation arose or entered into or renewed by the
Managing General Partner and/or its Affiliates after the subordination obligation
arose.

5.01(b)(5). Commingling of Revenues From All Partnership Wells. The revenues from all Partnership
wells shall be commingled, so regardless of when a Participant subscribes for Units or is admitted
to the Partnership, he will share in the Partnership’s revenues from all of its wells on the same
basis as the other Participants.

5.01(c). Allocations.

5.01(c)(1). Allocations among Participants. Except as provided otherwise in this Agreement, costs
(other than Intangible Drilling Costs and Tangible Costs) and revenues charged or credited to the
Participants as a group, which includes all revenue credited to the Participants under §5.01(b)(4),
shall be allocated among the Participants, including the Managing General Partner to the extent of
any optional subscription for Units under §3.03(b)(1), in the ratio of their respective Units based
on $20,000 per Unit regardless of the actual subscription price paid by a Participant for his
Units.

Intangible Drilling Costs and Tangible Costs charged to the Participants as a group shall be
allocated among the Participants, including the Managing General Partner to the extent of any
optional subscription for Units under §3.03(b)(1), in the ratio of the subscription amount
designated on their respective Subscription Agreements rather than the number of their respective
Units.

5.01(c)(2). Costs and Revenues Not Directly Allocable to a Partnership Well. Costs and revenues
not directly allocable to a particular Partnership Well or additional operation shall be allocated
among the Partnership Wells or additional operations in any manner the Managing General Partner in
its reasonable discretion, shall select, and shall then be charged or credited in the same manner
as costs or revenues directly applicable to the Partnership Well or additional operation are being
charged or credited.

 

38

 

5.01(c)(3). Managing General Partner’s Discretion in Making Allocations For Federal Income Tax
Purposes. In determining the proper method of allocating charges or credits among the parties,
allocating any item of income, gain, loss, deduction or credit pursuant to new laws or new IRS or
judicial interpretations of existing law, allocating any other item that is
not otherwise specifically allocated in this Agreement or is subsequently determined by the
Managing General Partner to be clearly inconsistent with a party’s economic interest in the
Partnership, or making any other allocations under this Agreement, the Managing General Partner may
adopt any method of allocation that it selects, in its sole discretion, after consultation with the
Partnership’s legal counsel or accountants. Any new allocation provisions shall be made in a
manner that is consistent with the parties’ economic interests in the Partnership and will result
in the most favorable aggregate consequences to the Participants that are, as nearly as possible,
consistent with the original allocations described in this Agreement.

5.02. Capital Accounts and Allocations Thereto.

5.02(a). Capital Accounts for Each Party to this Agreement. A single, separate Capital Account
shall be established for each party, regardless of the number of interests owned by the party, the
class of the interests and the time or manner in which the interests were acquired.

5.02(b). Charges and Credits.

5.02(b)(1). General Standard. Except as otherwise provided in this Agreement, the Capital Account
of each party shall be determined and maintained in accordance with Treas. Reg. §1.704-l(b)(2)(iv)
and shall be increased by:

	 	(i)	 	the amount of money contributed by him to the Partnership;

	 	(ii)	 	the fair market value of property contributed by him to the Partnership,
without regard to §7701(g) of the Code, net of liabilities secured by the contributed
property that the Partnership is considered to assume or take subject to under §752 of
the Code; and

	 	(iii)	 	allocations to him of Partnership income and gain, or items thereof, including
income and gain exempt from tax and income and gain described in Treas. Reg.
§1.704-l(b)(2)(iv)(g), but excluding income and gain described in Treas. Reg.
§1.704-l(b)(4)(i);

and shall be decreased by:

	 	(iv)	 	the amount of money distributed to him by the Partnership;
	 
	 	(v)	 	the fair market value of property distributed to him by the Partnership,
without regard to §7701(g) of the Code, net of liabilities secured by the distributed
property that he is considered to assume or take subject to under §752 of the Code;

	 	(vi)	 	allocations to him of Partnership expenditures described in §705(a)(2)(B) of
the Code; and

	 	(vii)	 	allocations to him of Partnership loss and deduction, or items thereof,
including loss and deduction described in Treas. Reg. §1.704-l(b)(2)(iv)(g), but
excluding items described in (vi) above, and loss or deduction described in Treas. Reg.
§1.704-l(b)(4)(i) or (iii).

5.02(b)(2). Exception. If Treas. Reg. §1.704-l(b)(2)(iv) fails to provide guidance, Capital
Account adjustments shall be made in a manner that:

	 	(i)	 	maintains equality between the aggregate governing Capital Accounts of the
parties and the amount of Partnership capital reflected on the Partnership’s balance
sheet, as computed for book purposes;
	 
	 	(ii)	 	is consistent with the underlying economic arrangement of the parties; and
	 
	 	(iii)	 	is based, wherever practicable, on federal tax accounting principles.

 

39

 

5.02(c). Payments to the Managing General Partner. The Capital Account of the Managing General
Partner shall be reduced by payments to it pursuant to §4.04(a)(2) only to the extent of the
Managing General Partner’s distributive share of any Partnership deduction, loss, or other downward
Capital Account adjustment resulting from the payments. Also, in the
event, and to the extent, that the Managing General Partner is treated under the Code as having
been transferred an interest in the Partnership in connection with the performance of services for
the Partnership (whether before or after the formation of the Partnership):

	 	(i)	 	any resulting compensation income shall be allocated 100% to the Managing
General Partner;

	 	(ii)	 	any associated increase in Capital Accounts shall be credited 100% to the
Managing General Partner; and

	 	(iii)	 	any associated deduction to which the Partnership is entitled shall be
allocated 100% to the Managing General Partner.

5.02(d). Discretion of Managing General Partner in the Method of Maintaining Capital Accounts.
Notwithstanding any other provisions of this Agreement, the method of maintaining Capital Accounts
may be changed from time to time, in the discretion of the Managing General Partner, to take into
consideration §704 and other provisions of the Code and the related rules, regulations and
interpretations as may exist from time to time.

5.02(e). Revaluations of Property. In the discretion of the Managing General Partner the Capital
Accounts of the parties may be increased or decreased to reflect a revaluation of Partnership
property, including intangible assets such as goodwill, on a property-by-property basis except as
otherwise permitted under §704(c) of the Code and the regulations thereunder, on the Partnership’s
books, in accordance with Treas. Reg. §1.704-l(b)(2)(iv)(f).

5.02(f). Amount of Book Items. In cases where §704(c) of the Code or §5.02(e) applies, Capital
Accounts shall be adjusted in accordance with Treas. Reg. §1.704-l(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain and loss, as computed for book purposes, with
respect to the property.

5.03. Allocation of Income, Deductions and Credits.

5.03(a). In General.

5.03(a)(1). Deductions Are Allocated to Party Charged with Expenditure. To the extent permitted
by law and except as otherwise provided in this Agreement, all deductions and credits, including,
but not limited to, intangible drilling and development costs and depreciation, shall be allocated
to the party who has been charged with the expenditure giving rise to the deductions and credits;
and to the extent permitted by law, these parties shall be entitled to the deductions and credits
in computing taxable income or tax liabilities to the exclusion of any other party. Also, any
Partnership deductions that would be nonrecourse deductions if they were not attributable to a loan
made or guaranteed by the Managing General Partner or its Affiliates shall be allocated to the
Managing General Partner to the extent required by law.

5.03(a)(2). Income and Gain Allocated in Accordance With Revenues. Except as otherwise provided
in this Agreement, all items of income and gain, including gain on disposition of assets, shall be
allocated in accordance with the related revenue allocations set forth in §5.01(b) and its
subsections.

5.03(b). Tax Basis of Each Property. Subject to §704(c) of the Code, the tax basis of each oil
and gas property for computation of cost depletion and gain or loss on disposition shall be
allocated and reallocated when necessary based on the capital interest in the Partnership as to the
property and the capital interest in the Partnership for this purpose as to each property shall be
considered to be owned by the parties in the ratio in which the expenditure giving rise to the tax
basis of the property has been charged as of the end of the year.

 

40

 

5.03(c). Gain or Loss on Oil and Gas Properties. Each party shall separately compute its gain or
loss on the disposition of each natural gas and oil property in accordance with the provisions of
§613A(c)(7)(D) of the Code, and the calculation of the gain or loss shall consider the party’s
adjusted basis in his property interest computed as provided in §5.03(b) and the party’s allocable
share of the amount realized from the disposition of the property.

5.03(d). Gain on Depreciable Property. Gain from each sale or other disposition of depreciable
property shall be allocated to each party whose share of the proceeds from the sale or other
disposition exceeds its contribution to the adjusted basis of the property in the ratio that the
excess bears to the sum of the excesses of all parties having an excess.

5.03(e). Loss on Depreciable Property. Loss from each sale, abandonment or other disposition of
depreciable property shall be allocated to each party whose contribution to the adjusted basis of
the property exceeds its share of the proceeds from the sale, abandonment or other disposition in
the proportion that the excess bears to the sum of the excesses of all parties having an excess.

5.03(f). Allocation If Recapture Treated As Ordinary Income. Any recapture treated as an increase
in ordinary income by reason of §§1245, 1250 or 1254 of the Code shall be allocated to the parties
in the amounts in which the recaptured items were previously allocated to them; provided that to
the extent recapture allocated to any party is in excess of the party’s gain from the disposition
of the property, the excess shall be allocated to the other parties but only to the extent of the
other parties’ gain from the disposition of the property.

5.03(g). Tax Credits. If a Partnership expenditure, whether or not deductible, that gives rise to
a tax credit in a Partnership taxable year also gives rise to valid allocations of Partnership loss
or deduction, or other downward Capital Account adjustments, for the year, then the parties’
interests in the Partnership with respect to the credit, or the cost giving rise thereto, shall be
in the same proportion as the parties’ respective distributive shares of the loss or deduction, and
adjustments. If Partnership receipts, whether or not taxable, that give rise to a tax credit,
including a marginal well production credit under §45I of the Code, in a Partnership taxable year
also give rise to valid allocations of Partnership income or gain, or other upward Capital Account
adjustments, for the year, then the parties’ interests in the Partnership with respect to the
credit, or the Partnership’s receipts or production of natural gas and oil production giving rise
thereto, shall be in the same proportion as the parties’ respective shares of the Partnership’s
production revenues from the sales of its natural gas and oil production as provided in
§5.01(b)(4).

5.03(h). Deficit Capital Accounts and Qualified Income Offset. Notwithstanding any provision of
this Agreement to the contrary, an allocation of loss or deduction which would result in a party
having a deficit Capital Account balance as of the end of the taxable year to which the allocation
relates, if charged to the party, to the extent the Participant is not required to restore the
deficit to the Partnership, taking into account:

	 	(i)	 	adjustments that, as of the end of the year, reasonably are expected to be made
to the party’s Capital Account for depletion allowances with respect to the
Partnership’s natural gas and oil properties;

	 	(ii)	 	allocations of loss and deduction that, as of the end of the year, reasonably
are expected to be made to the party under §§704(e)(2) and 706(d) of the Code and
Treas. Reg. §1.751-1(b)(2)(ii); and

	 	(iii)	 	distributions that, as of the end of the year, reasonably are expected to be
made to the party to the extent they exceed offsetting increases to the party’s Capital
Account, assuming for this purpose that the fair market value of Partnership property
equals its adjusted tax basis, that reasonably are expected to occur during or prior to
the Partnership taxable years in which the distributions reasonably are expected to be
made;

shall be charged to the Managing General Partner. Further, the Managing General Partner shall be
credited with an additional amount of Partnership income or gain equal to the amount of the loss or
deduction as quickly as possible to the extent that the chargeback does not cause or increase
deficit balances in the parties’ Capital Accounts which are not required to be restored to the
Partnership.

Notwithstanding any provision of this Agreement to the contrary, if a party unexpectedly receives
an adjustment, allocation, or distribution described in (i), (ii), or (iii) above, or any other
distribution, which causes or increases a deficit balance in the party’s Capital Account which is
not required to be restored to the Partnership, the party shall be allocated items of income and
gain, consisting of a pro rata portion of each item of Partnership income, including gross income
and gain for the year, in an amount and manner sufficient to eliminate the deficit balance as
quickly as possible.

 

41

 

5.03(i). Minimum Gain Chargeback. To the extent there is a net decrease during a Partnership
taxable year in the minimum gain attributable to a Partner nonrecourse debt, then any Partner with
a share of the minimum gain attributable to the debt at the beginning of the year shall be
allocated items of Partnership income and gain in accordance with Treas. Reg. §1.704-2(i).

5.03(j). Partners’ Allocable Shares. Except as otherwise provided in this Agreement, the Partners
agree that each party’s allocable share of Partnership income, gain, loss, deductions and credits
shall be determined for a taxable year of the Partnership by using any method that is prescribed or
permitted by the Secretary of the Treasury by regulations or other guidelines and selected for that
taxable year by the Managing General Partner which takes into account the varying interests of the
parties in the Partnership during the taxable year.

5.03(k). Contingent Income. Subject to §5.04(d), if it is determined that any taxable income
results to any party by reason of its entitlement to a share of capital of the Partnership, or a
share of profits or revenues of the Partnership before the profit or revenue has been realized by
the Partnership, the resulting deduction, as well as any resulting gain, shall not enter into
Partnership net income or loss, but shall be separately allocated to that party.

5.04. Elections.

5.04(a). Election to Deduct Intangible Costs. The Partnership’s federal income tax return shall
be made in accordance with an election under the option granted by the Code to deduct intangible
drilling and development costs.

5.04(b). No Election Out of Subchapter K. No election shall be made by the Partnership, any
Partner, or the Operator for the Partnership to be excluded from the application of the partnership
provisions of the Code, including Subchapter K of Chapter 1 of Subtitle A of the Code.

5.04(c). §754 Election. In the event of the transfer of an interest in the Partnership, or on the
death of an individual party hereto, or in the event of the distribution of property to any party,
the Managing General Partner may choose for the Partnership to file an election in accordance with
the applicable Treasury Regulations to cause the basis of the Partnership’s assets to be adjusted
for federal income tax purposes as provided by §§734 and 743 of the Code.

5.04(d). §83 Election. The Partnership, the Managing General Partner and each Participant hereby
agree to be legally bound by the provisions of this §5.04(d) and further agree that, in the
Managing General Partner’s sole discretion, the Partnership and all of its Partners may elect a
safe harbor under which the fair market value of a Partnership interest that is transferred in
connection with the performance of services is treated as being equal to the liquidation value of
that interest for transfers on or after the date final regulations providing the safe harbor are
published in the Federal Register. If the Managing General Partner determines that the Partnership
and all of its Partners will elect the safe harbor, which determination may be made solely in the
best interests of the Managing General Partner, the Partnership, the Managing General Partner and
each Participant further agree that:

	 	(i)	 	the Partnership shall be authorized and directed to elect the safe harbor;

	 	(ii)	 	the Partnership and each of its Partners (including any Person to whom a
Partnership interest is transferred in connection with the performance of services)
shall comply with all requirements of the safe harbor with respect to all Partnership
interests transferred in connection with the performance of services while the election
remains effective; and

	 	(iii)	 	the Managing General Partner, in its sole discretion, may cause the
Partnership to terminate the safe harbor election, which determination may be made in
the sole interests of the Managing General Partner.

 

42

 

5.05. Distributions.

5.05(a). In General.

5.05(a)(1). Monthly Review of Accounts. The Managing General Partner shall review the accounts of
the Partnership at least monthly to determine whether cash distributions are appropriate and the
amount to be distributed, if any.

5.05(a)(2). Distributions. Except as otherwise provided in this Agreement, the Partnership shall
distribute funds to the Managing General Partner and the Participants allocated to their respective
accounts that the Managing General Partner deems unnecessary for the Partnership to retain.

5.05(a)(3). No Borrowings. In no event shall funds be advanced or borrowed by the Partnership for
distributions to the Managing General Partner and the Participants if the amount of the
distributions would exceed the Partnership’s accrued and received revenues for the previous four
quarters, less paid and accrued Operating Costs with respect to the revenues. The determination of
revenues and costs shall be made in accordance with generally accepted accounting principles,
consistently applied.

5.05(a)(4). Distributions to the Managing General Partner. Cash distributions from the
Partnership to the Managing General Partner shall only be made as follows:

	 	(i)	 	in conjunction with distributions to Participants; and
	 
	 	(ii)	 	out of funds properly allocated to the Managing General Partner’s account.

5.05(a)(5). Reserve. At any time after one year from the date each Partnership Well is placed
into production, the Managing General Partner shall have the right to deduct each month from the
Partnership’s net sales proceeds from the sale of the natural gas and oil production from each of
its productive wells up to $200 per well for the purpose of establishing a fund to cover the
estimated costs of plugging and abandoning the well. All of these funds shall be deposited in a
separate interest bearing account for the benefit of the Partnership, and the total amount so
retained and deposited shall not exceed the Managing General Partner’s reasonable estimate of the
costs to plug and abandon the well.

5.05(b). Distribution of Uncommitted Subscription Proceeds. Any subscription proceeds not
expended or committed for expenditure, as evidenced by a written agreement, by the Partnership
within 12 months of the Offering Termination Date, except necessary operating capital, shall be
distributed to the Participants in the ratio that the subscription amount designated on each
Participant’s Subscription Agreement bears to the total subscription amounts designated on all of
the Participants’ Subscription Agreements, as a return of capital. The Managing General Partner
shall reimburse the Participants for the selling or other offering expenses, if any, allocable to
the return of capital.

For purposes of this subsection, “committed for expenditure” shall mean contracted for, actually
earmarked for or allocated by the Managing General Partner to the Partnership’s drilling
operations, and “necessary operating capital” shall mean those funds which, in the opinion of the
Managing General Partner, should remain on hand to assure continuing operation of the Partnership.

5.05(c). Distributions on Winding Up. On the winding up of the Partnership distributions shall be
made as provided in §7.02.

5.05(d). Interest and Return of Capital. No party shall under any circumstances be entitled to
any interest on amounts retained by the Partnership. Each Participant shall look only to his share
of distributions, if any, from the Partnership for a return of his Capital Contribution.

 

43

 

ARTICLE VI

TRANSFER OF UNITS

6.01. Transferability of Units. A Participant’s transfer of a portion or all his Units, or any
interest in his Units, is subject to all of the provisions of this Article VI. For purposes of
this Article VI, the term “transfer” shall include any sale, exchange, gift, assignment, pledge,
mortgage, hypothecation, redemption or other form of transfer of a Unit, or any interest in a Unit,
by a Participant (which may include the Managing General Partner or its Affiliates, if they
purchase Units) or by operation of law, including any transfers of Units which a Participant
presents to the Managing General Partner for purchase under §6.03.

6.01(a). Rights of Assignee. Unless a transferee of a Participant’s Unit becomes a substitute
Participant with respect to that Unit in accordance with the provisions of §6.02(a)(3)(a), he shall
not be entitled to any of the rights granted to a Participant
under this Agreement, other than the right to receive all or part of the share of the profits,
losses, income, gains, deductions, credits and depletion allowances, or items thereof, and cash
distributions or returns of capital to which his transferor would otherwise be entitled under this
Agreement.

6.01(b). Conversion of Investor General Partner Units to Limited Partner Units.

6.01(b)(1). Automatic Conversion. After all of the Partnership Wells have been drilled and
completed, as determined by the Managing General Partner, the Managing General Partner shall file
an amended certificate of limited partnership with the Secretary of State of the State of Delaware
for the purpose of converting the Investor General Partner Units to Limited Partner Units. In this
regard, a well shall be deemed to be completed when production equipment is installed on the well,
even though the well may not yet be connected to a pipeline for production of natural gas.

6.01(b)(2). Investor General Partners Shall Have Contingent Liability. On conversion the Investor
General Partners shall be Limited Partners entitled to limited liability; however, they shall
remain liable to the Partnership for any additional Capital Contribution required for their
proportionate share of any Partnership obligation or liability arising before the conversion of
their Units as provided in §3.05(b)(2).

6.01(b)(3). Conversion Shall Not Affect Allocations. The conversion shall not affect the
allocation to any Participant of any item of Partnership income, gain, loss, deduction or credit or
other item of special tax significance other than Partnership liabilities, if any. Further, the
conversion shall not affect any Participant’s interest in the Partnership’s natural gas and oil
properties and unrealized receivables.

6.01(b)(4). Right to Convert if Reduction of Insurance. Notwithstanding the foregoing, the
Managing General Partner shall notify all Participants at least 30 days before the effective date
of any material adverse change in the Partnership’s insurance coverage. If the insurance coverage
is to be materially reduced, then the Investor General Partners shall have the right to convert
their Units into Limited Partner Units before the reduction by giving written notice to the
Managing General Partner.

6.02. Special Restrictions on Transfers of Units by Participants.

6.02(a). In General. Transfers of Units by Participants are subject to the following general
conditions:

	 	(i)	 	except as provided by operation of law:

	 	(a)	 	only whole Units may be transferred unless the Participant owns
less than a whole Unit, in which case his entire fractional interest must be
transferred; and

	 	(b)	 	Units may not be transferred to a person who is under the age of
18 or incompetent (unless an attorney-in-fact, guardian, custodian or
conservator has been appointed to handle the affairs of that person) without the
Managing General Partner’s consent;

	 	(ii)	 	the costs and expenses associated with the transfer must be paid by the assignor Participant;
	 
	 	(iii)	 	the transfer documents must be in a form satisfactory to the Managing General Partner; and
	 
	 	(iv)	 	the terms of the transfer must not contravene those of this Agreement.

Transfers of Units by Participants are subject to the following additional restrictions set forth
in §§6.02(a)(1) and 6.02(a)(2).

 

44

 

6.02(a)(1). Tax Law Restrictions. Subject to transfers permitted by §6.03 and transfers by
operation of law, no transfer of a Unit by a Participant shall be made which, in the opinion of
counsel to the Partnership, would result in the Partnership being either:

	 	(i)	 	terminated for tax purposes under §708 of the Code; or
	 
	 	(ii)	 	treated as a “publicly-traded” partnership for purposes of §469(k) of the Code.

6.02(a)(2). Securities Laws Restriction. Subject to transfers permitted by §6.03 and transfers by
operation of law, no Unit shall be transferred by a Participant unless there is either:

	 	(i)	 	an effective registration of the Unit under the Securities Act of 1933, as
amended, and qualification under applicable state securities laws; or

	 	(ii)	 	an opinion of counsel acceptable to the Managing General Partner that the
registration and qualification of the Unit is not required, unless this requirement is
waived by the Managing General Partner.

Transfers of Units by Participants are also subject to any conditions contained in the Subscription
Agreement.

6.02(a)(3). Substitute Participant.

6.02(a)(3)(a). Procedure to Become Substitute Participant. Subject to §§6.02(a)(1) and
6.02(a)(2), a transferee of a Participant’s Unit shall become a substitute Participant entitled to
all the rights of a Participant if, and only if:

	 	(i)	 	the transferor gives the transferee the right;

	 	(ii)	 	the Managing General Partner consents to the substitution, which shall be in
the Managing General Partner’s absolute discretion;

	 	(iii)	 	the transferee pays to the Partnership all costs and expenses incurred by the
Partnership in connection with the substitution; and

	 	(iv)	 	the transferee executes and delivers the instruments necessary to establish
that a legal transfer has taken place and to confirm the agreement of the transferee to
be bound by all of the terms of this Agreement, in a form acceptable to the Managing
General Partner.

6.02(a)(3)(b). Rights of Substitute Participant. A substitute Participant shall be entitled to
all of the rights attributable to full ownership of the assigned Units including the right to vote.

6.02(b). Effect of Transfer.

6.02(b)(1). Amendment of Records. The Partnership shall amend its records at least once each
calendar quarter to effect the substitution of substitute Participants.

Any transfer of a Unit by a Participant which is permitted under this Article VI, when the
transferee does not become a substitute Participant, shall be effective as follows:

(i) midnight of the last day of the calendar month in which it is made; or

(ii) at the Managing General Partner’s election, 7:00 A.M. of the following day.

6.02(b)(2). A Transfer of Units Does Not Relieve the Transferor of Certain Costs. No transfer of
a Unit by a Participant, including a transfer of less than all of a Participant’s Units or the
transfer of a Participant’s Units to more than one party, shall relieve the transferor of its
responsibility for its proportionate part of any expenses, obligations and liabilities under this
Agreement related to the Units so transferred, whether arising before or after the transfer.

 

45

 

6.02(b)(3). A Transfer of Units Does Not Require A Partnership Accounting. No transfer of a Unit
by a Participant shall require an accounting of the Partnership. Also, no transfer of a Unit shall
grant rights under this Agreement, including the exercise of any elections, as between the
transferring Participant and the Partnership, the Managing General Partner and the remaining
Participants to more than one Person unanimously designated by the transferee(s) of the Unit, and,
if he has retained an interest in the transferred Unit, the transferor of the Unit.

6.02(b)(4). Required Notice to Managing General Partner of Transfer of Units. Until the Managing
General Partner receives from the transferring Participant a written notice in a form acceptable to
the Managing General Partner that designates the transferee(s) of a Unit, the Managing General
Partner shall continue to account only to the Person to whom it was furnishing notices pursuant to
§8.01 and its subsections before the purported transfer of the Unit. This party shall continue to
exercise all rights under this Agreement applicable to the Units owned by the purported transferor
of the Unit.

6.03. Presentment.

6.03(a). In General. Participants shall have the right to present their Units to the Managing
General Partner for purchase subject to the conditions and limitations set forth in this §6.03. A
Participant, however, is not obligated to present his Units for purchase.

The Managing General Partner shall not be obligated to purchase more than 5% of the total
outstanding Units in any calendar year and this 5% limit may not be waived. The Managing General
Partner shall not purchase less than one Unit unless the lesser amount represents the Participant’s
entire interest in the Partnership, however, the Managing General Partner may waive this
limitation.

A Participant may present his Units in writing to the Managing General Partner every year beginning
with the fifth calendar year after the Offering Termination Date subject to the following
conditions:

	 	(i)	 	the presentment request must be made by the Participant within 120 days of the
reserve report described in §4.03(b)(3);

	 	(ii)	 	in accordance with Treas. Reg. §1.7704-1(f), the purchase may not be made until
at least 60 calendar days after the Participant notifies the Partnership in writing of
the Participant’s intention to exercise the presentment right; and

	 	(iii)	 	the purchase shall not be considered effective until the presentment price has
been paid to the Participant in cash, or other consideration in the Managing General
Partner’s discretion, to the Participant.

The Managing General Partner’s obligation to purchase Units presented may be discharged for its
benefit by a third-party or an Affiliate. The Units of the selling Participant shall be
transferred to the party who pays for them. A selling Participant shall be required to deliver an
executed assignment of his Units, in a form satisfactory to the Managing General Partner, together
with any other documentation as the Managing General Partner may reasonably request.

6.03(b). Calculation of Presentment Price. The presentment price shall be allocated pro rata to
each Participant in the ratio that his number of Units bears to the total number of Units. Subject
to the foregoing, the presentment price shall be the greater of the following:

	 	(i)	 	the sum of the following Partnership items:

	 	(a)	 	an amount based on 70% of the present worth of future net
revenues from the Proved Reserves as determined under the last reserve report of
the Partnership prepared by the Managing General Partner and reviewed by an
Independent Expert, provided that the Managing General Partner shall estimate
the present worth of future net revenues attributable to the Partnership’s
interest in the Proved Reserves as described in §4.03(b)(3)(ii);
	 
	 	(b)	 	cash on hand;

 

46

 

	 	(c)	 	prepaid expenses and accounts receivable less a reasonable amount
for doubtful accounts; and

	 	(d)	 	the estimated market value of all assets that are not separately
specified above, determined in accordance with standard industry valuation
procedures; and

there shall be deducted from the foregoing sum the following Partnership items:

	 	(a)	 	an amount equal to all debts, obligations, and other liabilities,
including accrued expenses; and

	 	(b)	 	any distributions made to the Participants between the date of
the presentment request and the date the presentment price is paid to the
selling Participant. However, if any amount of those cash distributions to the
Participant by the Partnership was derived from the sale of natural gas, oil or
other mineral production, or of a producing property owned by the Partnership,
after the date of the presentment request, for purposes of determining the
reduction of the presentment price the amount of those cash distributions shall
be discounted using the same rate used to take into account the risk factors
employed to determine the present worth of the Partnership’s Proved Reserves; or

	 	(ii)	 	an amount equal to three (3) times the total amount of distributions from the
Partnership’s natural gas and oil operations paid by Partnership to the Participant
during the previous twelve (12) months.

6.03(c). Further Adjustment May Be Allowed. The presentment price determined under §6.03(b)(i)
may be further adjusted by the Managing General Partner for estimated changes therein from the date
of the report to the date of payment of the presentment price to the Selling Participant because of
the following:

	 	(i)	 	the production or sales of, or additions to, reserves and lease and well
equipment, sale or abandonment of Leases, and similar matters occurring before the date
of the presentment request; and

	 	(ii)	 	any of the following occurring before payment of the presentment price to the
selling Participant:

	 	(a)	 	changes in well performance;

	 	(b)	 	increases or decreases in the market price of natural gas, oil or
other minerals;

	 	(c)	 	revisions to regulations relating to the importing of
hydrocarbons;

	 	(d)	 	changes in income, ad valorem, and other tax laws, such as
material variations in the provisions for depletion; and
	 
	 	(e)	 	similar matters.

6.03(d). Selection by Lot. If less than all of the Units presented at any time are to be
purchased, then the Participants whose Units are to be purchased will be selected by lot.

The Managing General Partner’s obligation to purchase Units presented may be discharged for its
benefit by a third-party or an Affiliate. The Units of the selling Participant shall be
transferred to the party who pays for it. A selling Participant shall be required to deliver an
executed assignment of his Units, in a form satisfactory to the Managing General Partner, together
with any other documentation as the Managing General Partner may reasonably request.

6.03(e). No Obligation of the Managing General Partner to Establish a Reserve. The Managing
General Partner shall have no obligation to establish any reserve to satisfy the presentment
feature under this section.

6.03(f). Suspension of Presentment Feature. The Managing General Partner may suspend this
presentment feature by so notifying Participants at any time if it determines in its sole
discretion that it:

	 	(i)	 	does not have sufficient cash flow; or

	 	(ii)	 	is unable to borrow funds or arrange other consideration for this purpose on
terms it deems reasonable.

 

47

 

In addition, the presentment feature may be conditioned, in the Managing General Partner’s sole
discretion, on the Managing General Partner’s receipt of an opinion of counsel that the transfers
will not cause the Partnership to be treated as a “publicly traded partnership” under the Code.

The Managing General Partner shall hold the purchased Units for its own account and not for resale.

6.04. Redemption of Units from Non-Citizens. If the Partnership, the Managing General Partner or
any of its Affiliates become subject to federal, state or local laws or regulations that, in the
reasonable determination of the Managing General Partner, create a substantial risk of cancellation
or forfeiture of any property that they have an interest in because of the nationality, citizenship
or other related status of any Participant or assignee of a Participant’s Units, the Partnership
may redeem, on 30 days’ advance notice to the Participant, the Participant’s Units or the Units
held by the assignee of a Participant, at a reasonable redemption price per Unit as determined by
the Managing General Partner in its sole discretion.

ARTICLE VII

DURATION, DISSOLUTION, AND WINDING UP

7.01. Duration.

7.01(a). Fifty Year Term. The Partnership shall continue in existence for a term of 50 years from
the effective date of this Agreement unless sooner terminated as set forth below.

7.01(b). Termination. The Partnership shall terminate following the occurrence of:

	 	(i)	 	a Final Terminating Event; or

	 	(ii)	 	any event that causes the dissolution of a limited partnership under the
Delaware Revised Uniform Limited Partnership Act.

7.01(c). Continuance of Partnership Except on Final Terminating Event. Other than the occurrence
of a Final Terminating Event, the Partnership or any successor limited partnership shall not be
wound up, but shall be continued by the parties and their respective successors as a successor
limited partnership under all of the terms of this Agreement. The successor limited partnership
shall succeed to all of the assets of the Partnership. As used throughout this Agreement, the term
“Partnership” shall include the successor limited partnership and the parties to the successor
limited partnership.

7.02. Dissolution and Winding Up.

7.02(a). Final Terminating Event. On the occurrence of a Final Terminating Event the affairs of
the Partnership shall be wound up and there shall be distributed to each of the parties its
Distribution Interest in the remaining Partnership assets.

7.02(b). Time of Liquidating Distribution. To the extent practicable and in accordance with sound
business practices in the judgment of the Managing General Partner, liquidating distributions shall
be made by:

	 	(i)	 	the end of the taxable year in which liquidation occurs, determined without
regard to §706(c)(2)(A) of the Code; or
	 
	 	(ii)	 	if later, within 90 days after the date of the liquidation.

Notwithstanding, the following amounts are not required to be distributed within the foregoing time
periods so long as the withheld amounts are distributed as soon as practical:

	 	(i)	 	amounts withheld for reserves reasonably required for liabilities of the
Partnership; and
	 
	 	(ii)	 	installment obligations owed to the Partnership.

 

48

 

7.02(c). In-Kind Distributions. The Managing General Partner shall not be obligated to offer
in-kind property distributions to the Participants, but may do so, in its discretion. Any in-kind
property distributions to the Participants shall be made to a liquidating trust or similar entity
for the benefit of the Participants, unless at the time of the distribution:

	 	(i)	 	the Managing General Partner offers the individual Participants the election of
receiving in-kind property distributions and the Participants accept the offer after
being advised of the risks associated with direct ownership; or

	 	(ii)	 	there are alternative arrangements in place which assure the Participants that
they will not, at any time, be responsible for the operation or disposition of
Partnership properties.

If the Managing General Partner has not received a Participant’s consent within 30 days after the
Managing General Partner mailed the request for consent, then it shall be presumed that the
Participant has refused to give his consent.

7.02(d). Sale If No Consent. Any Partnership asset which would otherwise be distributed in-kind
to a Participant, except for the failure or refusal of the Participant to give his written consent
to the distribution, may instead be sold by the Managing General Partner at the best price
reasonably obtainable from an independent third-party, who is not an Affiliate of the Managing
General Partner, or to the Managing General Partner itself or its Affiliates, including an
Affiliated Income Program, at fair market value as determined by an Independent Expert selected by
the Managing General Partner.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

8.01. Notices.

8.01(a). Method. Any notice required under this Agreement shall be:

	 	(i)	 	in writing; and
	 
	 	(ii)	 	given by mail or delivered by an overnight delivery company (although one-day
delivery is not required) addressed to the party to receive the notice at the address
designated in §1.03.

If there is a transfer of Units under this Agreement, no notice to the transferee shall be
required, nor shall the transferee have any rights under this Agreement, until notice of the
transfer has been given to the Managing General Partner.

Any transfer of Units under this Agreement shall not increase the Managing General Partner’s or the
Partnership’s duty to give notice. If there is a transfer of Units under this Agreement to more
than one party, then notice to any owner of any interest in the Units shall be notice to all of the
owners of the Units.

8.01(b). Change in Address. The address of any party to this Agreement may be changed by notice
as follows:

	 	(i)	 	to the Participants, if there is a change of address by the Managing General
Partner; or

	 	(ii)	 	to the Managing General Partner, if there is a change of address by a
Participant.

8.01(c). Time Notice Deemed Given. If the notice is given by the Managing General Partner, then
the notice shall be considered given, and any applicable time shall run, from the date the notice
is placed in the mail or delivered to the overnight delivery company.

If the notice is given by any Participant, then the notice shall be considered given and any
applicable time shall run from the date the notice is received.

 

49

 

8.01(d). Effectiveness of Notice. Any notice to a party other than the Managing General Partner,
including a notice requiring concurrence or nonconcurrence, shall be effective, and any failure to
respond binding, irrespective of the following:

	 	(i)	 	whether or not the notice is actually received; or

	 	(ii)	 	any disability or death on the part of the noticee, even if the disability or
death is known to the party giving the notice.

8.01(e). Failure to Respond. Except pursuant to §7.02(c) or when this Agreement expressly
requires affirmative approval of a Participant, any Participant who fails to respond in writing
within the time specified to a request by the Managing General Partner as set forth below, for
approval of, or concurrence in, a proposed action shall be conclusively deemed to have approved the
action. Except pursuant to §7.02(c), when this Agreement expressly requires affirmative approval
of a Participant, the Managing General Partner shall send a first request and the time period for
the Participant’s written response shall not be less than 15 business days from the date of mailing
of the request. If the Participant does not respond in writing to the first request, then the
Managing General Partner shall send a second request. If the Participant does not respond in
writing to the second request within seven calendar days from the date of mailing the second
request, then the Participant shall be conclusively deemed to have approved the action.

8.02. Time. Time is of the essence of each part of this Agreement.

8.03. Applicable Law. The terms and provisions of this Agreement shall be construed under the
laws of the State of Delaware, other than its conflict of law provisions, however, this section
shall not be deemed to limit causes of action for alleged violations of federal or state securities
law to the laws of the State of Delaware.

8.04. Agreement in Counterparts. This Agreement may be executed in counterpart and shall be
binding on all of the parties executing this or similar agreements from and after the date of
execution by each party.

8.05. Amendment.

8.05(a). Procedure for Amendment. No changes in this Agreement shall be binding unless:

	 	(i)	 	proposed in writing by the Managing General Partner, and adopted with the
consent of Participants whose Units equal a majority of the total Units; or

	 	(ii)	 	proposed in writing by Participants whose Units equal 10% or more of the total
Units and approved by an affirmative vote of Participants whose Units equal a majority
of the total Units.

8.05(b). Circumstances Under Which the Managing General Partner Alone May Amend. The Managing
General Partner is authorized to amend this Agreement and its exhibits without the consent of
Participants in any way deemed necessary or desirable by it to do any or all of the following:

	 	(i)	 	add, or substitute in the case of an assigning party, additional Participants;

	 	(ii)	 	enhance the tax benefits of the Partnership to the parties and amend the
allocation provisions of this Agreement as provided in §5.01(c)(3);

	 	(iii)	 	satisfy any requirements, conditions, guidelines, options, or elections
contained in any opinion, directive, order, ruling, or regulation of the SEC, the IRS,
or any other federal or state agency, or in any federal or state statute, compliance
with which it deems to be in the best interest of the Partnership;

	 	(iv)	 	cure any ambiguity, correct or supplement any provision of this Agreement that
may be inconsistent with any other provision of this Agreement, or add any provision to
this Agreement with respect to matters, events or issues arising under this Agreement
that is not inconsistent with the other provisions of this Agreement; or

	 	(v)	 	facilitate any agreements entered into by the Partnership, or by Atlas Energy,
Inc., Atlas Energy Resources, LLC or their Affiliates on the Partnership’s behalf, to
hedge the Partnership’s natural gas and oil reserves and pledge up to 100% of its
assets and natural gas and oil reserves in connection therewith.

 

50

 

Notwithstanding the foregoing, no amendment materially and adversely affecting the interests or
rights of Participants shall be made without the consent of the Participants whose interests or
rights will be so affected.

8.06. Additional Partners. Each Participant consents to the admission to the Partnership of
additional Participants as the Managing General Partner, in its discretion, chooses to admit.

8.07. Legal Effect. This Agreement shall be binding on and inure to the benefit of the parties,
their heirs, devisees, personal representatives, successors and assigns, and shall run with the
interests subject to this Agreement. The terms “Partnership,” “Limited Partner,” “Investor General
Partner,” “Participant,” “Partner,” “Managing General Partner,” “Operator,” or “parties” shall
equally apply to any successor limited partnership, and any heir, devisee, personal representative,
successor or assign of a party.

	 
	IN WITNESS WHEREOF, the parties hereto set their hands as of the 14 day of May, 2010.

	 	 	 	 	 
	ATLAS:	 ATLAS RESOURCES, LLC

Managing General Partner

 	 
	 	By:  	/s/ Freddie Kotek
 	 

 

51

 

EXHIBIT (I-A)

MANAGING GENERAL PARTNER SIGNATURE PAGE

Attached to and made a part of the AMENDED AND RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP of ATLAS RESOURCES SERIES 28-2010 L.P.

The undersigned agrees:

	 	1.	 	to serve as the Managing General Partner of ATLAS RESOURCES SERIES 20-2010 L.P. (the “partnership”), and hereby executes, swears to, and agrees to all the terms
of the Partnership Agreement;
	 
	 	2.	 	to pay the required subscription of the Managing General Partner under §3.04(a) of the Partnership Agreement; and
	 
	 	3.	 	to subscribe to the Partnership as follows:

	 	(a)	 	$                                         [                    ] Unit(s)] under Section 3.03(b)(1) of the Partnership
Agreement as a Limited Partner; or
	 
	 	(b)	 	$                                         [                    ] Unit(s)] under Section 3.03(b)(1) of the
Partnership Agreement as an Investor General Partner.

	 	 	 	 	 	 	 	 	 
	Managing General Partner:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Atlas Resources, LLC	 	 	 	Address:	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Freddie Kotek
	 	 	 	Westpointe Corporate Center One	 	 
	 

	 	 

	 	 	 	1550 Coraopolis Heights Road
	 	 
	 

	 	 	 	 	 	Suite 300	 	 
	 

	 	 	 	 	 	Moon Township, Pennsylvania 15108	 	 

ACCEPTED this 14 day of May, 2010.

	 	 	 	 	 
	 	ATLAS RESOURCES, LLC

MANAGING GENERAL PARTNER

 	 
	 	By:  	/s/ Freddie KotekExhibit 10.1

EXHIBIT 10.1

DRILLING AND OPERATING

AGREEMENT

FOR ATLAS RESOURCES SERIES 28-2010 L.P.

 

 

 

EXHIBIT (II)

FORM OF

DRILLING AND OPERATING AGREEMENT

FOR

ATLAS RESOURCES SERIES 28-2010 L.P.

 

 

 

INDEX

	 	 	 	 	 
	Section	 	Page	 
	 
	 	 	 	 
	1. Assignment of Well Locations; Representations and Indemnification Associated with the Assignment of the Lease; Designation of
Additional Well Locations; Outside Activities Are Not Restricted
	 	 	1	 
	 
	 	 	 	 
	2. Drilling of Wells; Timing; Depth; Interest of Developer; Right to Substitute Well Locations
	 	 	3	 
	 
	 	 	 	 
	3. Operator — Responsibilities in General; Covenants; Term
	 	 	4	 
	 
	 	 	 	 
	4. Operator’s Charges for Drilling and Completing Wells; Payment; Completion Determination; Dry Hole Determination; Excess Funds and Cost
Overruns — Intangible Drilling Costs; Excess Funds and Cost Overruns — Tangible Costs
	 	 	5	 
	 
	 	 	 	 
	5. Title Examination of Well Locations; Developer’s Acceptance and Liability; Additional Well Locations
	 	 	9	 
	 
	 	 	 	 
	6. Operations Subsequent to Completion of the Wells; Fee Adjustments; Extraordinary Costs; Pipelines; Price
Determinations; Plugging and Abandonment
	 	 	9	 
	 
	 	 	 	 
	7. Billing and Payment Procedure with Respect to Operation of Wells; Disbursements; Separate Account for Sale
Proceeds; Records and Reports; Additional Information
	 	 	12	 
	 
	 	 	 	 
	8. Operator’s Lien; Right to Collect From Oil or Gas Purchaser
	 	 	13	 
	 
	 	 	 	 
	9. Successors and Assigns; Transfers; Appointment of Agent
	 	 	14	 
	 
	 	 	 	 
	10. Operator’s Insurance; Subcontractors’ Insurance; Operator’s Liability
	 	 	15	 
	 
	 	 	 	 
	11. Internal Revenue Code Election; Relationship of Parties; Right to Take Production in Kind
	 	 	15	 
	 
	 	 	 	 
	12. Effect of Force Majeure; Definition of Force Majeure; Limitation
	 	 	16	 
	 
	 	 	 	 
	13. Term
	 	 	17	 
	 
	 	 	 	 
	14. Governing Law; Invalidity
	 	 	17	 
	 
	 	 	 	 
	15. Integration; Written Amendment
	 	 	17	 
	 
	 	 	 	 
	16. Waiver of Default or Breach
	 	 	17	 
	 
	 	 	 	 
	17. Notices
	 	 	18	 
	 
	 	 	 	 
	18. Interpretation
	 	 	18	 
	 
	 	 	 	 
	19. Counterparts
	 	 	18	 

	 	 	 
	Exhibit A

	 	Description of Leases and Initial Well Locations
	Exhibits A-l through A-_____ 

	 	Maps of Initial Well Locations
	Exhibit B

	 	Form of Assignment
	Exhibit C

	 	Form of Addendum

 

 

 

DRILLING AND OPERATING AGREEMENT

THIS AGREEMENT made this 15 day of May, 2010, by and between ATLAS RESOURCES, LLC,
a Pennsylvania limited liability company (hereinafter referred to as “Atlas” or “Operator”),

and

ATLAS RESOURCES SERIES 28-2010 L.P., a Delaware limited partnership, (hereinafter referred to as
the “Developer”).

WITNESSETH THAT:

WHEREAS, the Operator, by virtue of the Oil and Gas Leases (the “Leases”) described on Exhibit A
attached to and made a part of this Agreement, has certain rights to develop the                     
(_____) initial well locations (the “Initial Well Locations”) identified on the maps attached to
and made a part of this Agreement as Exhibits A-l through A-_____;

WHEREAS, the Developer, subject to the terms and conditions of this Agreement, desires to acquire
certain of the Operator’s rights to develop the Initial Well Locations and to provide for the
development on the terms and conditions set forth in this Agreement of additional well locations
(“Additional Well Locations”) that the parties may from time to time designate; and

WHEREAS, the Operator is in the oil and gas exploration and development business, and the Developer
desires that Operator, as its independent contractor, perform certain services in connection with
its efforts to develop the aforesaid Initial and Additional Well Locations (collectively the “Well
Locations”) and to operate the wells completed on the Well Locations, on the terms and conditions
set forth in this Agreement;

NOW THEREFORE, in consideration of the mutual covenants herein contained and subject to the terms
and conditions hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:

	1.	 	Assignment of Well Locations; Representations and Indemnification Associated with the
Assignment of the Lease; Designation of Additional Well Locations; Outside Activities Are Not
Restricted.

	 	(a)	 	Assignment of Well Locations. The Operator shall execute an assignment of an
undivided percentage of Working Interest in the Well Location for each well to the
Developer as shown on Exhibit A attached hereto, which assignment shall be limited by
the Operator to the “Prospect” which is defined as the minimum area permitted by state
law or local practice on which one well may be drilled, which may be different for
different Horizons. Subject to the foregoing sentence, “Prospect” shall be deemed:

	 	•	 	the wellbore plus 125 feet on either side of the center line of a lateral in
the well extending from the beginning of the first perforation to the end of the
last perforation and from the bottom of the Tully zone to the bottom of the
Marcellus Shale formation, in horizontal wells in the Marcellus Shale formation
in western Pennsylvania;
	 
	 	•	 	the wellbore plus 125 feet on either side of the center line of a lateral in
the well extending from the beginning of the first perforation or open hole
section to the end of the last perforation or last open hole section and from
the top of the Borden Shale zone to the bottom of the New Albany zone, in
horizontal wells in the New Albany Shale reservoir in Indiana;
	 
	 	•	 	the wellbore plus 125 feet on either side of the center line of a lateral in
the well extending from the beginning of the first perforation to the end of the
last perforation and from the top of the Fort Payne zone to the bottom of the
Chattanooga zone, in any horizontal wells in the Chattanooga Shale reservoir in
Tennessee;
	 
	 	•	 	the wellbore plus 125 feet on either side of the center line of a lateral in
the well extending from the beginning of the first perforation to the end of the
last perforation and from the top of the Lachine Member to the bottom of the
Antrim zone, in any horizontal wells in the Antrim Shale reservoir in Michigan;
and

	 	•	 	approximately 80 acres for any vertical wells in the Upper Devonian Antrim
Shale reservoir in Michigan.

 

1

 

The assignment shall be substantially in the form of Exhibit B attached to and made a
part of this Agreement. The amount of acreage, or the wellbore, as the case may be,
included in each Initial Well Location and the configuration of the Initial Well
Location are indicated on the maps attached to this Agreement as Exhibits A-l through
A-_____. The amount of acreage, or the wellbore, as the case may be, included in each
Additional Well Location and the configuration of the Additional Well Location shall
be indicated on the maps to be attached as exhibits to the applicable addendum to
this Agreement as provided in sub-section (c) below.

	 	(b)	 	Representations and Indemnification Associated with the Assignment of the
Lease. With respect to the Lease assignements described in Section 1(a), the Operator
represents and warrants to the Developer that:

	 	(i)	 	the Operator is the lawful owner of the Lease and rights and
interest under the Lease and of the personal property on the Lease or used in
connection with the Lease;
	 
	 	(ii)	 	the Operator has good right and authority to sell and convey the rights, interest, and property;
	 
	 	(iii)	 	the rights, interest, and property are free and clear from all liens and encumbrances; and
	 
	 	(iv)	 	all rentals and royalties due and payable under the Lease have been duly paid.

The Operator agrees to indemnify, protect and hold the Developer and its successors
and assigns harmless from and against all costs (including but not limited to
reasonable attorneys’ fees), liabilities, claims, penalties, losses, suits, actions,
causes of action, judgments or decrees resulting from the breach of any of the above
representations and warranties. It is understood and agreed that, except as
specifically set forth above, the Operator makes no warranty or representation,
express or implied, as to its title or the title of the lessors in and to the lands
or oil and gas interests covered by said Leases.

	 	(c)	 	Designation of Additional Well Locations. If the parties hereto desire to
designate Additional Well Locations to be developed in accordance with the terms and
conditions of this Agreement, then the parties shall execute an addendum substantially
in the form of Exhibit C attached to and made a part of this Agreement specifying:

	 	(i)	 	the undivided percentage of Working Interest and the Oil and Gas
Leases to be included as Leases under this Agreement;

	 	(ii)	 	the amount and configuration of acreage included in each
Additional Well Location on maps attached as exhibits to the addendum; and

	 	(iii)	 	their agreement that the Additional Well Locations shall be
developed in accordance with the terms and conditions of this Agreement.

	 	(d)	 	Outside Activities Are Not Restricted. It is understood and agreed that the
assignment of rights under the Leases and the oil and gas development activities
contemplated by this Agreement relate only to the Initial Well Locations and the
Additional Well Locations. Nothing contained in this Agreement shall be interpreted to
restrict in any manner the right of each of the parties to conduct without the
participation of the other party any additional activities relating to exploration,
development, drilling, production, or delivery of oil and gas on lands adjacent to or
in the immediate vicinity of the Well Locations or elsewhere.

 

2

 

	2.	 	Drilling of Wells; Timing; Depth; Interest of Developer; Right to Substitute Well Locations.

	 	(a)	 	Drilling of Wells. Operator, as Developer’s independent contractor, agrees to
drill, complete (or plug) and operate
 _____ 

(_____) oil and gas wells on the

 _____ 

(_____) Initial Well Locations in accordance with the terms and
conditions of this Agreement. Developer, as a minimum commitment, agrees to
participate in and pay the Operator’s charges for drilling and completing (or plugging)
the wells and any extra costs pursuant to Section 4 in proportion to the share of the
Working Interest owned by the Developer in the wells with respect to all initial wells.
It is understood and agreed that, subject to sub-section (e) below, Developer does not
reserve the right to decline participation in the drilling of any of the initial wells
to be drilled under this Agreement.

	 	(b)	 	Timing. Operator shall begin drilling the first well within thirty (30) days
after the date of this Agreement, and shall begin drilling each of the other initial
wells for which payment is made pursuant to Section 4(b) before the close of the
90th day after the close of the calendar year in which this Agreement is
entered into by Operator and the Developer. Subject to the foregoing time limits,
Operator shall determine the timing of and the order of drilling the Initial Well
Locations.

	 	(c)	 	Extent of Drilling. All of the wells to be drilled under this Agreement shall
be:

	 	(i)	 	drilled and completed (or plugged) in accordance with the
generally accepted and customary oil and gas field practices and techniques then
prevailing in the geographical area of the Well Locations; and

	 	(ii)	 	drilled to a depth sufficient to test thoroughly the objective
formation or the deepest assigned depth, whichever is less, in the case of a
vertical well, and drilled vertically and horizontally to the extent of the
assigned Lease interest necessary to thoroughly test the objective formation in
the case of a horizontal well.

	 	(d)	 	Interest of Developer. Except as otherwise provided in this Agreement, all
costs, expenses, and liabilities incurred in connection with the drilling and other
operations and activities contemplated by this Agreement shall be borne and paid, and
all wells, gathering lines of up to approximately 2,500 feet on each Well Location in
connection with a natural gas well, equipment, materials, and facilities acquired,
constructed or installed under this Agreement shall be owned, by the Developer in
proportion to the share of the Working Interest owned by the Developer in the wells.
Subject to the payment of lessor’s royalties and other royalties and overriding
royalties, if any, production of oil and gas from the wells to be drilled under this
Agreement shall be owned by the Developer in proportion to the share of the Working
Interest owned by the Developer in the wells. Additionally, all costs, expenses, and
liabilities incurred in connection with the leasing, developing, drilling, and
operation of water disposal or injection wells, and the transportation or injection of
waste water from Developer’s productive wells under this Agreement shall be the sole
responsibility of Developer in proportion to the share of the Working Interest owned by
the Developer. In the event Operator provides any services related to disposal wells,
injection wells, transportation of waste water or similar matters under this Agreement,
Operator shall be paid a monthly competitive fee, as determined by Developer and
Operator.

	 	(e)	 	Right to Substitute Well Locations. Notwithstanding the provisions of
sub-section (a) above, if the Operator or Developer determines in good faith, with
respect to any Well Location, before operations begin under this Agreement on the Well
Location, that it would not be in the best interest of the parties to drill a well on
the Well Location, then the party making the determination shall notify the other party
of its determination and the basis for its determination and, unless otherwise
instructed by Developer, the well shall not be drilled. This determination may be based
on:

	 	(i)	 	the production or failure of production of any other wells that
may have been recently drilled in the immediate area of the Well Location;

 

3

 

	 	(ii)	 	newly discovered title defects; or

	 	(iii)	 	any other evidence with respect to the Well Location as may have
been obtained.

If the well is not drilled, then Operator shall promptly propose a new well location
(including all information for the Well Location as Developer may reasonably request)
to be substituted for the original Well Location. Developer shall then have seven
(7) business days to either reject or accept the proposed new well location. If the
new well location is rejected, then Operator shall promptly propose another
substitute well location pursuant to the provisions of this sub-section.

Once the Developer accepts a substitute well location or does not reject it within
the seven (7) day period, this Agreement shall terminate as to the original Well
Location and the substitute well location shall become subject to the terms and
conditions of this Agreement.

	3.	 	Operator — Responsibilities in General; Covenants; Term.

	 	(a)	 	Operator — Responsibilities in General. Atlas shall be the Operator of the
wells and Well Locations subject to this Agreement and, as the Developer’s independent
contractor, shall, in addition to its other obligations under this Agreement do the
following:

	 	(i)	 	arrange for drilling and completing (or plugging) the wells and,
if a gas well, installing the necessary gas gathering line systems and
connection facilities;

	 	(ii)	 	make the technical decisions required in drilling, testing,
completing (or plugging), and operating the wells;

	 	(iii)	 	manage and conduct all field operations in connection with the
drilling, testing, completing (or plugging), equipping, operating, and producing
the wells;

	 	(iv)	 	maintain all wells, equipment, gathering lines if a gas well, and
facilities in good working order during their useful lives;

	 	(v)	 	perform the necessary administrative and accounting functions;
and

	 	(vi)	 	design water disposal plans, if needed, for the wells.

In performing the work contemplated by this Agreement, Operator is an independent
contractor with authority to control and direct the performance of the details of the
work.

	 	(b)	 	Covenants. Operator covenants and agrees that under this Agreement:

	 	(i)	 	it shall perform and carry on (or cause to be performed and
carried on) its duties and obligations in a good, prudent, diligent, and
workmanlike manner using technically sound, acceptable oil and gas field
practices then prevailing in the geographical area of the Well Locations;

	 	(ii)	 	all drilling and other operations conducted by, for and under the
control of Operator shall conform in all respects to federal, state and local
laws, statutes, ordinances, regulations, and requirements;

	 	(iii)	 	unless otherwise agreed in writing by the Developer, all work
performed pursuant to a written estimate shall conform to the technical
specifications set forth in the written estimate and all equipment and materials
installed or incorporated in the wells and facilities shall be new or used and
of good quality;

 

4

 

	 	(iv)	 	in the course of conducting operations, it shall comply with all
terms and conditions, other than any minimum drilling commitments, of the Leases
(and any related assignments, amendments, subleases, modifications and
supplements);

	 	(v)	 	it shall keep the Well Locations and all wells, equipment and
facilities located on the Well Locations free and clear of all labor, materials
and other types of liens or encumbrances arising out of operations;

	 	(vi)	 	it shall file all reports and obtain all permits and bonds
required to be filed with or obtained from any governmental authority or agency
in connection with the drilling or other operations and activities; and

	 	(vii)	 	it will provide competent and experienced personnel to supervise
drilling, completing (or plugging), and operating the wells and use the services
of competent and experienced service companies to provide any third party
services necessary or appropriate in order to perform its duties.

	 	(c)	 	Term. Atlas shall serve as Operator under this Agreement until the earliest
of:

	 	(i)	 	the termination of this Agreement pursuant to Section 13;

	 	(ii)	 	the termination of Atlas as Operator by the Developer at any time
in the Developer’s discretion, with or without cause on sixty (60) days’ advance
written notice to the Operator; or

	 	(iii)	 	the resignation of Atlas as Operator under this Agreement which
may occur on ninety (90) days’ written notice to the Developer at any time after
five (5) years from the date of this Agreement, it being expressly understood
and agreed that Atlas shall have no right to resign as Operator before the
expiration of the five-year period.

Any successor Operator shall be selected by the Developer. Nothing contained in this
sub-section shall relieve or release Atlas or the Developer from any liability or
obligation under this Agreement that accrued or occurred before Atlas’ removal or
resignation as Operator under this Agreement. On any change in Operator under this
provision, the then present Operator shall deliver to the successor Operator
possession of all records, equipment, materials and appurtenances used or obtained
for use in connection with operations under this Agreement and owned by the
Developer.

	4.	 	Operator’s Charges for Drilling and Completing Wells; Payment; Completion Determination; Dry
Hole Determination; Excess Funds and Cost Overruns-Intangible Drilling Costs; Excess Funds and
Cost Overruns-Tangible Costs.

	 	(a)	 	Operator’s Charges for Drilling and Completing Wells. Each oil and gas well
that is drilled and completed under this Agreement shall be drilled and completed for
an amount equal to the sum of the following items: (i) the Cost of permits, supplies,
materials, equipment, and all other items used in the drilling and completion of a well
provided by third-parties, or if the foregoing items are provided by Affiliates of the
Developer’s Managing General Partner, then those items shall be charged at competitive
rates; (ii) fees for third-party services; (iii) fees for services provided by the
Developer’s Managing General Partner’s Affiliates, which shall be charged at
competitive rates; (iv) an administration and oversight fee at a competitive rate in
the area where the well is situated, which is $244,222 per horizontal well in the
Marcellus Shale primary area, and $46,122 per horizontal well in the New Albany Shale
(Indiana) primary area; and (v) a mark-up in an amount equal to 18% of the sum of (i),
(ii), (iii) and (iv), above, for the Developer’s Managing General Partner’s services as
general drilling contractor as Operator under this Agreement.

 

5

 

“Cost” shall mean the price paid by Operator in an arm’s-length transaction.
Additionally, if the Operator drills a well for the Developer that the Developer’s
Managing General Partner determines is not an average well in the area because of the
well’s depth, complexity associated with either drilling or completion activity or as
otherwise determined by the Managing General Partner, the administration and
oversight fee for the well described above, if applicable, and in §4.02(d)(1)(iv) of
the Developer’s Partnership Agreement, may be increased to a competitive rate as
determined by the Managing General Partner.

The estimated price for drilling and completing each of the wells shall be set forth
in an Authority for Expenditure (“AFE”) that shall be attached to this Agreement as
an Exhibit, and shall cover all ordinary costs which may be incurred in drilling and
completing (or plugging) each well. This includes without limitation, site
preparation, permits and bonds, roadways, surface damages, power at the site, water,
Operator’s compensation as set forth above, rights-of-way, drilling rigs, equipment
and materials, costs of title examinations, logging, cementing, fracturing, casing,
meters (other than utility purchase meters), connection facilities, salt water
collection tanks, separators, siphon string, rabbit, tubing, an average of 2,500 feet
of gathering line per well in connection with each gas well, and geological,
geophysical and engineering services.

After each intangible well or additional well is drilled and completed under this
Agreement, on request Operator shall prepare and deliver to the Developer an amended
AFE that sets forth the allocation between Intangible Drilling Costs and Tangible
Costs (as those terms are defined in Section 4(b), below, for the well based on the
actual costs to drill and complete the well.

	 	(b)	 	Payment. The Developer shall pay to Operator, in proportion to the share of
the Working Interest owned by the Developer in the wells, one hundred percent (100%) of
the estimated IDCs and Tangible Costs, as those terms are defined below, for drilling
and completing all initial wells on execution of this Agreement. Notwithstanding the
foregoing, Atlas’ payments for its share of the estimated Tangible Costs, as that term
is defined below, of drilling and completing all initial wells as the Managing General
Partner of the Developer shall be paid within five (5) business days of notice from
Operator that the costs have been incurred. The Developer’s payment shall be
nonrefundable in all events in order to enable Operator to do the following:

	 	(i)	 	commence site preparation for the initial wells;

	 	(ii)	 	obtain suitable subcontractors for drilling and completing or
plugging the initial wells at currently prevailing prices; and

	 	(iii)	 	insure the availability of equipment and materials.

For purposes of this Agreement, “Intangible Drilling Costs” or “IDCs” shall mean
those expenditures associated with property acquisition and the drilling and
completion of oil and gas wells that under present law are generally accepted as
fully deductible currently for federal income tax purposes. This includes:

	 	(i)	 	all expenditures made with respect to any well before the
establishment of production in commercial quantities for wages, fuel, repairs,
hauling, supplies and other costs and expenses incident to and necessary for the
drilling of the well and the preparation of the well for the production of oil
or gas, that are currently deductible pursuant to Section 263(c) of the Internal
Revenue Code of 1986, as amended (the “Code”), and Treasury Reg. Section
1.612-4, which are generally termed “intangible drilling and development costs”;

	 	(ii)	 	the expense of plugging and abandoning any well before a
completion attempt; and

	 	(iii)	 	the costs (other than Tangible Costs and Lease acquisition
costs) to re-enter and deepen an existing well, complete the well to deeper
formations or reservoirs, or plug and abandon the well if it is nonproductive
from the targeted deeper formations or reservoirs.

 

6

 

“Tangible Costs” shall mean those costs associated with property acquisition and the
drilling and completion of oil and gas wells that are generally accepted as capital
expenditures pursuant to the provisions of the Code. This includes:

	 	(i)	 	all costs of equipment, parts and items of hardware used in
drilling and completing (or plugging) a well;

	 	(ii)	 	the costs (other than IDCs and Lease acquisition costs) to
re-enter and deepen an existing well, complete the well to deeper formations or
reservoirs, or plug and abandon the well if it is nonproductive from the
targeted deeper formations or reservoirs; and

	 	(iii)	 	those items necessary to deliver acceptable oil and gas
production to purchasers to the extent installed downstream from the wellhead of
any well, which are required to be capitalized under the Code and its
regulations.

With respect to each additional well drilled on the Additional Well Locations, if
any, the Developer shall pay to Operator, in proportion to the share of the Working
Interest owned by the Developer in the wells, one hundred percent (100%) of the
estimated IDCs and Tangible Costs for drilling and completing the well on execution
of the applicable addendum pursuant to Section l(c) above. Notwithstanding the
foregoing, Atlas’ payments for its share of the estimated Tangible Costs of drilling
and completing all additional wells as the Managing General Partner of the Developer
shall be paid within five (5) business days of notice from Operator that the costs
have been incurred.

The Developer’s payment shall be nonrefundable in all events in order to enable
Operator to do the following:

	 	(i)	 	commence site preparation for the additional wells;

	 	(ii)	 	obtain suitable subcontractors for drilling and completing the
additional wells at currently prevailing prices; and

	 	(iii)	 	insure the availability of equipment and materials.

Developer shall pay, in proportion to the share of the Working Interest owned by the
Developer in the wells, any extra costs incurred for each well pursuant to
sub-section (a) above within ten (10) business days of its receipt of Operator’s
statement for the extra costs.

	 	(c)	 	Completion Determination. Operator shall determine whether or not to run the
production casing for an attempted completion or to plug and abandon any well drilled
under this Agreement. However, a well shall be completed only if Operator has made a
good faith determination that there is a reasonable possibility of obtaining commercial
quantities of oil and/or gas.

	 	(d)	 	Dry Hole Determination. If Operator determines at any time during the drilling
or attempted completion of any well drilled under this Agreement, in accordance with
the generally accepted and customary oil and gas field practices and techniques then
prevailing in the geographic area of the Well Location that the well should not be
completed, then it shall promptly and properly plug and abandon the well.

	 	(e)	 	Excess Funds and Cost Overruns-Intangible Drilling Costs. Any estimated IDCs
(which are the IDCs set forth on the AFE Exhibit) prepaid by Developer with respect to
any well that exceed Operator’s price specified in sub-section (a) above for the
Intangible Drilling Costs of the well (i.e., the actual IDCs) shall be retained by
Operator. This excess of estimated IDCs as reflected on the AFE Exhibit over the
actual price of the IDCs for the well shall be applied, in proportion to the share of
the Working Interest owned by the Developer in the wells, to:

	 	(i)	 	the IDCs of an additional well or wells to be drilled on the
Additional Well Locations; or

 

7

 

	 	(ii)	 	any cost overruns owed by the Developer to Operator for IDCs on
one or more of the other wells on the Well Locations.

Conversely, if Operator’s price specified in sub-section (a) above for the IDCs of
any well (i.e., the actual IDCs) exceeds the estimated IDCs (which are the IDCs set
forth on the AFE Exhibit) prepaid by Developer for the well, then:

	 	(i)	 	Developer shall pay the additional price to Operator within ten
(10) business days after notice from Operator that the additional amount is due
and owing; or

	 	(ii)	 	Developer and Operator may agree to delete or reduce Developer’s
Working Interest in the well or one or more of the other wells to be drilled
under this Agreement to provide funds to pay the additional amounts owed by
Developer to Operator. If doing so results in any excess prepaid IDCs, then
these funds shall be applied, in proportion to the share of the Working Interest
owned by the Developer in the wells, to:

	 	(a)	 	the IDCs of an additional well or wells to be
drilled on the Additional Well Locations; or

	 	(b)	 	any cost overruns owed by the Developer to Operator
for IDCs of one or more of the other wells on the Well Locations.

The Exhibits to this Agreement with respect to the affected wells shall be amended as
appropriate.

	 	(f)	 	Excess Funds and Cost Overruns — Tangible Costs. Any estimated Tangible Costs
(which are the Tangible Costs set forth on the AFE Exhibit) prepaid by Developer with
respect to any well that exceed Operator’s price specified in sub-section (a) above for
the Tangible Costs of the well (i.e., the actual Tangible Costs) shall be retained by
Operator. This excess of Tangible Costs as reflected on the AFE Exhibit over the
actual price of the Tangible Costs for the well shall be applied, in proportion to the
share of the Working Interest owned by the Developer in the wells, to:

	 	(i)	 	the Developer’s Participants’ share of the Tangible Costs for an
additional well or wells to be drilled on the Additional Well Locations; or

	 	(ii)	 	any cost overruns owed by the Developer to Operator for the
Developer’s Participants’ share of the Tangible Costs or Intangible Drilling
Costs of one or more of the other wells on the Well Locations.

Conversely, if Operator’s price specified in sub-section (a) above for the
Developer’s Participants’ share of Tangible Costs of any well (i.e., the actual
Tangible Costs) exceeds the estimated Tangible Costs (which are the Tangible Costs
set forth on the AFE Exhibit) prepaid by Developer for the Developer’s Participants’
share of the Tangible Costs for the well, then:

	 	(i)	 	Developer shall pay the additional price to Operator within ten
(10) business days after notice from Operator that the additional price is due
and owing; or

	 	(ii)	 	Developer and Operator may agree to delete or reduce Developer’s
Working Interest in the well or one or more of the other wells to be drilled
under this Agreement to provide funds to pay the additional amounts owed by
Developer to Operator. If doing so results in any excess prepaid Tangible
Costs, then these funds shall be applied, in proportion to the share of the
Working Interest owned by the Developer in the wells, to:

	 	(a)	 	the Developer’s Participants’ share of the Tangible
Costs of an additional well or wells to be drilled on the Additional Well
Locations; or

	 	(b)	 	any cost overruns owed by the Developer to Operator
for the Developer’s Participants’ share of the Tangible Costs or
Intangible Drilling Costs of one or more of the other wells on the Well
Locations.

 

8

 

	 	(iii)	 	The Developer’s Participants’ share of the Tangible Costs, in
the aggregate, of all of the wells drilled under this Agreement and any
additional wells to be drilled on the Additional Well Locations under any
Addendum to this Agreement shall not exceed fifteen percent (15%) of the total
price prepaid by Developer to Operator pursuant to Section 4(b) of this
Agreement or any Addendum hereto. The Developer’s Managing General Partner
shall pay all remaining Tangible Costs owed by Developer to Operator.
Developer’s Managing General Partner’s share of Tangible Costs for the wells
drilled under this Agreement, or any Addendum hereto, shall be paid within five
(5) business days of notice from Operator that the Tangible Costs have been
incurred. The Developer’s Participants’ share of the Tangible Costs of any one
well drilled under this Agreement shall be determined, subject to the preceding
sentence, taking into account the Developer’s share of all of the Tangible Costs
of all of the wells to be drilled under this Agreement and any Addendum hereto.

The Exhibits to this Agreement with respect to the affected wells shall be amended as
appropriate.

	5.	 	Title Examination of Well Locations; Developer’s Acceptance and Liability; Additional Well
Locations.

	 	(a)	 	Title Examination of Well Locations, Developer’s Acceptance and Liability. The
Developer acknowledges that Operator has furnished Developer with the title opinions
identified on Exhibit A, and other documents and information that Developer or its
counsel has requested in order to determine the adequacy of the title to the Initial
Well Locations and leased premises subject to this Agreement. The Developer accepts
the title to the Initial Well Locations and leased premises and acknowledges and agrees
that, except for any loss, expense, cost, or liability caused by the breach of any of
the warranties and representations made by the Operator in Section l(b), any loss,
expense, cost or liability whatsoever caused by or related to any defect or failure of
the Developer’s title shall be the sole responsibility of and shall be borne entirely
by the Developer.

	 	(b)	 	Additional Well Locations. Before beginning drilling of any well on any
Additional Well Location, Operator shall conduct, or cause to be conducted, a title
examination of the Additional Well Location, in order to obtain appropriate abstracts,
opinions and certificates and other information necessary to determine the adequacy of
title to both the applicable Lease and the fee title of the lessor to the premises
covered by the Lease. The results of the title examination and such other information
as is necessary to determine the adequacy of title for drilling purposes shall be
submitted to the Developer for its review and acceptance. No drilling on the
Additional Well Location shall begin until the title has been accepted in writing by
the Developer or Developer has otherwise authorized the drilling on the Additional Well
Location. After any title has been accepted by the Developer or drilling on the
Additional Well Location has begun, any loss, expense, cost, or liability whatsoever,
caused by or related to any defect or failure of the Developer’s title shall be the
sole responsibility of and shall be borne entirely by the Developer, unless such loss,
expense, cost, or liability was caused by the breach of any of the warranties and
representations made by the Operator in Section l(b).

	6.	 	Operations Subsequent to Completion of the Wells; Fee Adjustments; Extraordinary Costs;
Pipelines; Price Determinations; Plugging and Abandonment.

	 	(a)	 	Operations Subsequent to Completion of the Wells. Beginning with the month in
which a well drilled under this Agreement begins to produce, Operator shall be entitled
to an operating fee at a competitive rate in the area where the well is situated, which
is $975 per month for each productive well in the Marcellus Shale in western
Pennsylvania and $1,500 per month for each productive well in the New Albany Shale in
Indiana. The operating fees shall be proportionately reduced, on a well-by-well basis
to the extent the Developer owns less than 100% of the Working Interest in a well.
This fee shall be in lieu of any direct
charges by Operator for its services or the provision by Operator of its equipment
for normal superintendence and maintenance of the wells and related pipelines and
facilities.

 

9

 

The operating fees shall cover all normal, regularly recurring operating expenses for
the production, delivery and sale of natural gas, including without limitation:

	 	(i)	 	well tending, routine maintenance and adjustment;
	 
	 	(ii)	 	reading meters, recording production, pumping, maintaining appropriate books and records;
	 
	 	(iii)	 	preparing reports to the Developer and government agencies; and
	 
	 	(iv)	 	collecting and disbursing revenues.

The operating fees shall not cover costs and expenses related to the following:

	 	(i)	 	the production and sale of oil;
	 
	 	(ii)	 	the collection and disposal of salt water or other liquids produced by the wells;
	 
	 	(iii)	 	the rebuilding of access roads; and
	 
	 	(iv)	 	the purchase of equipment, materials or third party services;

which, subject to the provisions of sub-section (c) of this Section 6, shall be
invoiced by Operator to the Developer on a monthly basis, and shall be paid by the
Developer within ten (10) business days after notice from Operator that the
additional amounts are due and owing in proportion to the share of the Working
Interest owned by the Developer in the wells.

Any well that is temporarily abandoned or shut-in continuously for an entire calendar
month shall not be considered a producing well for purposes of determining the number
of wells in the month subject to the operating fee.

	 	(b)	 	Fee Adjustments. The monthly operating fee set forth in sub-section (a) above
may be adjusted by Operator annually, as of the first day of January (the “Adjustment
Date”) of each year, beginning January 1, 2011. This adjustment, if any, shall not
exceed the percentage increase in the average weekly earnings of “Crude Petroleum,
Natural Gas, and Natural Gas Liquids” workers, as published by the U.S. Department of
Labor, Bureau of Labor Statistics, and shown in Employment and Earnings Publication,
Monthly Establishment Data, Hours and Earning Statistical Table C-2, Index Average
Weekly Earnings of “Crude Petroleum, Natural Gas, and Natural Gas Liquids” workers, SIC
Code #131-2, or any successor index thereto, since January l, 2010, in the case of the
first adjustment, and since the previous Adjustment Date, in the case of each
subsequent adjustment.

In addition, the monthly operating fee set forth in sub-section (a) above for any
given well or wells being operated under this Agreement may be increased beyond the
annual adjustment described in the prior paragraph without advance notice to the
Developer, from time-to-time, to the competitive rate in the area where the well(s)
are situated, as determined by the Operator in its sole discretion.

	 	(c)	 	Extraordinary Costs. Without the prior written consent of the Developer,
pursuant to a written estimate submitted by Operator, Operator shall not undertake any
single project or incur any extraordinary cost with respect to any well being produced
under this Agreement that is reasonably estimated to result in an expenditure of more
than $5,000, unless the project or extraordinary cost is necessary for the following:

	 	(i)	 	to safeguard persons or property; or

	 	(ii)	 	to protect the well or related facilities in the event of a
sudden emergency.

 

10

 

In no event, however, shall the Developer be required to pay for any project or
extraordinary cost arising from the negligence or misconduct of Operator, its agents,
servants, employees, subcontractors, licensees, or invitees.

All extraordinary costs incurred and the cost of projects undertaken under this
section with respect to a well being produced under this Agreement shall be billed to
the Developer at the invoice cost of third-party services performed or materials
purchased together with a reasonable and competitive charge by Operator for any
services performed directly by it, in proportion to the share of the Working Interest
owned by the Developer in the well. Operator shall have the right to require the
Developer to pay in advance all or a portion of the estimated costs of a project
undertaken under this section, before undertaking the project, in proportion to the
share of the Working Interest owned by the Developer in the well or wells.

	 	(d)	 	Pipelines. Subject to Sections 2 (d) and 4 (a) relating to Developer’s
interest in gathering lines for the wells, Developer shall have no interest in any
natural gas pipeline and gathering system or processing plant, including but not
limited to gathering system’s owned by the Operator or its Affiliates, including Laurel
Mountain Midstream, LLC’s gathering system and processing plants in Indiana in which an
affiliate of the Developer owns an interest. Also, Developer shall not be charged any
cost or expense for the construction, expansion or maintenance of those pipeline and
gathering systems or processing plants.

	 	(e)	 	Price Determinations. Notwithstanding anything in this Agreement to the
contrary, the Developer shall pay all costs in proportion to the share of the Working
Interest owned by the Developer in the wells with respect to obtaining price
determinations under and otherwise complying with the Natural Gas Policy Act of 1978
and the implementing state regulations. This responsibility shall include, without
limitation, preparing, filing, and executing all applications, affidavits, interim
collection notices, reports and other documents necessary or appropriate to obtain
price certification, to effect sales of natural gas, or otherwise to comply with the
Act and the implementing state regulations.

Operator agrees to furnish the information and render the assistance as the Developer
may reasonably request in order to comply with the Act and the implementing state
regulations without charge for services performed by its employees.

	 	(f)	 	Plugging and Abandonment. The Developer shall have the right to direct
Operator to plug and abandon any well that has been completed under this Agreement as a
producer. In addition, Operator shall not plug and abandon any well that has been
drilled and completed as a producer under this Agreement before obtaining the written
consent of the Developer. However, if the Operator determines that any well drilled
and completed under this Agreement as a producer shall be plugged and abandoned in
accordance with the generally accepted and customary oil and gas field practices and
techniques then prevailing in the geographic area of the well location, and makes a
written request to the Developer for authority to plug and abandon the well and the
Developer fails to respond in writing to the request within forty-five (45) days
following the date of the request, then the Developer shall be deemed to have consented
to the plugging and abandonment of the well.

All costs and expenses related to plugging and abandoning wells that have been
drilled and completed under this Agreement as producing wells shall be borne and paid
by the Developer in proportion to the share of the Working Interest owned by the
Developer in the wells. Also, at any time after one (1) year from the date each well
drilled and completed under this Agreement is placed into production, Operator shall
have the right to deduct each month from the proceeds of the sale of the production
from the well up to $200, in proportion to the share of the Working Interest owned by
the Developer in the well, for the purpose of establishing a fund to cover the
Operator’s estimate of the Developer’s share of the costs of eventually plugging and
abandoning the well. All of these funds shall be deposited by Operator in a separate
interest bearing escrow account for the account of the Developer, and the total
amount so retained and deposited
shall not exceed Operator’s reasonable estimate of Developer’s share of the costs of
eventually plugging and abandoning the well.

 

11

 

	7.	 	Billing and Payment Procedure with Respect to Operation of Wells; Disbursements; Separate
Account for Sale Proceeds; Records and Reports; Additional Information.

	 	(a)	 	Billing and Payment Procedure with Respect to Operation of Wells. Operator
shall promptly and timely pay and discharge on behalf of the Developer, in proportion
to the share of the Working Interest owned by the Developer in the wells, the
following:

	 	(i)	 	all expenses and liabilities payable and incurred by reason of
its operation of the wells in accordance with this Agreement, such as severance
taxes, royalties, overriding royalties, operating fees, and pipeline gathering
charges; and

	 	(ii)	 	any third-party invoices received by Operator with respect to the
Developer’s share of the costs and expenses incurred in connection with the
operation of the wells.

Operator, however, shall not be required to pay and discharge any of the above costs
and expenses that are being contested in good faith by Operator.

Operator shall:

	 	(i)	 	deduct the foregoing costs and expenses from the Developer’s
share of the proceeds of the oil and/or gas sold from the wells; and

	 	(ii)	 	keep an accurate record of the Developer’s account, showing
expenses incurred and charges and credits made and received with respect to each
well.

If the Developer’s share of the proceeds of the oil and/or gas sold from the wells is
insufficient to pay the costs and expenses, then Operator shall promptly and timely
pay and discharge the costs and expenses described above, in proportion to the share
of the Working Interest owned by the Developer in the wells, and prepare and submit
an invoice to the Developer each month for those costs and expenses. The invoice
shall be accompanied by the form of statement specified in sub-section (b) below, and
shall be paid by the Developer within ten (10) business days of its receipt.

	 	(b)	 	Disbursements. Operator shall disburse to the Developer, on a monthly basis,
the Developer’s share of the proceeds received from the sale of oil and/or gas sold
from the wells operated under this Agreement, less:

	 	(i)	 	the amounts charged to the Developer under sub-section (a); and

	 	(ii)	 	the amount, if any, withheld by Operator for future plugging
costs pursuant to sub-section (f) of Section 6.

Each disbursement made and/or invoice submitted to the Developer pursuant to
sub-section (a) above shall be accompanied by a statement from the Operator itemizing
with respect to each well:

	 	(i)	 	the total production of oil and/or gas since the date of the last
disbursement or invoice billing period, as the case may be, and the Developer’s
share of the production;

	 	(ii)	 	the total proceeds received from any sale of the production, and
the Developer’s share of the proceeds;

	 	(iii)	 	the costs and expenses deducted from the proceeds and/or being
billed to the Developer pursuant to sub-section (a) above;

 

12

 

	 	(iv)	 	the amount withheld for future plugging costs; and

	 	(v)	 	any other information as Developer may reasonably request,
including without limitation copies of all third-party invoices listed on the
statement for the period.

	 	(c)	 	Separate Account for Sale Proceeds. Operator agrees to deposit all proceeds
from the sale of oil and/or gas sold from the wells operated under this Agreement in a
separate checking account maintained by Operator. This account shall be used solely
for the purpose of collecting and disbursing funds constituting proceeds from the sale
of production under this Agreement.

	 	(d)	 	Records and Reports. In addition to the statements required under sub-section
(b) above, Operator, within seventy-five (75) days after the completion of each well
drilled, shall furnish the Developer with a detailed statement itemizing with respect
to the well the total costs and charges under Section 4(a) and the Developer’s share of
the costs and charges, and any other information as is necessary to enable the
Developer:

	 	(i)	 	to allocate any extra costs incurred with respect to the well
between Tangible Costs and Intangible Drilling Costs; and

	 	(ii)	 	to determine the amount of the investment tax credit or marginal
well production tax credit, if applicable.

	 	(e)	 	Additional Information. Operator shall promptly furnish the Developer with any
additional information as it may reasonably request, including without limitation
geological, technical, and financial information, in the form as may reasonably be
requested, pertaining to any phase of the operations and activities governed by this
Agreement. The Developer and its authorized employees, agents and consultants,
including independent accountants shall, at Developer’s sole cost and expense:

	 	(i)	 	on at least ten (10) days’ written notice to Operator have access
during normal business hours to all of Operator’s records pertaining to
operations under this Agreement, including without limitation, the right to
audit the books of account of Operator relating to all receipts, costs, charges,
expenses and disbursements and information regarding the separate account
required under sub-section (c); and

	 	(ii)	 	have access, at its sole risk, to any wells drilled by Operator
under this Agreement at all times to inspect and observe any machinery,
equipment and operations.

	8.	 	Operator’s Lien; Right to Collect From Oil or Gas Purchaser.

	 	(a)	 	Operator’s Lien. To secure the payment of all sums due from Developer to
Operator under this Agreement, the Developer grants Operator a first and preferred lien
on and security interest in the following:

	 	(i)	 	the Developer’s interest in the Leases covered by this Agreement;

	 	(ii)	 	the Developer’s interest in oil and gas produced under this
Agreement and its share of the proceeds from the sale of the oil and gas; and

	 	(iii)	 	the Developer’s interest in materials and equipment under this
Agreement.

	 	(b)	 	Right to Collect From Oil or Gas Purchaser. If the Developer fails to timely
pay any amount owing under this Agreement by it to the Operator, then Operator, without
prejudice to other existing remedies, may collect and retain from any purchaser or
purchasers of oil or gas the Developer’s share of the proceeds from the sale of the oil
and gas until the amount owed by the Developer, plus twelve percent (12%) interest on a
per annum basis, and any additional costs (including without limitation actual
attorneys’ fees and costs)
resulting from the delinquency, has been paid. Each purchaser of oil or gas shall be
entitled to rely on Operator’s written statement concerning the amount of any
default.

 

13

 

	9.	 	Successors and Assigns; Transfers; Appointment of Agent.

	 	(a)	 	Successors and Assigns. This Agreement shall be binding on and inure to the
benefit of the undersigned parties and their respective successors and permitted
assigns. However, without the prior written consent of the Developer, the Operator may
not assign, transfer, pledge, mortgage, hypothecate, sell or otherwise dispose of any
of its interest in this Agreement, or any of its rights or obligations under this
Agreement. Notwithstanding, this consent shall not be required in connection with:

	 	(i)	 	the assignment of work to be performed for Operator to
subcontractors, it being understood and agreed, however, that any assignment to
Operator’s subcontractors shall not in any manner relieve or release Operator
from any of its obligations and responsibilities under this Agreement;

	 	(ii)	 	any lien, assignment, security interest, pledge or mortgage
arising under Operator’s present or future financing arrangements; or

	 	(iii)	 	the liquidation, merger, consolidation, or other corporate
reorganization or sale of substantially all of the assets of Operator.

Further, in order to maintain uniformity of ownership in the wells, production,
equipment, and leasehold interests covered by this Agreement, and notwithstanding any
other provision of this Agreement to the contrary, the Developer shall not, without
the prior written consent of Operator, sell, assign, transfer, encumber, mortgage or
otherwise dispose of any of its interest in the wells, production, equipment or
leasehold interests covered by this Agreement unless the disposition encompasses
either:

	 	(i)	 	the entire interest of the Developer in all wells, production,
equipment and leasehold interests subject to this Agreement; or

	 	(ii)	 	an equal undivided interest in all such wells, production,
equipment, and leasehold interests.

	 	(b)	 	Transfers. Subject to the provisions of sub-section (a) above, any sale,
encumbrance, transfer or other disposition made by the Developer of its interests in
the wells, production, equipment, and/or leasehold interests covered by this Agreement
shall be made:

	 	(i)	 	expressly subject to this Agreement;
	 
	 	(ii)	 	without prejudice to the rights of the Operator; and
	 
	 	(iii)	 	in accordance with and subject to the provisions of the Leases
covering the Well Locations.

	 	(c)	 	Appointment of Agent. If at any time the interest of the Developer is divided
among or owned by co-owners, Operator may, in its discretion, require the co-owners to
appoint a single trustee or agent with full authority to do the following:

	 	(i)	 	receive notices, reports and distributions of the proceeds from
production;
	 
	 	(ii)	 	approve expenditures;

	 	(iii)	 	receive billings for and approve and pay all costs, expenses and
liabilities incurred under this Agreement;

	 	(iv)	 	exercise any rights granted to the co-owners under this
Agreement;

 

14

 

	 	(v)	 	grant any approvals or authorizations required or contemplated by
this Agreement;

	 	(vi)	 	sign, execute, certify, acknowledge, file and/or record any
agreements, contracts, instruments, reports, or documents whatsoever in
connection with this Agreement or the activities contemplated by this Agreement;
and

	 	(vii)	 	deal generally with, and with power to bind, the co-owners with
respect to all activities and operations contemplated by this Agreement.

However, all the co-owners shall continue to have the right to enter into and execute
all contracts or agreements for their respective shares of the oil and gas produced
from the wells drilled under this Agreement in accordance with sub-section (c) of
Section 11.

	10.	 	Operator’s Insurance; Subcontractors’ Insurance; Operator’s Liability.

	 	(a)	 	Operator’s Insurance. Operator shall obtain and maintain at its own expense so
long as it is Operator under this Agreement all required Workmen’s Compensation
Insurance and comprehensive general public liability insurance in amounts and coverage
not less than $1,000,000 per person per occurrence for personal injury or death and
$1,000,000 for property damage per occurrence, which shall include coverage for
blow-outs, and total liability coverage of not less than $10,000,000.

Subject to the above limits, the Operator’s general public liability insurance shall
be in all respects comparable to that generally maintained in the industry with
respect to services of the type to be rendered and activities of the type to be
conducted under this Agreement. Operator’s general public liability insurance shall,
if permitted by Operator’s insurance carrier:

	 	(i)	 	name the Developer as an additional insured party; and

	 	(ii)	 	provide that at least thirty (30) days’ prior notice of
cancellation and any other adverse material change in the policy shall be given
to the Developer.

However, the Developer shall reimburse Operator for the additional cost, if any, of
including it as an additional insured party under the Operator’s insurance.

Current copies of all policies or certificates of the Operator’s insurance coverage
shall be delivered to the Developer on request. It is understood and agreed that
Operator’s insurance coverage may not adequately protect the interests of the
Developer and that the Developer shall carry at its expense the excess or additional
general public liability, property damage, and other insurance, if any, as the
Developer deems appropriate.

	 	(b)	 	Subcontractors’ Insurance. Operator shall require all of its subcontractors to
carry all required Workmen’s Compensation Insurance and to maintain such other
insurance, if any, as Operator in its discretion may require.

	 	(c)	 	Operator’s Liability. Operator’s liability to the Developer as Operator under
this Agreement shall be limited to, and Operator shall indemnify the Developer and hold
it harmless from, claims, penalties, liabilities, obligations, charges, losses, costs,
damages, or expenses (including but not limited to reasonable attorneys’ fees) as
provided in Section 4.05 of the Developer’s Partnership Agreement.

	11.	 	Internal Revenue Code Election; Relationship of Parties; Right to Take Production in Kind.

	 	(a)	 	Internal Revenue Code Election. With respect to this Agreement, each of the
parties elects under Section 761(a) of the Internal Revenue Code of 1986, as amended,
to be excluded from the provisions of Subchapter K of Chapter 1 of Subtitle A of the
Internal Revenue Code of 1986, as amended. If the income
tax laws of the state or states in which the property covered by this Agreement is
located contain, or may subsequently contain, a similar election, each of the parties
agrees that the election shall be exercised.

 

15

 

Beginning with the first taxable year of operations under this Agreement, each party
agrees that the deemed election provided by Section 1.761-2(b)(2)(ii) of the
Regulations under the Internal Revenue Code of 1986, as amended, will apply; and no
party will file an application under Section 1.761-2 (b)(3)(i) of the Regulations to
revoke the election. Each party agrees to execute the documents and make the filings
with the appropriate governmental authorities as may be necessary to effect the
election.

	 	(b)	 	Relationship of Parties. It is not the intention of the parties to create, nor
shall this Agreement be construed as creating, a mining or other partnership or
association or to render the parties liable as partners or joint venturers for any
purpose. Operator shall be deemed to be an independent contractor and shall perform
its obligations as set forth in this Agreement.

	 	(c)	 	Right to Take Production in Kind. Subject to the provisions of Section 8
above, the Developer shall have the exclusive right to sell or dispose of its
proportionate share of all oil and gas produced from the wells to be drilled under this
Agreement, exclusive of production:

	 	(i)	 	that may be used in development and producing operations;
	 
	 	(ii)	 	unavoidably lost; and
	 
	 	(iii)	 	used to fulfill any free gas obligations under the terms of the
applicable Lease or Leases.

Operator shall not have any right to sell or otherwise dispose of the oil and gas.
The Developer shall have the exclusive right to execute all contracts relating to the
sale or disposition of its proportionate share of the production from the wells
drilled under this Agreement.

Developer shall have no interest in any gas supply agreements of Operator, except the
right to receive Developer’s share of the proceeds received from the sale of any gas
or oil from wells developed under this Agreement. The Developer agrees to designate
Operator or Operator’s designated bank agent as the Developer’s collection agent in
any contracts. On request, Operator shall assist Developer in arranging the sale or
disposition of Developer’s oil and gas under this Agreement and shall promptly
provide the Developer with all relevant information that comes to Operator’s
attention regarding opportunities for selling production.

If Developer fails to take in kind or separately dispose of its proportionate share
of the oil and gas produced under this Agreement, then Operator shall have the right,
subject to the revocation at will by the Developer, but not the obligation, to
purchase the oil and gas or sell it to others at any time and from time to time, for
the account of the Developer at the best price obtainable in the area for the
production. Notwithstanding, Operator shall have no liability to Developer should
Operator fail to market the production.

Any such purchase or sale by Operator shall be subject always to the right of the
Developer to exercise at any time its right to take in-kind, or separately dispose
of, its share of oil and gas not previously delivered to a purchaser. Any purchase
or sale by Operator of the Developer’s share of oil and gas under this Agreement
shall be only for reasonable periods of time as are consistent with the minimum needs
of the oil and gas industry under the particular circumstances, but in no event for a
period in excess of one (1) year.

	12.	 	Effect of Force Majeure; Definition of Force Majeure; Limitation.

	 	(a)	 	Effect of Force Majeure. If Operator is rendered unable, wholly or in part, by
force majeure (as defined below) to carry out any of its obligations under this
Agreement, including but not limited to beginning the drilling of one or more wells by
the applicable times set forth in Section 2(b), or any Addendum to this Agreement, the
obligations of the Operator, so far as it is affected by the force majeure,
shall be suspended during but no longer than, the continuance of the force majeure.
The Operator shall give to the Developer prompt written notice of the force majeure
with reasonably full particulars concerning it. Operator shall use all reasonable
diligence to remove the force majeure as quickly as possible to the extent the same
is within its reasonable control.

 

16

 

	 	(b)	 	Definition of Force Majeure. The term “force majeure” shall mean an act of
God, strike, lockout, or other industrial disturbance, act of the public enemy, war,
terrorist acts, blockade, public riot, lightning, fire, storm, flood, explosion,
governmental restraint, unavailability of drilling rigs, equipment or materials, plant
shut-downs, curtailments by oil and gas purchasers and any other causes whether of the
kind specifically enumerated above or otherwise, which directly preclude Operator’s
performance under this Agreement and are not reasonably within the control of the
Operator including, but not limited to, the inability of Operator to begin the drilling
of the wells subject to this Agreement by the applicable times set forth in Section
2(b) or in any Addendum to this Agreement due to decisions of third-party operators to
delay drilling the wells, poor weather conditions, inability to obtain drilling
permits, access rights to the drilling site or title problems.

	 	(c)	 	Limitation. The requirement that any force majeure shall be remedied with all
reasonable dispatch shall not require the settlement of strikes, lockouts, or other
labor difficulty affecting the Operator contrary to its wishes. The method of handling
these difficulties shall be entirely within the discretion of the Operator.

	13.	 	Term.

This Agreement shall become effective when executed by Operator and the Developer. Except
as provided in sub-section (c) of Section 3, this Agreement shall continue and remain in
full force and effect for the productive lives of each well being operated under this
Agreement.

	14.	 	Governing Law; Invalidity.

	 	(a)	 	Governing Law. This Agreement shall be governed by, construed and interpreted
in accordance with the laws of the Commonwealth of Pennsylvania, excluding its conflict
of law provisions.

	 	(b)	 	Invalidity. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions of this Agreement, and this
Agreement shall be construed in all respects as if the invalid or unenforceable
provision were omitted.

	15.	 	Integration; Written Amendment.

	 	(a)	 	Integration. This Agreement, including the Exhibits to this Agreement,
constitutes and represents the entire understanding and agreement of the parties with
respect to the subject matter of this Agreement and supersedes all prior negotiations,
understandings, agreements, and representations relating to the subject matter of this
Agreement.

	 	(b)	 	Written Amendment. No change, waiver, modification, or amendment of this
Agreement shall be binding or of any effect unless in writing duly signed by the party
against which the change, waiver, modification, or amendment is sought to be enforced.

	16.	 	Waiver of Default or Breach.

No waiver by any party to any default of or breach by any other party under this Agreement
shall operate as a waiver of any future default or breach, whether of like or different
character or nature.

 

17

 

	17.	 	Notices.

Unless otherwise provided in this Agreement, all notices, statements, requests, or demands
that are required or contemplated by this Agreement shall be in writing and shall be
hand-delivered or sent by registered or certified
mail, postage prepaid, to the following addresses until a party’s address is changed by
certified or registered letter so addressed to the other party:

	 	(i)	 	If to the Operator, to:

Atlas Resources, LLC

Westpointe Corporate Center One

1550 Coraopolis Heights Road

Suite 300

Moon Township, Pennsylvania 15108

Attention: President

	 	(ii)	 	If to Developer, to:

Atlas Resources Series 28-2010 L.P.

c/o Atlas Resources, LLC

Westpointe Corporate Center One

1550 Coraopolis Heights Road

Suite 300

Moon Township, Pennsylvania 15108

Notices that are served by registered or certified mail on the parties in the manner
provided above shall be deemed sufficiently served or given for all purposes under this
Agreement at the time the notice is hand-delivered or mailed in any post office or branch
post office regularly maintained by the United States Postal Service or any successor. All
payments shall be hand-delivered or sent by United States mail, postage prepaid to the
addresses set forth above until a party’s address is changed by certified or registered
letter so addressed to the other party.

	18.	 	Interpretation.

The titles of the Sections in this Agreement are for convenience of reference only and shall
not control or affect the meaning or construction of any of the terms and provisions of this
Agreement. As used in this Agreement, the plural shall include the singular and the
singular shall include the plural whenever appropriate.

	19.	 	Counterparts.

The parties may execute this Agreement in any number of separate counterparts, each of
which, when executed and delivered by the parties, shall have the force and effect of an
original; but all counterparts of this Agreement shall be deemed to constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.

	 	 	 	 	 	 	 
	 	 	ATLAS RESOURCES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Frank P. Carolas	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Frank P. Carolas, Executive Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	ATLAS RESOURCES SERIES 28-2010 L.P.	 	 
	 
	 	 	 	 	 	 
	 	 	By its Managing General Partner:

ATLAS RESOURCES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Frank P. Carolas	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Frank P. Carolas, Executive Vice President	 	 

 

18

 

DESCRIPTION OF LEASES AND INITIAL WELL LOCATIONS

[To be completed as information becomes available]

	1.	 	WELL LOCATION

	 	(a)	 	Oil and Gas Lease from                                          dated                                    
     
and recorded in Deed Book Volume
 _____, Page
 _____ 

in the Recorder’s Office
of County,
                    ,
covering approximately
 _____ 

acres in
                    
                    
Township,
                    
                    
County,
                                        .

	 	(b)	 	The portion of the leasehold estate constituting the                                         
No.
 _____ 

Well Location is described on the map attached hereto as Exhibit A-l.

	 	(c)	 	
Title Opinion of                     ,                     ,
                    ,                     , dated                     , 20_____.

	 	(d)	 	The Developer’s interest in the leasehold estate constituting this Well
Location is an undivided
 _____% Working Interest to those oil and gas
rights from the surface to the deepest depth penetrated at the cessation of drilling
activities (which is                      feet), subject to the landowner’s royalty interest and
overriding royalty interests.

Exhibit A

 

 

 

Well Name, Twp.

County, State

ASSIGNMENT OF OIL AND GAS LEASE

STATE/COMMONWEALTH OF                                                             

COUNTY OF                                                             

KNOW ALL MEN BY THESE PRESENTS:

THAT the undersigned                                                                  
               
(collectively, hereinafter called “Assignor”), for and in consideration of One Dollar and other
valuable consideration ($1.00 ovc), the receipt and adequacy of which is hereby acknowledged, does
hereby sell, assign, transfer and set over unto _____ (hereinafter called “Assignee”), an undivided
                                         in, and to, the oil and gas lease(s) described as follows:

with respect to the well(s) known as                                         , but only to the extent described as
follows (with all other interests being expressly reserved to Assignor) [check one box to
show applicability]:

	o	 	 Horizontal Antrim Shale Well(s): Subject to the exception(s) set
forth below, if any, and as shown on the attached plat(s), the well
bore plus one hundred twenty-five feet on either side of the center
line of the lateral in the well extending from the beginning of the
first perforation to the end of the last perforation and from the top
of the Lachine Member to the bottom of the Antrim zone.
	 
	o	 	 Vertical Antrim Shale Well(s): Subject to the exception(s) set forth
below, if any, eighty (80) acres surrounding the well bore, as shown
on the attached plat(s), from the surface of the earth to the deepest
depth penetrated.
	 
	o	 	 Horizontal Marcellus Shale Well(s): Subject to the exception(s) set
forth below, if any, and as shown on the attached plat(s), the well
bore plus one hundred twenty-five (125) feet on either side of the
center line of the lateral in the well extending from the beginning of
the first perforation to the end of the last perforation and from the
bottom of the Tully zone to the bottom of the Marcellus Shale
formation.
	 
	o	 	 Horizontal New Albany Shale Well(s): Subject to the exception(s) set
forth below, if any, and as shown on the attached plat(s), the well
bore plus one hundred twenty-five (125) feet on either side of the
center line of the lateral in the well extending from the beginning of
the first perforation or open hole section to the end of the last
perforation or last open hole section and from the top of the Borden
Shale zone to the bottom of the New Albany zone.
	 
	o	 	 Horizontal Chattanooga Shale Well(s): Subject to the exception(s) set
forth below, if any, and as shown on the attached plat(s), the well
bore plus one hundred twenty-five (125) feet on either side of the
center line of the lateral in the well extending from the beginning of
the first perforation to the end of the last perforation and from the
top of the Fort Payne zone to the bottom of the Chattanooga zone.

Exhibit B

(Page 1)

 

 

 

(EXCEPTIONS:                                                                  
               )
together with the rights incident thereto and the personal property thereto, appurtenant thereto,
or used, or obtained, in connection therewith.

And for the same consideration, the Assignor covenants with the said Assignee and his or its
heirs, successors, or assigns that Assignor is the lawful owner of said lease and rights and
interest thereunder and of the personal property thereon or used in connection therewith; that the
undersigned has good right and authority to sell and convey the same; and that said rights,
interest and property are free and clear from all liens and encumbrances, and that all rentals and
royalties due and payable thereunder have been duly paid.

[remainder of page intentionally left blank; signatures appear on following page]

Exhibit B

(Page 2)

 

 

 

IN WITNESS WHEREOF, and intending to be legally bound, the undersigned Assignor has signed and
sealed this instrument the
 _____ 

day of                     , 20_____.

	 	 	 	 	 
	Signed and acknowledged in the presence of

	 	 
 

	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

Exhibit B

(Page 3)

 

 

 

ADDENDUM NO.                     

TO DRILLING AND OPERATING AGREEMENT

DATED                     , 20__

THIS ADDENDUM NO.
 _____ 

made and entered into this
 _____ 

day of                     , 20_____, by
and between ATLAS RESOURCES, LLC, a Pennsylvania limited liability company (hereinafter referred to
as “Operator”),

and

ATLAS RESOURCES SERIES 28-2010 L.P., a Delaware limited partnership, (hereinafter referred to as
the Developer).

WITNESSETH THAT:

WHEREAS, Operator and the Developer have entered into a Drilling and Operating Agreement dated
                    , 20_____, (the “Agreement”), which relates to the drilling and operating of
                    
(_____) wells on the                     
(_____) Initial Well Locations identified
on the maps attached as Exhibits A-l through A-
 _____ 

to the Agreement, and provides for the
development on the terms and conditions set forth in the Agreement of Additional Well Locations as
the parties may from time to time designate; and

WHEREAS, pursuant to Section l(c) of the Agreement, Operator and Developer presently desire to
designate                      Additional Well Locations described below to be developed in accordance
with the terms and conditions of the Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Addendum and intending
to be legally bound, the parties agree as follows:

1. Pursuant to Section l(c) of the Agreement, the Developer hereby authorizes Operator to
drill, complete (or plug) and operate, on the terms and conditions set forth in the Agreement and
this Addendum No.
 _____,                      additional wells on the                      Additional
Well Locations described on Exhibit A to this Addendum and on the maps attached to this Addendum as
Exhibits A-_____ through A-_____.

2. Operator, as Developer’s independent contractor, agrees to drill, complete (or plug) and
operate the additional wells on the Additional Well Locations in accordance with the terms and
conditions of the Agreement and further agrees to begin drilling the first additional well within
thirty (30) days after the date of this Addendum and to begin drilling all of the additional wells
before the close of the 90th day after the close of the calendar year in which the
Agreement was entered into by Operator and the Developer, or, if this Addendum is dated after that
90 day period, to begin drilling the first additional well within thirty (30) days after the date
of this Addendum and to drill and complete (or plug) all of the remaining additional wells by the
end of the calendar year in which this Addendum is dated.

3. Developer acknowledges that:

	 	(a)	 	Operator has furnished Developer with the title opinions identified on Exhibit A to
this Addendum; and

	 	(b)	 	such other documents and information which Developer or its counsel has requested in
order to determine the adequacy of the title to the above Additional Well Locations.

The Developer accepts the title to the Additional Well Locations and leased premises in accordance
with the provisions of Section 5 of the Agreement.

4. The drilling and operation of the additional wells on the Additional Well Locations shall
be in accordance with and subject to the terms and conditions set forth in the Agreement as
supplemented by this Addendum No.                     
and except as previously supplemented, all terms and conditions of the Agreement shall remain
in full force and effect as originally written.

Exhibit C

(Page 1)

 

 

 

5. This Addendum No.
 _____ 

shall be legally binding on, and shall inure to the benefit of,
the parties and their respective successors and permitted assigns.

WITNESS the due execution of this Addendum on the day and year first above written.

	 	 	 	 	 	 	 
	 	 	ATLAS RESOURCES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	ATLAS RESOURCES SERIES 28-2010 L.P.	 	 
	 
	 	 	 	 	 	 
	 	 	By its Managing General Partner:	 	 
	 
	 	 	 	 	 	 
	 	 	ATLAS RESOURCES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	 	 	 
	 

	 	 	 	 	 	 

Exhibit C

(Page 2)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00188-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00188-of-00352.parquet"}]]