Document:

Drilling and Operating Agreement

 Exhibit 10.9 
 DRILLING AND OPERATING AGREEMENT 
 DATED SEPTEMBER 15, 2004 
 BY AND BETWEEN 
 ATLAS AMERICA, INC.

 AND 
 KNOX
ENERGY, LLC 

 TABLE OF CONTENTS 
  

					
	 	  	 	  	PAGE
	1.	  	Definitions	  	1
	2.	  	Minimum Well Drilling Schedule; Initial and Subsequent Drilling; Election to Participate; Gathering	  	3
	3.	  	Title; Lease Status; Assignment by Non-Operator; AMI Election	  	8
	4.	  	Drilling and Certain Related Procedures; Abandonment	  	11
	5.	  	Other Operating Responsibilities of the Operator	  	13
	6.	  	Marketing of Natural Gas and Oil	  	14
	7.	  	Superintendence and Maintenance of the Wells; Operator’s Fee and Other Charges	  	16
	8.	  	Costs and Expenses; Plugging Reserve Account	  	17
	9.	  	Additional Operations	  	19
	10.	  	Non-Operator’s Access; Audit	  	20
	11.	  	Term and Termination	  	20
	12.	  	Contract Not Assignable	  	22
	13.	  	Relationship; Internal Revenue Code Election	  	22
	14.	  	Force Majeure	  	22
	15.	  	Notices	  	23
	16.	  	Governing Law	  	24
	17.	  	Successors in Interest	  	24
	18.	  	Integration; Amendment; Interpretation	  	24
	19.	  	Severability	  	24
	20.	  	Waivers	  	24
	21.	  	Further Assurances	  	25
	22.	  	Attorneys’ Fees	  	25
	23.	  	Public Statements	  	25
	24.	  	Counterpart; Fax	  	25

  

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 DEFINITIONS 
  

			
	 TERM
	  	 DEFINED AT:

	 Additional Potential Lease(s)
	  	§ 3.4
		
	 AFE
	  	§ 2.5
		
	 Affiliate
	  	§ 4.3
		
	 Agreement
	  	Page 1
		
	 AMI
	  	Second Whereas clause, page 1
		
	 Assignment
	  	§ 1.1(a)
		
	 Casing Point
	  	§ 1.1(b)
		
	 Completion
	  	§ 1.1(c)
		
	 COPAS
	  	§ 7.3
		
	 Drilling Acreage
	  	§ 1.1(d)
		
	 Drilling Costs
	  	§ 2.5
		
	 Dry Hole
	  	§ 1.1(e)
		
	 force majuere
	  	§ 14.1
		
	 Gas Purchaser
	  	§ 1.1(f)
		
	 Initial Period
	  	§ 2.8
		
	 Leases/Lease
	  	Second Whereas clause, page 1
		
	 Net Revenue
	  	§ 1.1(h)
		
	 Net Well
	  	§ 2.8
		
	 Non-Operator
	  	Page 1
		
	 Operating Expenses
	  	§ 1.1(i)
		
	 Operating Reserve Account
	  	§ 8.1
		
	 Operator
	  	Page 1
		
	 Operator’s Fee
	  	§ 7.3

  

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	 Option Period
	  	§ 2.8
		
	 Plugging Funds
	  	§ 8.4
		
	 Plugging Reserve Account
	  	§ 8.4
		
	 Proportionate Share
	  	§ 1.1(j)
		
	 Well Acreage
	  	§ 1.1(l)
		
	 Wells/Well
	  	§ 1.1(k)

  

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 LIST OF EXHIBITS 
  

					
	 	 	 	  	 PRINCIPAL REFERENCE:

	Exhibit A -	 	AMI Map	  	Second Whereas clause, page 1
			
	Exhibit B -	 	 Leases and Additional Potential Leases, Minimum Wells and Excluded Acreage
	  	First Whereas clause, page 1
			
	Exhibit C -	 	AFE’s	  	§ 2.3
			
	Exhibit D -	 	Assignment	  	§ 1.1(a)
			
	Exhibit E -	 	Gas Balancing Agreement	  	§ 6.4

  

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 DRILLING AND OPERATING AGREEMENT 
 This Drilling and Operating Agreement (this “Agreement”) is made and entered into, effective as of the 15th day of September, 2004, by and
between ATLAS AMERICA, INC., a Pennsylvania corporation (and not any other entity having the name Atlas America, Inc. or any derivative thereof), whose address is 311 Rouser Road, Moon Township, Coraopolis, PA 15108 (hereinafter referred to as
“Operator”) and KNOX ENERGY, LLC, a Tennessee limited liability company, whose address is 132 Mitchell Road, Oak Ridge, TN 37830 (hereinafter referred to as “Non-Operator”). 
 WHEREAS, by the agreements described in Exhibit B which is attached hereto and made a part hereof, Non-Operator is vested with the right to drill one or
more wells for the purpose of exploring for and producing natural gas and/or oil from the tracts or parcels covered thereby situate in Anderson, Campbell, Morgan, Roane and Scott Counties, Tennessee; and 
 WHEREAS, Operator and Non-Operator desire to drill wells on the property covered by the agreements described in Exhibit B (as well as any other
agreements granting Non-Operator, either of the members of Non-Operator and/or any affiliate of any of them the right to drill one or more wells on the property within the area of mutual interest (the “AMI”) outlined on the map attached
hereto as Exhibit A and made a part hereof) for the production of natural gas and/or oil therefrom, and the processing, transportation and marketing of such natural gas and/or oil, on the terms and conditions hereinafter set forth; the agreements
described in Exhibit B, as well as any other agreements described in this WHEREAS clause which are deemed Leases as set forth in Section 3.4 hereof, are referred to herein collectively as the “Leases” and individually as a
“Lease”. 
 NOW, THEREFORE, WITNESSETH, that for and in consideration of the foregoing premises, and the mutual covenants herein
contained, the parties hereto mutually covenant and agree as follows: 
  

	 	1.	Definitions  

 1.1 The following
terms used in this Agreement shall have the meanings set forth below: 
 (a) The term “Assignment” shall mean, with
respect to Wells (as defined below), the separate agreement in the form attached hereto and made a part hereof as Exhibit D, whereby Non-Operator will grant, assign and convey, as set forth herein, unto the Operator and/or its successor and assigns,
their Proportionate Share (as defined below) of the right, title and interest of Non-Operator in and to a part or portion of the property described in and covered by the Leases. 
 (b) The term “Casing Point” means the time when a Well has been drilled to the depth or the formation or formations hereinafter
designated and such tests have been conducted so that a determination can be made as to whether the Well can be further developed to completion. 
 (c) The term “Completion” means in the case of a natural gas Well or an oil Well the time when all Well equipment has been installed and the Well is capable of 

 
producing natural gas and/or oil without regard to whether all facilities necessary to permit the delivery of natural gas or oil production from the Well to
a purchaser have been installed. 
 (d) The term “Drilling Acreage” shall mean those tracts or parcels of land, or
the parts or portions thereof other than the 1.628 acre, more or less, parcel referred to in Section 2.8 hereof, covered by the Leases. 
 (e) The term “Dry Hole” means a Well that has been drilled to the Casing Point but which is not completed pursuant to the provisions of this Agreement. 
 (f) The term “Gas Purchaser” shall mean that party, whether one or more, designated by the Operator and/or the Non-Operator to
purchase gas produced from one or more Wells. 
 (g) The term “Net Revenue” shall mean the gross receipts of the
Wells less all royalties, overriding royalties, the Operator’s Fee (as defined in Section 7.3 hereof) and Operating Expenses (as defined below) and any other item of expense not expressly chargeable to the Operator. 
 (h) The term “Operating Expenses” shall mean the customary expense of operation and maintenance of a Well, if it is producing,
the production and marketing of natural gas and/or oil therefrom, and of plugging and abandoning a Well, if unproductive. Such term includes business and occupation, gross receipts, ad valorem and severance taxes and all other taxes payable with
respect to the production from the Wells, and all legal fees, all transportation charges (including compression charges), all materials utilized in production, such as, but not limited to, alcohol, soap, solvents, cleaners, electric drops,
electricity and other similar items and any other item commonly or ordinarily used in connection with producing a natural gas and/or oil well or designated as an Operating Expense in this Agreement, but shall not include any cost or expense incurred
by the Operator in discharging its obligation to superintend and maintain a Well, if producing (for which the Operator is to receive monthly payments as set forth in Section 7.3 hereof) or any other such costs and expenses which the Operator is
required by the terms of this Agreement to bear itself. Such term shall also include any amounts payable as damages subsequent to reclamation of all well roads and drill sites in accordance with applicable law to any owner of the surface estate
where a Well is drilled or any right of way or easement appurtenant thereto and costs of defending or arbitrating any action or claims asserted with respect thereto. 
 (i) The term “Proportionate Share” shall mean the percentage share of Operator or its successors or assigns and of Non-Operator
in the drilling and completion costs, Operating Expenses, Operator’s Fee, working interest, production revenues and ownership of each Well to be drilled pursuant to this Agreement. 
 (j) The term “Well” shall mean a well, and the term “Wells” shall mean all wells, drilled in accordance with the terms
of this Agreement. 
 (k) The term “Well Acreage” shall mean that part or portion of the Drilling Acreage covered by
one or more Leases included in a square area of forty (40) acres having as its center the borehole of a Well to the extent such part or portion shall fall within the boundaries of such square area, provided, however, that if a Lease, or any
governmental or 

  

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other regulatory authority or agency, provides or requires for a larger area or a different configuration, the Well Acreage shall mean such larger area
and/or different configuration. 
  

	 	2.	Minimum Well Drilling Schedule; Initial and Subsequent Drilling; Election to Participate; Gathering  

 2.1 The Leases identified in Exhibit B provide that a minimum number of wells are to be drilled before certain dates as set forth on
Exhibit B as a condition to the drilling of additional wells on the property subject to such Leases. 
 2.2 It is understood
and agreed by the parties that Operator is presently unable to perform the duties and obligations of Operator hereunder with respect to (i) permitting and titling of Wells, (ii) drilling and completing Wells, (iii) accounting for the
costs of drilling and completing Wells, (iv) tending Wells, (v) marketing production from the Wells or (vi) accounting for, and distributing, Net Revenues and royalties and overriding royalties relating to production from the Wells.
The parties agree that Non-Operator will initially perform such duties and obligations and shall be entitled to receive payment from Operator of Operator’s Proportionate Share of the Drilling Costs, Operating Expenses and Operator’s Fee
relating thereto. The parties will fully cooperate with each other and use all reasonable efforts to have Operator perform such duties and obligations relating to each of the foregoing numbered activities as soon as reasonably practicable (giving
due consideration to effecting a smooth transition as to each of the foregoing numbered activities when Operator has adequate personnel in place to perform such duties and obligations with respect to such activities), provided, however, that
Operator shall perform all such duties and obligations no later than when fifty (50) Wells have been drilled hereunder. 
 For example and without limiting the foregoing, until such time as Operator obtains any and all required governmental and other approvals and permissions to drill, complete and operate Wells on the property subject to a Lease identified in
Exhibit B and has adequate personnel in place to conduct such activities, Non-Operator shall perform such activities, and shall have all of the rights, of Operator hereunder with respect to such activities. Operator shall promptly and diligently
pursue all reasonable actions to obtain such approvals and permissions and have such adequate personnel in place. Upon obtaining such approvals and permissions and having such personnel in place, Operator shall thereafter perform all such
activities, and shall have all of the rights, of Operator hereunder with respect to such activities and Non-Operator shall promptly transfer to Operator all permits and other authorizations to drill, complete and operate Wells on the property
subject to the Leases identified in Exhibit B. 
 2.3 Non-Operator has obtained all governmental and other approvals and
permits to drill, complete and operate wells on the property subject to the Leases identified in Exhibit B as set forth on Exhibit B under the heading Presently Permitted Minimum Wells. Until Operator obtains any and all required governmental and
other approvals and permissions to drill, complete and operate Wells on the property subject to a Lease identified in Exhibit B, Non-Operator shall promptly and diligently pursue all reasonable action to obtain such approvals and permissions to
drill, complete and operate, and shall drill, the minimum number of Wells set forth on Exhibit B with respect to such Lease. After obtaining any and all required approvals and permissions to drill, complete and operate Wells on the property subject
to a Lease identified in Exhibit B, Operator shall promptly and diligently drill the minimum number of wells set forth on Exhibit B with respect to such Lease (less the number previously drilled) during the periods Operator has the right to drill
wells under this Agreement. 
  

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 With respect to each of the first ten (10) Wells identified in Exhibit B under the
heading Presently Permitted Minimum Wells, Operator shall pay to Non-Operator, upon execution of this Agreement, Operator’s Proportionate Share of the Drilling Costs (as defined in Section 2.5 hereof) as estimated in the AFE (as defined in
Section 2.5 hereof) for such Well attached hereto as Exhibit C and made a part hereof, and after Non-Operator determines the final third-party costs of drilling and completing such Well, Operator shall pay to Non-Operator, as set forth in
Section 2.5 hereof, Operator’s Proportionate Share of such final costs in excess of the amounts set forth in the AFE for such Well, subject to the refund or credit set forth in such Section. With respect to any other Well which is drilled
and completed by Non-Operator, not later than five (5) days prior to such drilling, Operator shall pay to Non-Operator the Operator’s Proportionate Share of the Drilling Costs as estimated in the AFE for such Well, and after Non-Operator
determines the final third-party costs of drilling and completing such Well, Operator shall pay to Non-Operator, as set forth in Section 2.5 hereof, Operator’s Proportionate Share of such final costs in excess of the amounts set forth in
the AFE for such Well, subject to the refund or credit set forth in such Section. 
 Operator and Non-Operator agree that no
other well will be drilled on the property subject to the Leases closer than one thousand three hundred twenty (1,320) feet to any Well drilled pursuant hereto unless Operator and Non-Operator otherwise agree in writing; provided, however, that
after the expiration of the Initial Period or, if applicable, the Option Period, or the termination of this Agreement if such termination occurs prior to the expiration of the Initial Period or the Option Period, Non-Operator shall have the right to
drill wells on the property subject to the Leases which are closer than one thousand three hundred twenty (1,320) feet to any Well drilled pursuant hereto so long as no such well produces natural gas or oil from any formation (other than
methane gas from coal beds or coal mines) from the surface to one hundred (100) feet below the deepest formation from which natural gas and/or oil is produced from any such Well and so long as the drilling, completion and operation (including
the production, compression and transportation of natural gas and/or oil) of all such wells do not unduly interfere with the operation (including the production, compression and transportation of natural gas and/or oil) of any Well and provided,
further, that if a Well is plugged and abandoned, the limitations as to formations and interference in the foregoing proviso as to such Well shall not apply. If Non-Operator drills a well which is closer than one thousand three hundred twenty
(1,320) feet to any Well which has not been plugged and abandoned, it shall promptly furnish to Operator copies of all drilling reports, logs, completion reports and other data reasonably requested by Operator for the purpose of verifying that
such well is not producing, and will not produce, any natural gas or oil from any formation (other than methane gas from coal beds or coal mines) from the surface to one hundred (100) feet below the deepest formation from which natural gas
and/or oil is produced from such Well. The agreements set forth above in this paragraph shall be covenants running with the land and shall be set forth by reference to this Agreement in the Assignment in the form attached hereto as Exhibit D and
made a part hereof. 
 2.4 Non-Operator shall have the right to participate, on a well-by-well basis, for up to fifty percent
(50%) of the working interests in each Well drilled hereunder. 
 Except as set forth in Exhibit B under the heading
Wells To Be Drilled On Or Before March 31, 2005, Operator shall propose the number and location of the Wells to be drilled pursuant hereto and shall give written notice thereof to Non-Operator. Non-Operator may elect to participate by giving
written notice to Operator of such election within thirty (30) days after receipt of Operator’s proposal. Failure of Non-Operator to give notice to Operator of its 

  

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election to participate within the period set forth above shall be deemed, and shall constitute, an election by Non-Operator not to participate. 

Non-Operator has elected not to participate in the first ten (10) proposed Wells identified in Exhibit B under the heading
Presently Permitted Minimum Wells for any working interest and Operator shall own one hundred percent (100%) of the working interests in such Wells. 
 2.5 Operator and Non-Operator shall each pay its Proportionate Share of the actual third-party costs of drilling and completing each Well plus an amount to cover general and administrative, and technical supervision,
expenses allocated to the drilling and completion of each Well (the “Drilling Costs”). For each Well for which the drilling is commenced prior to March 31, 2005, the amount allocated for general and administrative, and technical
supervision, expenses for the drilling and completion of each such Well shall be Fourteen Thousand Dollars ($14,000). Thereafter, for each annual period beginning April 1 and ending March 31 of the following year, Operator shall determine
the amount to be allocated for general and administrative, and technical supervision, expenses allocated to the drilling and completion of a Well for which the drilling is commenced during such period, such amount to be equal to the amount Operator
allocates to Wells drilled for any limited partnership or other entity from which Operator receives funds to drill such Wells. 
 Operator shall give Non-Operator thirty (30) days’ prior written notice of the anticipated drilling date for a Well in which Non-Operator has elected to participate. No later than five (5) days prior to the drilling by
Operator of a Well in which Non-Operator has elected to participate, Non-Operator shall pay to Operator its Proportionate Share of the Drilling Costs of the Well as estimated in an Authority for Expenditure (“AFE”) to be furnished to
Non-Operator by Operator along with the written notice to be provided by Operator to Non-Operator pursuant to Section 2.4 hereof. Within thirty (30) days after Operator determines the final third-party costs of drilling and completing a
Well, Operator shall either (i) invoice Non-Operator for its Proportionate Share of the final costs in excess of the amount prepaid by Non-Operator and Non-Operator shall pay such invoice within thirty (30) days after receipt or
(ii) at the election of Non-Operator, Operator shall refund to Non-Operator, or credit against Non-Operator’s Proportionate Share of the Drilling Costs for one or more other Wells in which it has elected to participate, the amount prepaid
by Non-Operator in excess of the final Drilling Costs for the Well. It is expressly understood and agreed that if the final Drilling Costs for a Well exceed one hundred ten percent (110%) of the Drilling Costs as estimated in the AFE for the
Well, Non-Operator shall have no obligation to pay more than its Proportionate Share (based upon its election to participate in the Well pursuant to Section 2.4 hereof) of such excess, provided, however, that if Non-Operator does not pay such
Proportionate Share of the excess, its Proportionate Share of the Well shall be reduced to a share equal to the share of the final Drilling Costs of the Well paid by it. 
 2.6 If Non-Operator elects to participate in a Well for a fifty-percent (50%) working interest, the Well will be burdened with an
overriding royalty payable to Non-Operator equal to 1/64th (1.5625%); if Non-Operator does not elect to participate
in a Well for any working interest, the Well will be burdened with an overriding royalty payable to Non-Operator equal to 1/32nd (3.125%). To the extent that Non-Operator participates in a Well for less than a fifty-percent (50%) working interest, the overriding royalty to Non-Operator shall be determined by subtracting from an overriding royalty of
1/32nd (3.125%) an amount determined by multiplying 1/64th (1. 5625%) by a fraction, the numerator of which is the Non-Operator’s working interest and the denominator of which is fifty percent (50%). For example,
if Non-Operator elects to 

  

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participate for a thirty-percent (30%) working interest in a Well, the overriding royalty to Non-Operator shall be: 
 3.125% less (1.5625% x (30% ÷ 50%)) = 
 3.125% less .9375% = 2.1875% 
 2.7 With respect to each of the first ten (10) Wells identified in Exhibit B under the heading Presently Permitted Minimum Wells, Operator shall pay to Non-Operator, upon execution of this Agreement,
Operator’s Proportionate Share of a site fee of Four Thousand Dollars ($4,000) and a completion fee of Two Thousand Dollars ($2,000) for each such Well. With respect to each other Well drilled and completed during the Initial Period (as defined
in Section 2.8 hereof), Operator shall pay to Non-Operator, not later than five (5) days prior to drilling such Well, Operator’s Proportionate Share of a site fee of Four Thousand Dollars ($4,000) and Operator shall pay to
Non-Operator, not later than thirty (30) days after completion of such Well, Operator’s Proportionate Share of a completion fee of Two Thousand Dollars ($2,000). During the Option Period (as defined in Section 2.8 hereof), if
applicable, the site fee shall be Five Thousand Dollars ($5,000) and the completion fee shall be Two Thousand Five Hundred Dollars ($2,500). 
 2.8 During the period ending June 30, 2007 (the “Initial Period”), Operator shall have the exclusive right to propose and drill three hundred (300) Net Wells (as defined in this Section 2.8)
under this Agreement inclusive of Wells identified in Exhibit B under the heading Presently Permitted Minimum Wells and other Wells drilled by Non-Operator under Section 2.3 hereof. If agreed to by Non-Operator in writing no later than
December 31, 2006, Operator shall have the exclusive right to propose and drill two hundred (200) additional Net Wells under this Agreement during the period commencing July 1, 2007 and ending June 30, 2009 (the “Option
Period”). For purposes of this Agreement, a Net Well shall mean one or more Wells in which Operator’s (and its successors’ and assigns’) total initial participation equals one hundred percent (100%) of the working interests;
for example, if Operator has a working interest of one hundred percent (100%) in each of four (4) Wells, seventy-five percent (75%) in each of four (4) Wells and fifty percent (50%) in each of four (4) Wells, the number
of Net Wells shall be four (4), three (3) and two (2), respectively, or a total of nine (9) Net Wells. 
 Subject to
the performance by Non-Operator of its obligations, and the accuracy of its representations and warranties, herein contained (including but not limited to those set forth in Section 2.3 hereof, this Section 2.8 and Section 3.2 hereof)
and subject to the provisions of Section 14 hereof, Operator shall drill the minimum number of Wells set forth in the Leases to keep each such Lease in full force and effect during the Initial Period and, if applicable, during the Option Period
and, except with respect to the minimum number of Wells to be drilled prior to March 31, 2005 and one (1) Well to be drilled under the Brimstone Lease on or before June 1, 2005 as set forth in Exhibit B, Operator shall commence the
drilling of such minimum number of Wells no later than ninety (90) days prior to the dates set forth in each of the Leases to keep each of the Leases in full force and effect during the Initial Period and, if applicable, during the Option
Period. Notwithstanding the provisions of the foregoing sentence, (i) if Non-Operator substitutes a new Operator under Section 11.2 hereof, Operator shall have no obligation, nor right, to drill any additional Wells and (ii) if the
expiration of the Initial Period or, if applicable, the Option Period, occurs during a period when a Lease provides a minimum number of Wells is to be drilled to keep such Lease in full force and effect, the obligation of Operator to drill the
minimum number of Wells to keep such Lease in full force and effect shall be prorated based upon the time of such period prior to, and after, the expiration of the Initial Period and, if applicable, the Option Period; for example, if the period in
the Lease during which a minimum 

  

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number of Wells to be drilled is from January 1 of a year to December 31 of such year and the minimum number of Wells to be drilled in such period
is ten (10), then in the calendar year 2007, Operator shall have an obligation to drill only five (5) Wells if the Option Period is not applicable. 
 Failure of the Operator to drill the minimum number of Wells as set forth above in the preceding paragraph shall result in the immediate termination of Operator’s right to thereafter drill any Well and, except as
set forth below, Operator’s right or obligation to participate in any Well thereafter drilled, provided, however, that if after such termination, Non-Operator drills, or causes to be drilled, any Wells during the Initial Period or if
applicable, the Option Period, to satisfy the minimum number of Wells as set forth in the preceding paragraph to be drilled in such period, Operator shall participate in each such Well drilled no deeper than one hundred (100) feet below the
Chattanooga Shale formation (or such deeper formation to which such Well is required to be drilled by a Lease) for such working interests, if any, as Non-Operator shall notify Operator in writing prior to the drilling of such Well and Operator shall
be responsible for, and shall pay, its Proportionate Share of the Drilling Costs, Operating Expenses and Operator’s Fee for such Well; the termination of the rights of Operator set forth above and the right of Non-Operator to require Operator
to participate in the minimum number of Wells drilled no deeper than one hundred (100) feet below the Chattanooga Shale formation (or such deeper formation to which such Well is required to be drilled by a Lease) shall be the sole and exclusive
remedy of Non-Operator with respect to Operator’s failure to drill the minimum number of Wells as set forth above in the preceding paragraph. 
 Non-Operator represents and warrants, to the best of its knowledge, to and for the benefit of Operator and its successors and assigns that no person, corporation or other entity, other than Non-Operator, has the right
to explore for or produce natural gas or oil (including the right to drill, complete and operate Wells for the production, compression, transportation, marketing and sale of natural gas and oil produced therefrom) from the property subject to the
Leases identified in Exhibit B other than the 1.628 acre, more or less, portion of the tract covered by the Coal Creek Lease described in Exhibit B under the heading Excluded Acreage. Non-Operator agrees that during the Initial Period, and if
applicable, during the Option Period, Non-Operator shall not grant, assign or otherwise transfer to any person, corporation or other entity, except to Operator as set forth herein, the right to explore for and produce natural gas or oil from the
property subject to the Leases not including methane gas from coal beds and coal mines. 
 Notwithstanding anything to the
contrary contained in this Agreement, upon the expiration of the Initial Period and, if applicable, the Option Period, Operator shall have no obligation or right to drill any well, and shall have no right to participate in any well drilled
thereafter, on the property subject to any Lease. 
 2.9 Notwithstanding anything to the contrary contained in this Agreement,
without the written consent of Non-Operator, no Well drilled under this Agreement shall be drilled or completed to produce any methane gas from coal beds or coal mines, and after the initial drilling and completion of a Well, such Well shall not be
deepened without the consent of both Operator and Non-Operator. It is expressly understood and agreed that Operator has no rights of ownership or otherwise in, nor liabilities with respect to, any well (whether producing, plugged or abandoned)
drilled on the property subject to any Lease identified in Exhibit B by Non-Operator or any other person, corporation or other entity prior to the date of this Agreement or, unless otherwise agreed to in writing by Non-Operator and Operator, in any
well (whether producing, plugged or abandoned) drilled on the property subject to any other Lease prior to the 

  

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time it is deemed a Lease pursuant to Section 3.4 hereof; and to the extent it has the right to do so, Non-Operator may produce, rework, deepen and
perform other operations on such wells for its sole account. 
 2.10 Operator and Non-Operator shall each have the right to
transfer or otherwise assign working interests in any Well to any affiliate and to any limited partnership or other entity from which Operator or Non-Operator receives funds to drill the Well, provided, however, that each party must retain at least
twenty percent (20%) of the working interests for which it participated hereunder in each Well (such retention may be by the direct ownership of such minimum working interest or indirectly by such party’s ownership of an affiliate or such
limited partnership or other entity which owns working interests in the Well) unless otherwise consented to by the other party, such consent not to be unreasonably withheld. 
  

	 	3.	Title; Lease Status; Assignment by Non-Operator; AMI Election  

 3.1 Promptly after the execution of this Agreement, Non-Operator shall provide to Operator all information in its possession or subject to its control as to the title to the natural gas and oil underlying the property
subject to the Leases identified in Exhibit B and the rights to explore for, develop, operate, produce and market such natural gas and oil including but not limited to the names and addresses of all owners of royalties and overriding royalties and
the amounts of such royalties and overriding royalties. Additionally, at the time a copy of an agreement described in Section 3.4 hereof is sent to Operator, and thereafter, promptly after being requested to do so, Non-Operator shall provide to
Operator all information in its possession or subject to its control as to the title to the natural gas and oil underlying the property subject to such agreement and the rights to explore for, develop, operate, produce and market such natural gas
and oil. As to the title to the natural gas and oil underlying the property subject to the Leases and the right to explore for, develop, operate, produce and market such natural gas and oil, Non-Operator represents and warrants to and for the
benefit of Operator and its successors and assigns that it will defend such title against every person, corporation or other entity claiming or to claim an interest therein by, through or under Non-Operator, or any member of Non-Operator, or any
affiliate of any of them, but not otherwise. 
 Prior to the drilling of a Well, the Operator shall obtain a report, prepared
by an attorney or title insurance company licensed to practice or do business in Tennessee, as to whether the lessor(s) of the Lease, and each assignee of such lessor(s) including Non-Operator, are vested with good and marketable title to the rights
to explore for, develop, operate, produce and market natural gas and oil on Well Acreage covered by the Lease on which the Well is to be drilled. Without limiting the foregoing, the report will cover, with respect to the Well Acreage covered by the
Lease on which the Well is to be drilled, the ownership of the (i) oil and natural gas, (ii) working interests, (iii) royalties, (iv) overriding royalties and (v) other production payments, if any. Promptly after receipt of
a report, Operator shall furnish a copy thereof to Non-Operator. If a report reveals defects in title, Operator may, in the exercise of its reasonable judgment, caused to be performed such curative work as Operator deems prudent (including obtaining
pooling amendments or agreements) or may decide not to drill a Well on the Well Acreage subject to the report. Operator and Non-Operator shall each be responsible for, and pay, its Proportionate Share of the costs incurred to obtain such reports,
and to perform curative work, including costs of abstracts, attorney’s fees, title company charges, land broker charges and other related direct charges, provided, however, that Non-Operator shall not be responsible for, and shall not pay, any
amount for services rendered by in-house counsel or other personnel of Operator with respect to title to any Well Acreage or any curative work relating thereto. Except as to the warranty of title set forth in the preceding 

  

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paragraph, neither Operator nor Non-Operator shall have any liability to the other for failure of title or any matter relating thereto. 
 3.2 Non-Operator hereby represents and warrants, as of the date hereof and continuing until March 31, 2005, to and for the benefit of
Operator and its successors and assigns, that the Leases identified in Exhibit B are in full force and effect in accordance with their terms and that there are no defaults by lessee thereunder and that the lessee has no obligation under any such
Lease to drill any well for the production of any methane or other gas from coal beds or coal mines and that all amendments to each such Lease are identified in Exhibit B and that all consents required under such Leases to permit Operator to perform
its obligations, and exercise its rights, contemplated hereby have been obtained including consents to the assignment of such Leases and interests in the Wells and Well Acreage to Operator and to any affiliate of Operator or Non-Operator and to any
limited partnerships and other entities from which Operator or Non-Operator receives funds to drill Wells, true and correct copies of such consents having been furnished by Non-Operator to Operator on or prior to the execution of this Agreement.
Non-Operator shall not agree to any amendment or other modification of any Lease identified in Exhibit B without the prior written consent of Operator. Non-Operator shall be solely responsible for the payment of, and shall pay, all delay rentals,
minimum royalties and other amounts required to be paid under the Leases to keep the Leases in full force and effect and upon request of Operator, Non-Operator shall provide evidence of such payment in such detail as Operator may reasonably request;
Non-Operator shall be entitled to recoup such delay rentals, minimum royalties and/or other amounts as may be provided in the Lease and to the extent Operator receives funds from the sale or other disposition of natural gas and oil produced from the
Wells which may be applied to such recoupment, it will pay such funds to Non-Operator. Operator and Non-Operator shall each pay its Proportionate Share of any shut-in royalties required to be paid under the Leases with respect to a Well.
Additionally, Non-Operator shall comply with all other provisions of the Leases (except, subject to Section 2.3 hereof, the provisions to drill a minimum number of wells), and take all other actions to otherwise keep the Leases in full force
and effect, with respect to the property subject thereto exclusive of Well Acreage. Promptly after receipt of any notice, or any document or other writing, from any lessor of a Lease, any governmental or regulatory authority or agency or any other
person, corporation or authority relating to any Lease or Well or any activities conducted on the property subject to the Leases or relating to any other matter concerning the drilling, completion or operation of one or more Wells, or the
transportation, compression, processing, marketing or sale of natural gas and/or oil produced therefrom, Non-Operator and Operator, as the case may be, shall provide the other with such notice, or document or other writing. 
 3.3 Upon payment by Operator of its Proportionate Share of the site fee for a Well pursuant to Section 2.7 hereof, the Non-Operator
shall promptly execute and deliver to the Operator or its successors and assigns an Assignment in substantially the form attached hereto and made a part hereof as Exhibit D with respect to the Well Acreage on which the Well is to be drilled and the
non-exclusive right to construct, maintain, repair and operate one or more lines, compressors, processing facilities and meters on the property subject to the Leases to transport, compress, process, measure, market and sell natural gas and oil
produced from the Wells, which natural gas and oil shall be transported through the Coalfield Pipeline pursuant to a Gas Gathering Agreement between Operator and Coalfield Pipeline Company being executed contemporaneously with this Agreement. Unless
otherwise agreed to by the Non-Operator, the Assignment shall except and reserve to the Non-Operator all interests and estates with respect to methane gas in coal beds and coal mines, together with the right to conduct operations on and drill
through Well Acreage for the development, extraction and processing of such methane 

  

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gas so long as such operations and drilling do not adversely affect the operation of, or production from, any Well. In the Assignment and subject to the
non-exclusive right described in the first sentence of this Section 3.3, Non-Operator shall further except and reserve unto itself all interests and estates in the Lease on which the Well is drilled, except as to the Well Acreage and as to all
oil and gas formations from the surface to one hundred (100) feet below the deepest producing formation in the Well. 
 3.4 If the Non-Operator, either member of the Non-Operator or any affiliate of any of them acquires the right to drill one or more wells on the AMI pursuant to an agreement not identified in Exhibit B, the Non-Operator shall provide a copy
of the agreement to the Operator promptly after the execution of such agreement. The Operator shall have the right, within thirty (30) days after receipt of the executed agreement, to notify the Non-Operator in writing that such agreement shall
be deemed a Lease, subject to such conditions as may be set forth in the notice (including consents to assignment), for all purposes of this Agreement and Non-Operator shall not agree to any amendment or other modification of such Lease without the
prior written consent of Operator. If such written notice is not given by the Operator within the thirty (30) day period, such agreement shall not be deemed a Lease and the Operator shall have no rights, or obligations, in regard to such
agreement. Notwithstanding the foregoing, Operator shall have no right to have any acreage described in Exhibit B under the heading Excluded Acreage deemed subject to a Lease. 
 With respect to the leases and other agreements (“Additional Potential Leases”) described in Exhibit B under the heading
Additional Potential Leases, on or before March 1, 2005, Non-Operator shall provide to Operator a copy of each such Additional Potential Lease. If Non-Operator desires to drill a natural gas and/or oil well on the property subject to an
Additional Potential Lease, at least ninety (90) days prior to drilling such well, Non-Operator shall give written notice to Operator of such desire along with the proposed location, target formation and anticipated drilling date of the well
(as well as copies of any amendment or other modification of such lease and of any consent to assignment required by such lease) and the Operator shall have the right to participate in such well for up to fifty percent (50%) of the working
interests, if Operator elects, as provided below, to have the Additional Potential Lease and well deemed a Lease and Well hereunder. If Operator notifies Non-Operator in writing within thirty (30) days after receipt of the written notice from
Non-Operator that Operator desires to participate in the well and sets forth, in such notice, its working interest participation, such well and Additional Potential Lease shall be deemed a Lease and a Well hereunder and Operator shall commence the
drilling of the Well before the drilling date set forth in the notice from Non-Operator, it being understood and agreed that after Non-Operator gives the written notice to Operator set forth above, Non Operator shall not agree to any amendment or
other modification of such Lease without the prior written consent of Operator. 
 3.5 The Operator agrees that for a period
of seven (7) years after the execution of this Agreement, it will not acquire, other than as provided in this Agreement, the right to drill any wells or to mine any coal, or any interests in oil and gas or coal, on the AMI without the written
consent of the Non-Operator. The provisions of this Section 3.5 shall survive the termination of this Agreement prior to the end of such seven (7) year period. 
 3.6 Notwithstanding anything to the contrary herein contained, all rights and obligations of Operator and Non-Operator hereunder relating
to the Leases are subject to the terms and provisions of the Leases including, but not limited to, any rights of lessor or others to take over any Well to be plugged and abandoned. 
  

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	 	4.	Drilling and Certain Related Procedures; Abandonment  

 4.1 Other than the minimum number of Wells to test the Knox Formation, the Monteagle formation or any other formation set forth in the Leases, the Operator shall drill each Well to such formation as it shall
designate, unless natural gas or oil is discovered in commercial quantities at a lesser depth which, in the opinion of the Operator, in its reasonable discretion, makes further drilling inadvisable to such target formations. If the Well is found to
be commercially productive in the reasonable discretion and judgment of the Operator, the Operator shall complete the Well and if the Well produces natural gas, connect it to the Coalfield Pipeline, and if the Well produces oil, make appropriate
arrangements for the prompt removal and sale of the oil produced from the Well. 
 4.2 The Operator shall provide or cause to
be provided all materials, supplies, tools, labor and services required to drill and complete the Wells to be drilled pursuant to this Agreement through the wellhead, including, but not limited to, drilling rigs, casings, bits, drill pipe, and all
water, power, fuel and lubricants required at the Well sites. In connection with the foregoing obligations, the Operator shall perform, or cause to be performed, with respect to the Wells, the following procedures, in accordance with industry custom
and standard in the locality: 
 (a) Grade and prepare the well location, including furnishing a suitable roadway thereto, if
required, and following completion, backfill, grade and reseed the well location, all in accordance with the requirements of applicable law; 
 (b) Install and cement the well casing in accordance with the specifications of the Operator and as required by state and federal law; 
 (c) Electronically log and test the well in accordance with the specifications of the Operator to determine its productive capacity;

 (d) Perforate such casing opposite such formations as Operator may select in accordance with the specifications of the
Operator; 
 (e) Unless the Operator reasonably determines it is not necessary, stimulate one or more of the productive
formations by means of nitrogen fracturing, hydrofracturing, acidizing, shooting, or other means in accordance with the specifications of the Operator, such stimulation and the extent and scope thereof to be designed by the Operator in accordance
with generally accepted industry practices in the locality; 
 (f) If necessary, install an oil and gas separator to separate
any recoverable liquids from the natural gas, if such liquids are contained by the natural gas in commercial amounts, before such natural gas is delivered to the designated pipeline or compressing equipment, together with a tank to store any liquids
so separated from the natural gas as required; 
 (g) Use commercially reasonable efforts to obtain all rights of way and
related surface rights and easements required, provide pipe for, and construct and place in operation, an appropriate gathering or other pipeline system to connect the Wells to the Coalfield Pipeline, provided, however, that to the extent
Non-Operator or any of its members or any affiliate of any of them has such rights-of-way and related surface rights and easements, it shall grant Operator the non-exclusive right to use the same for such purpose; 
  

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 (h) Install all drips and other devices in the gathering or other lines as shall be
needed to ensure that all natural gas entering the lines shall have a moisture content no greater than the maximum allowable under current industry standards; and 
 (i) In the event that Operator shall at any time determine that a Well is capable of producing oil in paying quantities, as either a
Drilling Cost or an Operating Expense (i) install well pumping equipment following its completion in order to produce oil from the Well in an amount equal to its allowable or capacity production and (ii) provide pipe for, and construct and
place in operation, an appropriate, if necessary, line to connect the Well to an oil transmission line (or, in the event that any oil produced is to be removed by tanker, construct a pipeline to an adequate tank battery at the designated pickup
point). 
 4.3 Notwithstanding anything to the contrary contained in this Agreement, the Operator shall have the right to
subcontract any part of the drilling, completion and operation of a Well, and any other work to be performed by Operator hereunder, to an affiliate of the Operator or any other party without the prior consent of the Non-Operator, provided, however,
that no such subcontracting shall relieve the Operator of its obligations and responsibilities hereunder and any such subcontract must be made on commercially reasonable terms. The term “affiliate” as used in this Agreement shall mean any
business entity which directly or indirectly through one or more intermediaries controls or is under the common control of the Operator or Non-Operator. 
 4.4 The Operator shall conduct all operations hereunder in a good and workmanlike manner. All materials and supplies to be provided shall be of good quality and suitable to the use to which they may be put and all
equipment, appliances and tools shall be in operating order. Operator shall not be responsible for loss resulting from any latent defect in any material supplied by any third party or the negligence of any third party of any service. 
 4.5 In the event a Well is determined by the Operator, in its reasonable discretion, to be commercially unproductive following drilling to
total depth and electronic logging thereof, and is thereby deemed a “Dry Hole,” the Operator may notify the Non-Operator of such fact and of Operator’s intention to plug and abandon, and the reasons for plugging and abandoning, the
Well in accordance with the laws and regulations of the State of Tennessee. After sixty (60) days have expired from the date of mailing such notice, Operator may plug and abandon the Well and Operator and Non-Operator shall each pay its
Proportionate Share of the costs of plugging and abandoning the Well. Notwithstanding the foregoing, in the event the Non-Operator desires that the Well not be plugged and abandoned, it shall, within said sixty (60) day period, serve upon
Operator a written notice requesting the resignation of the Operator as to the Well. Such notice shall designate a new operator for the Well, and shall be accompanied by evidence of an operator’s bond with respect to the Well. Such notice shall
also be accompanied by a written agreement, signed by the Non-Operator, agreeing to assume the operation of the Well through the newly designated operator and relieving and discharging Operator of all further responsibility in connection with the
operation or plugging and abandonment of the Well except for acts or activities occurring prior to the effective date of such notice. After the Well is placed under the bond of the new operator, Operator shall promptly transfer to Non-Operator, free
or charge, all rights, titles and interests of Operator in and to the Well and the Well Acreage on which the Well is drilled. 
  

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	 	5.	Other Operating Responsibilities of the Operator  

 5.1 In connection with the performance of its duties and responsibilities pursuant to the terms of this Agreement, Operator shall: 
 (a) Keep the Leases free and clear of all labor, materials and other liens or encumbrances arising out of its operations; 
 (b) Obtain and maintain at its own expense all worker’s compensation coverage required by law with respect to its employees and
employee liability insurance with a limit of $1,000,000 per occurrence, and require all of its subcontractors to obtain and maintain such coverage with respect to their employees; 
 (c) Maintain in force at its own expense, with an insurance company or companies licensed to do business in Tennessee and rated A-, VII or
better by A.M. Best, the following basic liability coverages (including independent contractor and completed operations and premises operations): comprehensive (including written contractual liability) general liability insurance and bodily injury
insurance - $1,000,000 each occurrence and $1,000,000 aggregate; property damage liability (with deletion of underground property damage exclusion provisions ) - $1,000,000 each occurrence and $1,000,000 aggregate; and comprehensive auto liability
and property damage in the same limits. The Operator shall also maintain an “umbrella” policy increasing the liability coverage hereinbefore set forth by the additional amount of $10,000,000. Upon receipt of a request of Non-Operator for a
certificate of insurance, Operator shall request such a certificate and shall, upon receipt of the certificate, furnish the same to the Non-Operator. Non-Operator and its members, CNX Gas Company, LLC (and its members) and New River Energy, LLC (and
its members), and CONSOL Energy, Inc., and their directors, officers and employees, shall be named as additional insureds under the policies and the policies shall provide that they may not be cancelled as to any coverage with respect to any of
them, except after thirty (30) days’ written notice to Non-Operator and CONSOL Energy, Inc. and the policies shall also provide a waiver of subrogation rights in favor of Non-Operator and its members, CNX Gas Company, LLC (and its members)
and New River Energy, LLC (and its members) and CONSOL Energy, Inc., and their directors, officers and employees. 
 In the
event Operator is unable, or fails, to obtain or maintain any of the insurance coverage described above, Operator shall give Non-Operator notice thereof as soon as reasonably possible and in such event, Operator shall immediately cease conducting
any activities on the property subject to the Leases until such time as Operator obtains such coverage unless such inability, or failure, results from insurance companies licensed to do business in Tennessee not generally offering such coverage. If
Operator is unable, or fails, to obtain or maintain any of the insurance coverage described above for a period of thirty (30) days, Non-Operator shall have the right to immediately terminate the right of Operator to thereafter drill any Well
and, except as set forth in the third paragraph of Section 2.8 hereof, the right or obligation of Operator to participate in any Well drilled thereafter, upon sending written notice to Operator unless such inability, or failure, results from
insurance companies licensed to do business in Tennessee not generally offering such coverage or unless one or more subcontractors of Operator who have such coverage conduct, to the exclusion of Operator, all activities on the property subject to
the Leases to fulfill all obligations of Operator hereunder to be performed on such property and Operator provides to Non-Operator within such thirty (30) day period a certificate of such insurance coverage of such subcontractor(s); 

 

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 (d) Comply with all requirements of applicable federal, state and local laws, and all
regulations pursuant thereto, including, but not limited to, (i) obtaining all permits and approvals required from any governmental or regulatory authority or agency for the drilling and other activities which are the subject hereof,
(ii) duly complying with all environmental and other similar laws and regulations relating to well drilling operations and associated earthmoving activities and with the terms of any orders issued by any governmental or regulatory authority or
agency having jurisdiction with respect thereto, and (iii) filing all reports required to be filed with any governmental or regulatory authority or agency in connection with the drilling and other activities which are the subject hereof. If
Operator and/or any of its subcontractors repeatedly violate the material provisions of applicable federal, state or local law, or of regulations pursuant thereto, and fail to cure such violations in a timely manner, Non-Operator shall have the
right to immediately terminate the right of Operator to thereafter drill any Well and, except as set forth in the third paragraph of Section 2.8 hereof, the right or obligation of Operator to participate in any Well drilled thereafter, upon
sending to Operator written notice setting forth such violations. Fines imposed as a result of Operator and/or its subcontractors violating applicable federal, state or local law, or of regulations pursuant thereto, shall be payable solely by
Operator unless such violations do not result from a breach by Operator of its obligations under paragraph (f) below, in which event Operator and Non-Operator shall each pay its Proportionate Share of such fines; 
 (e) Comply with all of the provisions of the Leases, and take all actions required to keep the Leases in full force and effect, with
respect to its operations hereunder; and 
 (f) Perform its duties under this Agreement as a reasonable prudent operator, in a
good and workmanlike manner, with due diligence and dispatch, in accordance with good oil field practice. Operator agrees to indemnify and hold Non-Operator, its employees, directors and affiliates harmless from any third-party suits, claims,
damages or actions related to the performance of its duties hereunder except to the extent that such suits, claims, damages or actions arise from the negligence of Non-Operator. Except for the indemnification provided in this paragraph (f), no party
shall be responsible to the other party for any special, indirect, consequential, lost profit or punitive damages regardless of the type of breach (financially related or non-financially related). 
  

	 	6.	Marketing of Natural Gas and Oil  

 6.1 The Operator shall use commercially reasonable efforts to sell, upon such terms and conditions as it shall in its reasonable discretion deem advisable, all natural gas and oil produced from the Wells, exclusive of any production which
may be used in development and producing operations and any production lost due to loss or shrinkage or used in compression of natural gas or in preparing and treating oil for marketing. At least ten (10) days prior to entering into any
agreement with respect to the sale of natural gas and/or oil produced from the Wells, Operator shall furnish a copy of such agreement to Non-Operator. Unless Non-Operator notifies Operator in writing, within ten (10) days after receipt by
Non-Operator of such agreement, that Non-Operator elects, pursuant to Section 6.2 hereof, to receive in kind its Proportionate Share of the production from the Wells, as well as the overriding royalty of Non-Operator set forth in
Section 2.6 hereof, Operator shall be authorized to sell Non-Operator’s Proportionate Share of the production from the Wells, as well as such overriding royalty, pursuant to the terms and provisions of such agreement. Any such agreement
shall be executed by Operator as agent for the Non-Operator, and the Non-Operator hereby appoints Operator as its agent and attorney-in-fact for such purpose and shall designate Operator as the 

  

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payee of the gross proceeds from the sale of natural gas and oil under such agreement so long as the Operator shall act as Operator hereunder.
Notwithstanding anything to the contrary contained in this Agreement, unless agreed to otherwise by Non-Operator in writing, Operator shall have no authority to sell, and shall not sell, Non-Operator’s Proportionate Share of the natural gas
produced from the Wells except for a floating price determined daily or monthly based upon the commodity price of natural gas as reflected in the future prices on the New York Mercantile Exchange or a nationally recognized commodities index;
Operator will use reasonable efforts to notify Non-Operator if it intends to sell Operator’s Proportionate Share of the natural gas produced from the Wells at a price other than set forth above, the parties recognizing, however, that such
notice may be given immediately before such sale because of market and other factors. Any authority delegated to the Operator to sell Non-Operator’s Proportionate Share of the production from the Wells shall be limited to a period of time not
in excess of the minimum needs of the industry and in no event for more than one year unless agreed to in writing by Non-Operator. 
 Operator shall be solely responsible for the payment of any and all charges imposed by a pipeline or other transporter of natural gas which is to receive natural gas produced from the Wells at its connection with the Coalfield Pipeline and
which arise from an imbalance between (i) quantities of natural gas produced from the Wells and nominated by Operator for delivery to such pipeline or other transporter and (ii) quantities of such natural gas actually delivered; provided,
however, that Operator shall have no such responsibility, and Non-Operator shall bear its Proportionate Share of any and all such charges, if the imbalance results from “force majeure” (as such term is defined in Section 14.1 hereof)
or any other cause except the negligence of Operator. 
 6.2 Notwithstanding anything to the contrary contained in this
Agreement, the Non-Operator shall own its Proportionate Share of the Wells and the natural gas and oil which is produced therefrom, and shall have, and may exercise, at any time and from time to time, its right and privilege to receive in kind its
Proportionate Share of the production from the Wells, as well as the overriding royalty of Non-Operator set forth in Section 2.6 hereof, and make a sale thereof for its own account, provided, however, that if Non-Operator exercises its right
and privilege to take in kind, such exercise shall be for one hundred percent (100%) of its Proportionate Share of the natural gas production from the Wells, as well as the natural gas overriding royalty of Non-Operator set forth in
Section 2.6 hereof and Non-Operator shall use its best efforts to actually take in kind one hundred percent (100%) of such natural gas production and overriding royalty and provided further, that Non-Operator shall be responsible for the
payment of all costs and expenses incurred by Non-Operator, Operator or otherwise in connection with Non-Operator’s receipt in kind and failure, if any, to take in kind one hundred percent (100%) of such natural gas production and
overriding royalty. Additionally, if Non-Operator exercises its right and privilege to receive in kind its Proportionate Share of the natural gas production from the Wells, as well as the natural gas overriding royalty of Non-Operator set forth in
Section 2.6 hereof, to the extent Operator has the right, whether exclusive or otherwise, to have natural gas produced from the Wells compressed and transported through the Coalfield Pipeline, such natural gas production and overriding royalty
of Non-Operator shall be delivered by Operator into the Coalfield Pipeline on the same basis as all other natural gas production from the Wells. 
 6.3 Operator shall distribute to Non-Operator on a monthly basis Non-Operator’s Proportionate Share of the Net Revenues from the Wells received by Operator and the overriding royalties payable to Non-Operator
pursuant to Section 2.6 hereof unless Non-Operator receives in kind, as set forth in Section 6.2 hereof, its Proportionate Share of the 

  

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production from the Wells and/or the overriding royalty of Non-Operator set forth in Section 2.6 hereof. 
 6.4 The balancing of the Proportionate Shares of Operator and Non-Operator of natural gas produced from the Wells, as well as the
Overriding Royalty of Non-Operator taken in kind, shall be governed by the terms and provisions of the Gas Balancing Agreement attached hereto as Exhibit E and made a part hereof. 
  

	 	7.	Superintendence and Maintenance of the Wells; Operator’s Fee and Other Charges  

 7.1 In addition to its other obligations hereunder, the Operator, shall be responsible for superintendence and maintenance of the Wells,
if productive. In particular, and without limiting the generality of the foregoing, the Operator shall take the following actions with respect to each Well: 
 (a) The Well shall remain connected to its transmission, gathering or other pipeline system, as appropriate, at all times, except to the
extent disconnection is required: 
 (i) For repairs to the Well or associated facilities; 
 (ii) To accommodate surface or other coal mining operations where the surface or other coal mining rights have priority over the oil and
gas exploration and production rights; and 
 (iii) To accommodate timbering operations where the timber rights have priority
over the oil and gas exploration and production rights. 
 (b) In the event the Well is disconnected for repairs, reconnection
shall be made promptly following the completion of such repairs (after authorization from the Gas Purchaser, if required); 
 (c) Appropriate shut-in pressure tests are conducted with respect to the Well; 
 (d) All metering, valves and other
wellhead equipment are checked regularly and maintained in good condition; and 
 (e) The Well is kept in good condition for
the production of natural gas and oil. 
 7.2 The number of employees required for the discharge of the Operator’s
superintendence and maintenance responsibilities hereunder and their selection and hours of labor shall be determined by the Operator, in its sole and absolute discretion. 
 7.3 In lieu of any direct charges by the Operator for the services of the Operator or any of its employees or subcontractors required for
superintendence and maintenance of the Wells under this Agreement, if productive, and in lieu of any accounting, bookkeeping and distribution expenses, the Operator shall be entitled to receive payment from Non-Operator of its Proportionate Share of
the rate of Two Hundred Twenty-Five Dollars ($225) 

  

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per month per Well (the “Operator’s Fee”), commencing with the first month or part thereof that the Well is in production and continuing for
each month thereafter whether or not the Well shall be in production, provided, however, that no Operator’s Fee shall be charged for any month during which the Well is shut-in for the entire month for reasons other than repair or maintenance.
Such amount is intended to compensate the Operator for the services supplied by Operator, its personnel and the personnel of any subcontractors engaged by Operator but excluding any allowance for materials, supplies, or the use of Operator’s
equipment. Notwithstanding the foregoing, in the event that it shall be necessary for Operator to incur unusual or extraordinary expenses in the operation of the Wells, such as in the case of a Well whose productivity of oil is such as to require
intensive supervision, such additional expenses shall be deemed to be an Operating Expense. 
 The Operator’s Fee at the
rate of Two Hundred Twenty-Five Dollars ($225) per month per Well shall be fixed at such amount until December 31, 2007. The Operator’s Fee may be adjusted as of January 1, 2008 for the period beginning on such date and ending on
December 31, 2008 and thereafter may be adjusted annually for the periods beginning January 1 of a year and ending December 31 of the same year. The adjustment shall be computed by multiplying the Operator’s Fee currently in
effect by the percentage increase or decrease, if any, recommended by the Council of Petroleum Accountants Societies (“COPAS”) each year and the adjusted Operator’s Fee shall be the Operator’s Fee currently in use plus or minus
the adjustment, provided, however, that the adjusted Operator’s Fee shall never be less than Two Hundred Twenty-Five Dollars ($225) per month per Well. 
  

	 	8.	Costs and Expenses; Plugging Reserve Account  

 8.1 The Operator shall cause all Operating Expenses to be promptly paid and discharged and Non-Operator shall be responsible for payment of its Proportionate Share of all Operating Expenses. In the event the Operator
shall have paid any Operating Expenses with respect to the Wells out of its own funds, Non-Operator’s Proportionate Share of the amounts thereof shall be reimbursed by the Non-Operator to the Operator within thirty (30) days after receipt
of a statement therefor to the extent Non-Operator’s Proportionate Share of such Operating Expenses exceeds its Proportionate Share of the Net Revenues from the Wells received by Operator. Additionally, Non-Operator’s Proportionate Share
of the Operating Fee for the Wells shall be paid by the Non-Operator to the Operator within thirty (30) days after receipt of a statement therefore to the extent Non-Operator’s Proportionate Share of the Operator’s Fee for the Wells
exceeds its Proportionate Share of the Net Revenues from the Wells received by Operator. Operator is authorized hereby to establish a reasonable reserve from the revenues of the Wells in order to defray the Operator’s Fee and reasonably
anticipated Operating Expenses associated with the Wells and to deposit the funds reserved in a separate and segregated interest-bearing reserve account (the “Operating Reserve Account”), provided, that the funds in the Operating Reserve
Account (including accrued interest) shall not exceed Two Thousand Dollars ($2,000) for any Well or Fifty Thousand Dollars ($50,000) in the aggregate for all Wells. Non-Operator hereby grants unto Operator a security interest or lien and right to
off-set in the revenues of the Wells to secure Operator in the payment of Operating Expenses and the Operator’s Fee. 
 8.2 The Operator shall further pay promptly all charges for labor and materials which it incurs in performing its duties under this Agreement, whether or not the same are chargeable to the Non-Operator, and shall not, providing that all
amounts due to Operator hereunder shall have been timely paid and shall not be in default in any respect, permit any 

  

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liens for such labor and/or materials to be filed by any person against the Non-Operator’s interests in the Wells or, if filed, shall take prompt action
to have the same removed. 
 8.3 Notwithstanding anything to the contrary contained in this Agreement, if after a Well has
been placed into production for natural gas and/or oil, the Operator shall reasonably determine that the Well has become incapable of producing natural gas and/or oil in commercial quantities, the Operator may notify the Non-Operator of the fact of
such non-productivity and of Operator’s intention to plug and abandon, and the reasons for plugging and abandoning, the Well in accordance with the laws and regulations of the State of Tennessee. After sixty (60) days have expired from the
date of mailing such notice, Operator may plug and abandon the Well. Operator shall first utilize the funds in the Plugging Reserve Account (as defined in Section 8.4 hereof) to pay the costs of plugging and abandoning the Well. In the event
the amounts in the Plugging Reserve Account are insufficient to pay all of the costs of plugging and abandoning the Well, then Operator shall invoice the Non-Operator for Non-Operator’s Proportionate Share of the additional amounts (which shall
be an Operating Expense) needed to pay such costs in full and the Non-Operator shall remit to Operator the Non-Operator’s Proportionate Share of such additional amounts within thirty (30) days after receipt of an invoice from Operator
therefor, it being understood and agreed that in no event will Non-Operator be responsible or liable for any costs to plug and abandon a Well beyond its Proportionate Share of such Well. Notwithstanding the foregoing, in the event the Non-Operator
desires that the Well not be plugged and abandoned, it shall, within said sixty (60) day period, serve upon Operator a written notice requesting the resignation of the Operator as to the Well. Such notice shall designate a new operator for the
Well, and shall be accompanied by evidence of an operator’s bond with respect to the Well. Such notice shall also be accompanied by (i) a written agreement, signed by the Non-Operator, agreeing to assume the operation of the Well through
the newly designated operator and relieving and discharging Operator of all further responsibility in connection with the operation or plugging and abandonment of the Well except for acts or activities occurring prior to the effective date of such
notice and (ii) payment to Operator and other working interest owners of their Proportionate Share of the then fair market value of the salvageable casing, tubing and fixtures of the Well. After the Well is placed under the bond of the new
operator, Operator and the other working interest owners shall promptly transfer to Non-Operator all of their rights, titles and interests in and to the Well and the Well Acreage on which the Well is drilled and shall promptly transfer to the new
operator the Non-Operator’s Proportionate Share of the funds in the Plugging Reserve Account attributable to the Well. 
 8.4 (a) Operator shall have the right to retain as an Operating Expense, on a monthly basis, a portion of the Net Revenues (the “Plugging Funds”) for the payment of the anticipated future costs of plugging and abandoning
Wells when the plugging and abandonment of one or more Wells becomes necessary in the opinion of the Operator, in its reasonable discretion. The Plugging Funds shall be placed in a separate and segregated interest-bearing reserve account for the
Wells (the “Plugging Reserve Account”). The Operator shall maintain an accounting system that will allow identification of the Plugging Funds which have been paid in for each Well, provided, however, that Non-Operator’s Proportionate
Share of the Plugging Funds for any Well may be used to pay Non-Operator’s Proportionate Share of the costs of plugging and abandoning any other Well. The amount of the Plugging Funds to be retained.monthly shall be determined by the Operator,
acting in good faith, taking into account the following factors: 
 (i) The anticipated life of the Well; 
  

 - 18 - 

 (ii) The anticipated costs of plugging and abandoning the Well in accordance with all
applicable statutes, codes and regulations at the end of the useful life of the Well; 
 (iii) The effect of compounded
interest upon amounts deposited into the Plugging Reserve Account for the Well; and 
 (iv) Any other factors which Operator
reasonably deems relevant. 
 (b) As of the date of this Agreement: 
 (i) Operator has determined that after the first year of production from a Well four percent (4%) of the monthly Net Revenues from
such Well, not to exceed Two Hundred Dollars ($200) for any month, will be placed in the Plugging Reserve Account; and 
 (ii) Operator has determined that such amount will be placed into the Plugging Reserve Account until the principal sum (including accrued interest) is equal to Ten Thousand Dollars ($10,000) for each Well. 
 The Operator reserves the right to revise the monthly withholding amounts and/or the total amounts set forth above when, acting in good
faith, the Operator determines, taking into account the factors set forth in Section 8.4(a) above, that such amounts must be adjusted upward or downward in order to provide for the payment in full of the future plugging and abandonment costs of
the Wells. 
 (c) Should the Operator determine, in its reasonable discretion, that at the time it becomes necessary to plug
and abandon Wells, insufficient funds for such abandonment and plugging are on deposit in the Plugging Reserve Account, the Operator shall invoice the Non-Operator for its Proportionate Share of the additional sums needed to plug and abandon the
Wells, and such additional sums shall be considered Operating Expenses under the terms of this Agreement, and Non-Operator shall pay such invoice within thirty (30) days after receipt. 
 Should the Operator determine, in its reasonable discretion, that funds, including accrued interest, in the Plugging Reserve Account
exceed the amount necessary to plug and abandon the Wells, the Operator shall, upon such determination, refund to the Non-Operator and other working interest owners their Proportionate Shares of such excess funds, provided, however, that no refund
will be made to the extent it would reduce the funds, including accrued interest, in the Plugging Reserve Account below Ten Thousand Dollars ($10,000) for any Well. 
 (d) Non-Operator’s Proportionate Share of the interest accrued on the Plugging Reserve Account shall be allocated as income to the
Non-Operator. 
  

	 	9.	Additional Operations  

 9.1 Without
the prior consent of the Non-Operator, no expenditure in excess of Ten Thousand Dollars ($10,000) shall be made relating to any Well in which Non-Operator has a working interest except the initial drilling and completion of such Well. 
  

 - 19 - 

 9.2 Notwithstanding the foregoing, the Operator shall be authorized, without being
required to obtain the consent of the Non-Operator, in the case of explosion, fire, flood, or discharge or release of any hydrocarbon or other hazardous substance which requires immediate remediation, or other sudden emergency whether of the same or
different nature, to take such steps and incur such expenses as in its opinion are required to deal with the emergency and to safeguard life and property. In such event, the Operator shall promptly notify the Non-Operator of the matter which gave
rise to the expenditures made by the Operator and account to the Non-Operator for all such expenditures and such expenditures, once accounted for, shall be deemed to be an Operating Expense unless the matter which gave rise to the expenditure
resulted from the negligence of the Operator. 
 9.3 Notwithstanding the foregoing, in the event that Operator shall propose
to make an expenditure with respect to a Well in excess of the amount specified in Section 9.1 hereof and in the event that Non-Operator owns less than a fifty percent (50%) working interest in the Well, such proposed expenditure may
nevertheless be made and any party advancing any funds attributable to the interest of Non-Operator may recoup an amount equal to two hundred percent (200%) of such funds from the Net Revenues of the Well attributable to the interest of
Non-Operator before any further distributions shall be made from the Net Revenues of the Well to Non-Operator. 
  

	 	10.	Non-Operator’s Access; Audit  

 10.1 The Non-Operator shall have access to the Wells and to any information in the possession of the Operator pertaining to the Wells, and shall be entitled to inspect and observe operations of every kind and character upon the property
covered by the Lease. 
 10.2 Upon reasonable notice to the Operator and at times mutually convenient to the parties hereto,
the Non-Operator shall also have access to, and is entitled to receive copies of, the records and other documents on file at the Operator’s office relating to the drilling, completion and operation of the Wells, including all Well logs and
production records. In addition, during the drilling and completion of a Well, such number (as the Non-Operator or its designated agent may reasonably request) of copies of drilling reports, logs, completion reports and other data produced in
connection with such activities shall be made available and provided to the Non-Operator or such agent, as they are produced or promptly thereafter. 
 10.3 The Non-Operator shall have the right, at its own cost and expense and not more frequently than once in each calendar year, to have an independent audit made of the books and records of Operator to verify, for
the preceding two (2) calendar years, all Drilling Costs and Operating Expenses charged to Non-Operator, the production of natural gas and oil from the Wells and the proceeds of the sale or other disposition of such natural gas and oil
production, the royalties and overriding royalties paid with respect to such production and the recoupment of delay rentals, minimum royalties and other amounts as set forth in Section 3.2 hereof and the funds (including accrued interest) in
the Operating Reserve Account and the Plugging Reserve Account. 
  

	 	11.	Term and Termination  

 11.1 This
Agreement shall commence upon the effective date hereof and shall remain in full force and effect with respect to each Well until such time as such Well is abandoned and plugged in accordance with the laws and regulations of the State of Tennessee.

  

 - 20 - 

 11.2 In the event that the Non-Operator shall, in good faith, determine that Operator is
in substantial or material breach of the duties and obligations imposed upon Operator by this Agreement, then the Non-Operator shall give Operator written notice thereof specifying the event or events of default to be cured by Operator. In the event
that Operator has substantially or materially breached the duties and obligations imposed upon the Operator by this Agreement, Operator shall then have a period of ninety (90) days after receipt of said written notice of default to cure such
breach or default, or in which to implement a plan of action which, if taken to its natural conclusion and continuously prosecuted, would cure such breach or default. In the event that Operator cures such breach or default or implements a plan of
action which, if taken to its natural conclusion and continuously prosecuted, would cure such breach or default, the Non-Operator shall not have the right to substitute a new operator. In the event that Operator upon the expiration of the aforesaid
ninety (90) day cure period has not cured such breach or default, and/or has not implemented a plan of action which, if taken to its natural conclusion and continuously prosecuted, would cure such breach or default or if Operator has failed to
continuously prosecute such plan of action, the Non-Operator may substitute a new operator. 
 11.3 After the Initial Period
and, if applicable, after the Option Period, Operator shall have the right to resign as Operator hereunder on ninety (90) days’ written notice to the Non-Operator, in which event the Non-Operator shall appoint a new operator, provided,
however, that if Non-Operator is unable, after having made reasonable efforts, to appoint a new operator within such ninety (90) day period, such period shall be extended for such additional time as Non-Operator continuously and diligently
seeks the appointment of a new operator. Upon the effective date of such resignation, Operator shall have no further responsibility hereunder and shall, except for acts or activities occurring prior to such effective date, have no liability for any
loss to the Non-Operator as a result of Operator’s resignation. 
 11.4 In the event that Operator shall, for any reason,
cease to be the Operator hereunder, the Non-Operator shall promptly furnish a bond in form and substance satisfactory for the operation of natural gas and oil wells and shall cause the Wells to be transferred and placed under Non-Operator’s
bond, or the Non-Operator may designate a properly bonded new operator. Promptly after all Wells are placed under the bond of Non-Operator or the new operator, Operator shall transfer to the Non-Operator or the new operator, as the case may be, all
funds in the Operating Reserve Account and the Plugging Reserve Account. Thereafter, Operator shall be deemed a non-operator hereunder with respect to the interests in the Wells owned by it, or by any affiliate or by any limited partnership or other
entity from which Operator received funds to drill Wells, with all the rights and liabilities of a non-operator hereunder relating to such interests, provided, however, that neither Operator nor any such affiliate, limited partnership or other
entity shall have any right to participate in any Wells drilled thereafter, although Operator may have the obligation under Section 2.8 hereof to participate in one or more such Wells. 
 Additionally, if Operator is no longer the operator hereunder, Non-Operator or the new operator, as the case may be, shall have no
obligation or other liability to account for any matter relating to the Wells to any affiliate of Operator or to any limited partnership or other entity from which Operator received funds to drill Wells, or to distribute to any such affiliate,
limited partnership or other entity, any Net Revenues from such Wells attributable to the interests in such Wells of any such affiliate, limited partnership or other entity. Non-Operator or the new operator, as the case may be, shall account for
matters relating to the Wells only to Operator and shall make distributions of such Net Revenues only to Operator, who in turn shall 

  

 - 21 - 

 
account, and make distributions of such Net Revenues, to such affiliates, limited partnerships and other entities. 
  

	 	12.	Contract Not Assignable  

 12.1
Except as set forth in Section 2.10 hereof, neither the Operator nor the Non-Operator shall assign its obligations or rights hereunder but Operator shall have the right to subcontract for the performance of all or any portion of the work to be
performed by Operator hereunder. 
  

	 	13.	Relationship; Internal Revenue Code Election  

 13.1 None of the rights, duties, or obligations of the parties hereto or terms hereof shall be construed as creating a joint venture, a partnership, nor any other legal entity whereby one party is responsible
individually for all debts, liabilities or charges incurred in connection with the drilling, completion, operation or abandonment of the Wells or any other activities contemplated hereby; each of the parties hereto shall be responsible only for its
Proportionate Share of such debts, liabilities or charges. 
 13.2 The parties by their execution of this Agreement hereby
assert that this Agreement and the activities contemplated hereby shall not constitute a partnership under the Internal Revenue Code of 1986, as amended (the “Code”); nevertheless, the parties elect, under the authority of Section 761
of the Code, to be excluded from the application of all of the provisions of Subchapter K of Chapter I of Subtitle A of the Code (“Subchapter K”). If future income tax laws of the United States, or the present or future income tax laws of
Tennessee, contain provisions similar to those contained in Subchapter K under which a similar election is permitted, the parties agree that such election shall be exercised. The Non-Operator authorizes and directs the Operator to execute on behalf
of Non-Operator such evidence of this election as may be required by the United States Treasury Department or the Internal Revenue Service, including specifically, but not by way of limitation, all of the returns, statements and data required by
Treasury Regulations Section 1.761. Should there be any requirement that any party affected hereby give further evidence of this election, such party shall execute such documents and furnish such other evidence as may be required by the
Internal Revenue Service as may be necessary to evidence this election. No party shall give any notices or take any other action inconsistent with the election made hereby. Should a gas imbalance arise where a party does not take its Proportionate
Share of production from a Well and another person, corporation or other entity takes more than its Proportionate Share of such production, then the party which does not take its Proportionate Share shall use the “cumulative gas balancing
method” as described in Treasury Regulation Section 1.761-2(d) for purposes of accounting for such imbalance. The parties agree to report their shares of the items of income, deductions and credits associated with the Wells in a manner
consistent with exclusion from the application of the provisions of Subchapter K. 
  

	 	14.	Force Majeure  

 14.1 If any party
is rendered unable, wholly or in part, by force majeure to carry out its obligations under this Agreement, other than the obligation to make money payments or furnish security, that party shall give to the other party prompt written notice of the
force majeure with reasonably full particulars concerning it; thereupon, the obligations of the party giving the notice, so far as they are affected by the force majeure, shall be suspended during, but no longer than, the continuance of the force
majeure. The term “force majeure”, as here employed, 

  

 - 22 - 

 
shall mean an act of God, strike, lockout, or other industrial disturbance, act of the public enemy, war, blockade, public riot, lightning, fire, storm,
flood or other act of nature, explosion, governmental action, governmental delay, restraint or inaction, unavailability of equipment, and any other cause, whether of the kind specifically enumerated above or otherwise, which is not reasonably within
the control of the party claiming suspension; provided, however, that unavailability of equipment shall not constitute “force majeure” for purposes of this Agreement with respect to the drilling, as set forth in Section 2.8 hereof, of
the minimum number of Wells set forth in the Leases to keep such Leases in full force and effect during the Initial Period and, if applicable, during the Option Period. 
 The affected party shall use all reasonable diligence to remove the force majeure situation as quickly as practicable. 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 by the party involved, contrary to its wishes; how all such difficulties shall be handled shall be
entirely within the discretion of the party concerned. 
  

	 	15.	Notices  

 15.1 All notices or other
correspondence required or made necessary by the terms of this Agreement shall be in writing and shall be considered as having been given to a party (i) if given by telecopy, at the time the telecopy is transmitted to the following telecopier
numbers and the appropriate answer back is received or receipt is otherwise confirmed, (ii) if given by mail, two (2) business days after being mailed by registered or certified mail, postage prepaid, to the following addresses, or
(iii) if given by any other means (including but not limited to overnight delivery), when delivered at the following addresses: 
  

	 	(a)	Operator: 

 Atlas America, Inc. 
 311 Rouser Road 
 Moon Township 

Coraopolis, PA 15108 
 Attention: Frank
Carolas 
 Telecopier No.: (412) 262-3927 
  

	 	(b)	Non-Operator: 

 Knox Energy, LLC 
 P.O. Box 947 
 Bluefield, VA 24605

 Attention: Claude Morgan 
 Telecopier: (276) 988-1076 
 with a copy to: 
 Knox Energy, LLC 
 132 Mitchell Road 
 Oak Ridge, TN 37830 
 Telecopier No.: (865)
481-3896 
  

 - 23 - 

 Each party shall have the right to change its address at any time, and from time to time, by giving written notice
thereof to the other party. 
  

	 	16.	Governing Law  

 16.1 This Agreement
shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to the principles of conflicts of laws of the Commonwealth of Pennsylvania, provided, however, that as to real property issues,
this Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee, without giving effect to the principles of conflicts of laws of the State of Tennessee. 
  

	 	17.	Successors in Interest  

 17.1 Each
and all of the covenants, agreements, terms and provisions of this Agreement shall be binding on and inure to the benefit of the parties hereto and their successors and assigns. 
  

	 	18.	Integration; Amendment; Interpretation  

 18.1 This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and supercedes all prior and contemporaneous agreements and understandings of the parties in connection herewith. Any amendment
or supplement made hereto shall be in writing and signed by all parties. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Terms such as
“herein”, “hereby”, “hereto”, “hereunder”, and “hereof” refer to this Agreement as a whole. 
  

	 	19.	Severability  

 19.1 If any term or
other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon any binding determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable and legally enforceable manner, to the end that the transactions contemplated hereby may be completed to the
fullest extent possible. 
  

	 	20.	Waivers  

 20.1 No waiver by any
party of any default hereunder by any other party shall operate as a waiver of any other default or of the same default on a subsequent occasion. No failure to exercise, and no delay in exercising, by any party of any power, remedy or right shall
operate as a waiver thereof, nor shall any single or partial exercise of any power, remedy or right preclude other or further exercise thereof or the exercise of any other power, remedy or right. All powers, rights and remedies may be asserted
concurrently, cumulatively, successively or independently from time to time. 
  

 - 24 - 

	 	21.	Further Assurances  

 21.1 The
parties agree to promptly execute and deliver, or cause to be executed and delivered, at such times as shall be reasonably requested, any additional instrument or take any further action as may be reasonably necessary or appropriate that any party
may reasonably request for the purpose of carrying out the transactions contemplated by, and the purposes and intents of, this Agreement. 
  

	 	22.	Attorneys’ Fees  

 22.1 In any
dispute among the parties hereto arising under this Agreement, the prevailing party shall be entitled to recover from the other party its reasonable attorney fees and other reasonable costs of litigation in addition to all other remedies.

  

	 	23.	Public Statements  

 23.1 Neither
party shall make any statements or releases to the general public relating to this Agreement or the activities conducted pursuant hereto without the permission of the other party, not to be unreasonably withheld, except (i) in filings required
of either Operator or its parent, Resource America, Inc., or any affiliate of either of them, under federal securities laws, rules and regulations, or under the laws, rules, regulations or ordinances of the United States or any other jurisdiction,
or by any federal, state or local governmental or regulatory authority or agency, (ii) disclosure required by the rules, regulations or policies of any stock exchange or automated interdealer quotation system on which any securities of Operator
or the parent of Operator, or any affiliate of either of them, may be listed, or (iii) if compelled to do so in any legal proceeding or otherwise. 
  

	 	24.	Counterpart; Fax  

 24.1 This
Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same agreement. It is agreed by the parties that facsimile signature pages signed by the
parties shall be binding to the same extent as original signature pages. 
 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 
  

 - 25 - 

 IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their proper officers duly
authorized all as of the day and year first hereinabove written. 
  

									
		 		 	 OPERATOR:

			
	 WITNESS:
	 		 	ATLAS AMERICA, INC., a Pennsylvania corporation
					
	  	 	  	 		 	By:	 	  
		 		 		 	Name:	 	  
		 		 		 	Title:	 	  

											
			
		 		 	NON-OPERATOR:
			
		 		 	KNOX ENERGY, LLC
				
		 		 		 	By its members:
				
	 WITNESS:
	 		 		 	CNX Gas Company, LLC, a Virginia limited liability company
						
	  	 	  	 		 		 	By:	 	  
		 		 		 		 	Name:	 	  
		 		 		 		 	Title:	 	  
				
	 WITNESS:
	 		 		 	New River Energy, LLC, a Tennessee limited liability company
						
	  	 	  	 		 		 	By:	 	  
		 		 		 		 	Name:	 	  
		 		 		 		 	Title:	 	  

  

 - 26 -Stock Purchase Agreement between Dreams, Inc. and The Frost Group, LLC

 Exhibit 10.1 
 SECURITIES PURCHASE AGREEMENT 
 This Securities Purchase Agreement (this “Agreement”) is dated as
of November 1, 2006 among Dreams, Inc., a Utah corporation (the “Company”), and the purchaser identified on the signature page hereto (“Purchaser”). 
 WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), the Company desires to issue and sell to Purchaser, and Purchaser desires to purchase from the Company, certain securities of the Company as more fully described in this Agreement. 
 NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and Purchaser agree as follows: 
 ARTICLE I. 
 DEFINITIONS 
 Definitions. In addition to the
terms defined elsewhere in this Agreement, the following terms have the meanings indicated: 
 “AFFILIATE” means any Person that,
directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 of the Securities Act. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary basis by the same investment manager as Purchaser will be deemed to be an Affiliate of Purchaser. 
 “BUSINESS DAY” means any day other than Saturday, Sunday or other day on which commercial banks in the City of Fort Lauderdale are authorized or required by law to remain closed. 
 “CLOSING” means the closing of the purchase and sale of the Shares pursuant to Section 2.1. 
 “CLOSING DATE” means the date of the Closing. 
 “COMMISSION” means the Securities and Exchange Commission. 
 “COMMON STOCK” means the
common stock of the Company, no par value. 
 “COMPANY COUNSEL” means Arnstein & Lehr LLP, counsel to the Company or such
other firm as may be counsel to the Company at the Closing. 
 “CONVERTIBLE SECURITIES” means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common Stock. 

 “EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended. 
 “LIEN” means any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction but not a restriction on
transferability under the Securities Act. 
 “LOSSES” means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation, costs of preparation and reasonable attorneys’ fees. 
 “OPTIONS” means any rights,
warrants or options to subscribe for or purchase Common Stock or Convertible Securities. 
 “MATERIAL ADVERSE EFFECT” has the
meaning set forth in Section 3.1(b). 
 “PERSON” means any individual, corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or any court or other federal, state, local or other governmental authority or other entity of any kind.

 “PER SHARE PURCHASE PRICE” means $0.065. 
 “PROCEEDING” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 “SHARES” means an aggregate of 30,769,231 shares of Common Stock, which are being issued and sold to the Purchaser at the
Closing. 
 “SUBSIDIARY” means any Person in which the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest, but does not include any Person as to which the Company does not hold a controlling interest. 
 “TRANSACTION
DOCUMENTS” means this Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder. 
 ARTICLE II. 
 PURCHASE AND SALE 
 2.01 Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to Purchaser, and Purchaser shall purchase from the Company, such number of Shares indicated below
Purchaser’s name on the signature page of this Agreement at the Per Share Purchase Price. The Closing shall take place at the offices of Arnstein & Lehr LLP immediately following the execution hereof, or at such other location or time
as the parties may agree. 
  

 2 

 2.02 Closing Deliveries. 
 (a) At the Closing, the Company shall deliver or cause to be delivered to Purchaser the following: 
 (i) one
or more stock certificates, free and clear of all restrictive and other legends (except as expressly provided in Section 4.1(b) hereof), evidencing such number of Shares equal to the number of Shares indicated below Purchaser’s name on the
signature page of this Agreement, registered in the name of Purchaser; 
 (ii) a legal opinion of Company Counsel, in the form of Exhibit A,
executed by such counsel and delivered to the Purchaser; and 
 (b) At the Closing, Purchaser shall deliver or cause to be delivered an
amount equal to$2,000,000, in United States dollars and in immediately available funds, by wire transfer to an account designated in writing to Purchaser by the Company for such purpose. 
 ARTICLE III. 
 REPRESENTATIONS AND WARRANTIES 
 3.01 Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser as follows: 
 (a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than those listed in Schedule 3.1(a). The Company owns, directly or indirectly,
all of the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien and all the issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights. 
 (b) Organization and Qualification. Except as set forth on Schedule 3.1(b), each
of the Company and the Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it
makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, (i) adversely affect the legality, validity or enforceability of any
Transaction Document, (ii) have or result in a material adverse effect on the results of operations, assets, business, financial condition or prospects of the Company and the Subsidiaries, taken as a whole on a consolidated basis, or
(iii) adversely impair the Company’s ability to perform fully on a timely basis its obligations under any of the Transaction Documents (any of (i), (ii) or (iii), a “Material Adverse Effect”). 
  

 3 

 (c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into
and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company, or its Board of Directors. Each of the
Transaction Documents has been (or upon delivery will be) duly executed by the Company and is, or when delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of the Company enforceable against the Company in
accordance with its terms. 
 (d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or
other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations and the rules and regulations of any self-regulatory organization to which the Company or its Shares are subject), or by which any
property or asset of the Company or a Subsidiary is bound or affected. 
 (e) Issuance of the Shares. The Shares are duly authorized and,
when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and shall not be subject to preemptive rights or similar rights of shareholders.

 (f) Capitalization. The number of shares and type of all authorized, issued and outstanding capital stock, Options and other Shares of the
Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) is set forth in Schedule 3.1(f). All outstanding shares of capital stock are duly authorized, validly issued, fully paid.
Except as disclosed in Schedule 3.1(f), there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any 
  

 4 

 right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements
by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. There are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing rights to security holders). The issue and sale of the Shares will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than
the Purchaser) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities. 
 (g) SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the
date hereof (the foregoing materials (together with any materials filed by the Company under the Exchange Act, whether or not required) being collectively referred to herein as the “SEC Reports” and, together with this Agreement and the
Schedules to this Agreement, the “Disclosure Materials”) except as set forth on Schedule 3.1(g). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. All material
agreements to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject are included as part of or specifically identified in the SEC Reports. 
 (h) Material Changes. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the
SEC Reports or in Schedule 3.1(h), (i) there has been no event, occurrence or development that, to the Company’s knowledge, individually or in the aggregate, has had or that would result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, except 
  

 5 

 as disclosed in its SEC Reports, (iv) the Company has not declared or made any dividend or distribution of cash or
other property to its shareholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer or director. 
 (i) Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or, to the Company’s knowledge, investigation before or by any
court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries that could, individually or in the aggregate, have a
Material Adverse Effect. 
 (j) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local
laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not, individually or in the aggregate, have or result in a Material Adverse
Effect. 
 (k) Title to Assets. The Company and the Subsidiaries have good and marketable title in all personal property owned by them that
is material to the business of the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in material compliance. 
 (l) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement, and the Company has not taken any action that would cause
Purchaser to be liable for any such fees or commissions. 
 (m) Registration Rights. Except as described in Schedule 3.1(n), the Company has
not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the Commission or any other governmental authority that have not been satisfied.

 (n) Application of Takeover Protections. There is no control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter 
  

 6 

 documents or the laws of its state of incorporation that is or could become applicable to the Purchaser as a result of
the Purchaser and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of the Company’s issuance of the Shares and the Purchaser’s ownership of the
Shares. 
 (o) Disclosure. All disclosure materials provided to the Purchaser regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries
or its or their business, properties, prospects, operations or financial conditions, which, to the Company’s knowledge, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed. 
 (p) Acknowledgment Regarding Purchaser’s Purchase of Shares. The Company acknowledges that the
Purchaser has advised it that it is acting solely in the capacity of an arm’s length purchaser with respect to the Company and to this Agreement and the transactions contemplated hereby. The Company further acknowledges that Purchaser is not
acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by Purchaser or any of its representatives or agents in connection
with this Agreement and the transactions contemplated hereby is merely incidental to the Purchaser’s purchase of the Shares. The Company further represents to Purchaser that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives. 
 (q) Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are reasonably prudent and customary in the businesses in which the Company and the Subsidiaries are
engaged. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost. 
 (r) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such
permits could not, individually or in the aggregate, have or result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any written notice of proceedings relating to the revocation or
modification of any Material Permit. 
  

 7 

 (s) Transactions With Affiliates and Employees. Except as set forth in SEC Reports filed at least ten
days prior to the date hereof, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 
 (t) Internal Accounting Controls. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 
 (u)
Sarbanes-Oxley Act. The Company is in compliance with applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations promulgated by the Commission thereunder in effect as of the date of this Agreement, except where
such noncompliance could not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. 
 (v) Tax Returns
and Payments. The Company has filed all tax returns required to be filed by it. All taxes shown to be due and payable on such returns, any assessments imposed, and all other taxes due and payable by the Company on or before the Closing, have been
paid or will be paid prior to the time they become delinquent. The Company has no knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that is not adequately provided for. 
 (w) Intellectual Property. 
 (i) To the best
of its knowledge the Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes necessary for its business as
now conducted and as presently proposed to be conducted, without any known infringement of the rights of others. 
  

 8 

 (ii) The Company has not received any communications alleging that the Company has violated by
conducting its business as presently proposed, or would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity, nor is the Company aware of any basis
therefore. 
 3.02 Representations and Warranties of the Purchaser. Purchaser hereby represents and warrants to the Company as follows:

 (a) Organization; Authority. Purchaser is an entity duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The purchase by Purchaser of the Shares hereunder has been duly authorized by all necessary action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes the valid and binding
obligation of Purchaser, enforceable against it in accordance with its terms. 
 (b) Investment Intent. Purchaser is acquiring the Shares for
investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof. 
 (c) Purchaser Status. At
the time Purchaser was offered the Shares, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act. 
 (d) Experience of Purchaser. Purchaser has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the
Shares, and has so evaluated the merits and risks of such investment. Purchaser is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment. 
 ARTICLE IV. 
 OTHER AGREEMENTS OF THE PARTIES

 4.01 Transfer Restrictions. 
 (a) Shares may only be disposed of pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of Shares other than pursuant to an effective registration statement or to the Company, except as otherwise set forth herein, the Company may require the transferor to provide to the
Company an opinion of counsel selected by the transferor, the form and substance of which opinion of counsel shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration under the Securities Act.

  

 9 

 (b) The Purchaser agrees to the imprinting, so long as is required by this Section 4.1(b), of the
following legend on any certificate evidencing Shares: 
 “THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) NOR HAVE THEY BEEN REGISTERED OR QUALIFIED WITH THE SECURITIES COMMISSION OF ANY STATE, AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.” 
 4.02 Furnishing of Information. As long as Purchaser owns Shares,
the Company agrees to use its reasonable best efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange
Act. As long as Purchaser owns Shares, if the Company is not required to file reports pursuant to such laws, it will use its reasonable best efforts to prepare and furnish to the Purchaser and make publicly available in accordance with paragraph
(c) of Rule 144 such information as is required for the Purchaser to sell the Shares under Rule 144. The Company further agrees that it will use its reasonable best efforts to take such further action as any holder of Shares may reasonably
request to satisfy the provisions of Rule 144 applicable to the issuer of shares relating to transactions for the sale of Shares pursuant to Rule 144. 
 4.03 Integration. The Company shall not, and shall use its best efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares in a manner that would require the registration under the Securities Act of the sale of the Shares to the Purchaser. 
 4.04 Securities Laws Disclosure; Publicity. The Company shall, promptly after the Closing Date, issue a press release in the form of Schedule 4.4
disclosing all material terms of the transactions contemplated hereby. Promptly after the Closing Date the Company shall file a Current Report on Form 8-K with the Commission (the “8-K Filing”) describing the terms of the transactions
contemplated by the Transaction Documents and including as exhibits to such Current Report on Form 8-K this Agreement, in the form required by the Exchange Act. 
  

 10 

 4.05 Use of Proceeds. The Company shall use the net proceeds from the sale of the Shares hereunder to
reduce its outstanding balance on its revolving credit facility with its senior lender. 
 4.06 Board of Directors. The Company agrees to
increase the size of its Board of Directors and appoint one designee of the Purchaser to the Board promptly after the Closing. 
 ARTICLE V.

 CONDITIONS 
 5.01 Conditions
Precedent to the Obligations of the Purchaser. The obligation of Purchaser to acquire Shares at the Closing is subject to the satisfaction or waiver by Purchaser, at or before the Closing, of each of the following conditions: 
 (a) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects
as of the date (except for those that speak as of a specific date) when made and as of the Closing as though made on and as of such date; 
 (b) Performance. The Company and Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with
by it at or prior to the Closing; 
 (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents; and 
 (d) No Suspensions of Trading in Common Stock. Trading in the Common Stock shall not have been suspended by the Commission. 
 5.02 Conditions Precedent to the Obligations of the Company. The obligation of the Company to sell Shares at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following conditions: 
 (a) Representations and Warranties. The
representations and warranties of the Purchaser contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date; and 
 (b) Performance. The Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied with by the Purchaser at or prior to the Closing. 
  

 11 

 (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents. 
 ARTICLE VI. 
 MISCELLANEOUS 
 6.01 Termination. This Agreement may be terminated by the Company or Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the fifteenth (15) day following the date of this Agreement; provided that no such termination will affect the right of any party to sue for any breach by the other party (or parties). 
 6.02 Fees and Expenses. Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the
issuance of the Shares. 
 6.03 Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the
entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents,
exhibits and schedules. At or after the Closing, and without further consideration, the Company will execute and deliver to the Purchaser such further documents as may be reasonably requested in order to give practical effect to the intention of the
parties under the Transaction Documents. 
 6.04 Notices. Any and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified on the signature
pages of this Agreement prior to 3:00 p.m. (Florida time) on a Business Day, (b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section
on a day that is not a Business Day or later than 3:00 p.m. (Florida time) on any Business Day, (c) the Business Day following the date of deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given. The addresses and facsimile numbers for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing
hereafter, in the same manner, by any such Person. 
 6.05 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and the Purchaser or, in the case of a waiver, by the party against whom 
  

 12 

 enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such right. 
 6.06 Construction. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party. 
 6.07 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and permitted assigns. Neither party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party. 
 6.08 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns
and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 
 6.09 Governing Law; Venue; Waiver Of Jury
Trial. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA. THE COMPANY AND PURCHASER HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE COUNT OF BROWARD FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION
CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR PURCHASER, ANY
CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND PURCHASER HEREBY WAIVE ALL RIGHTS TO A
TRIAL BY JURY. 
  

 13 

 6.10 Survival. The representations, warranties, agreements and covenants contained herein shall survive
the Closing and the delivery and/or exercise of the Shares, as applicable. 
 6.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that all parties need
not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof. 
 6.12 Severability. If any provision of this Agreement is
held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 
 6.13 Replacement of Shares. If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefore, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if
requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares. 
 [SIGNATURE PAGES TO FOLLOW] 
  

 14 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above. 
  

			
	DREAMS, INC.
		
	By:	 	 /s/ Ross Tannenbaum

	Name:	 	Ross Tannenbaum
	Title:	 	Chief Executive Officer

  

	
	 Address for Notice:
 Two South University Drive, Suite
325
 Plantation, Florida 33324
 Facsimile No. (954)
475-8785
 Telephone No. (954) 377-0002
 Attention: David
Greene

	
	 With a copy to:
 Arnstein & Lehr LLP

200 East Las Olas Boulevard, Suite 1700
 Fort Lauderdale, Florida
33301
 Facsimile No. (954) 713-7700
 Telephone No.
(954) 713-7600
 Attention: Joel D. Mayersohn, Esq.

 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 
 SIGNATURE PAGE FOR PURCHASER FOLLOWS] 
  

 15 

			
	THE FROST GROUP, LLC
		
	By:	 	 /s/ Steven D. Rubin

	Name:	 	 Steven D. Rubin

	Title:	 	 Vice President

	Number of Shares: 30.769,231
	
	Address for Notice:
	4400 Biscayne Boulevard, 15th
Floor
	Miami, Florida 33137
	Facsimile No. __________________________________________
	Telephone No. __________________________________________
	Attention:__________________________________________
	
	With a copy to:
	  

	  

	Facsimile No.__________________________________________
	Telephone No.__________________________________________
	Attention:_________________________________________________

  

 16

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